<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Mark One)
[X] AMENDMENT TO QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to_______________
Commission file number: 0-20960
HAMILTON BANCORP INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Florida 65-0149935
------------------------------- ----------------
(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)
Registrant's Telephone Number, Including Area Code: (305) 717 - 5500
---------------------------------------------------------------------
Indicate by check [X] 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 ISSUERS 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 [X]
<PAGE> 2
Item 1 and Item 2 of Part I and Part II Item 1 of the Registrant's Form 10Q for
the quarterly period ended June 30, 2000 are hereby amended to read as follows:
ITEM 1
PART I. FINANCIAL INFORMATION
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
Unaudited
(In thousands)
<TABLE>
<CAPTION>
As Restated, see As Restated, see
Note 5 Note 5
June 30, December 31,
------------------- ------------------
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
CASH AND DEMAND DEPOSITS WITH OTHER BANKS $ 22,716 $ 21,710
FEDERAL FUNDS SOLD 39,933 63,400
---------- ----------
Total cash and cash equivalents 62,649 85,110
INTEREST EARNING DEPOSITS WITH OTHER BANKS 129,039 187,685
SECURITIES AVAILABLE FOR SALE 367,819 274,277
LOANS-NET 1,077,589 1,091,976
DUE FROM CUSTOMERS ON BANKERS ACCEPTANCES 42,998 27,767
DUE FROM CUSTOMERS ON DEFERRED PAYMENT LETTERS OF CREDIT 1,616 5,835
PROPERTY AND EQUIPMENT-NET 4,892 5,209
ACCRUED INTEREST RECEIVABLE 19,043 19,111
GOODWILL-NET 1,571 1,658
OTHER ASSETS 18,444 22,672
---------- ----------
TOTAL $1,725,660 $1,721,300
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $1,505,747 $1,535,606
TRUST PREFERRED SECURITIES
12,650 12,650
BANKERS ACCEPTANCES OUTSTANDING
42,998 27,767
DEFERRED PAYMENT LETTERS OF CREDIT OUTSTANDING
1,616 5,835
OTHER LIABILITIES
12,049 5,544
---------- ----------
Total liabilities 1,575,060 1,587,402
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 75,000,000 shares authorized, 10,081,147
shares issued and outstanding at June 30, 2000 and December 31, 1999
101 101
Capital surplus 60,702 60,708
Retained earnings 83,844 67,871
Accumulated other comprehensive income 5,953 5,218
---------- ----------
Total stockholders' equity 150,600 133,898
---------- ----------
TOTAL $1,725,660 $1,721,300
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data) (Unaudited)
<TABLE>
<CAPTION>
As Restated,
see Note 5
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- -------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 26,940 $ 25,606 $ 56,345 $ 51,136
Deposits with other banks
3,437 3,754 7,278 6,995
Investment securities 6,414 1,744 9,466 4,499
Federal funds sold 815 383 1,518 849
----------- ----------- ----------- -----------
Total 37,606 31,487 74,607 63,479
INTEREST EXPENSE:
Deposits 21,490 16,846 41,655 35,014
Trust preferred securities 308 313 617 615
Federal funds purchased and other borrowing -- 39 1 144
----------- ----------- ----------- -----------
Total 21,798 17,198 42,273 35,773
----------- ----------- ----------- -----------
NET INTEREST INCOME 15,808 14,289 32,334 27,706
PROVISION FOR CREDIT LOSSES -- 1,746 750 2,646
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES 15,808 12,543 31,584 25,060
----------- ----------- ----------- -----------
NON-INTEREST INCOME:
Trade finance fees and commissions 2,219 3,442 4,984 6,432
Structuring and syndication fees 699 1,220 2,187 1,797
Customer service fees 449 356 849 771
Gain on sale of assets 1,343 27 2,691 214
Other 84 56 188 175
----------- ----------- ----------- -----------
Total 4,794 5,101 10,899 9,389
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Employee compensation and benefits 3,783 3,167 7,069 6,511
Occupancy and equipment 1,154 1,037 2,452 1,997
Other 3,641 3,257 8,071 6,122
----------- ----------- ----------- -----------
Total 8,578 7,461 17,592 14,630
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 12,024 10,183 24,891 19,819
PROVISION FOR INCOME TAXES 4,468 3,750 8,918 7,318
----------- ----------- ----------- -----------
NET INCOME $ 7,556 $ 6,433 $ 15,973 $ 12,501
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE:
BASIC $ 0.75 $ 0.64 $ 1.58 $ 1.24
=========== =========== =========== ===========
DILUTED $ 0.74 $ 0.63 $ 1.56 $ 1.22
=========== =========== =========== ===========
AVERAGE SHARES OUTSTANDING:
BASIC 10,081,147 10,065,908 10,081,147 10,061,037
=========== =========== =========== ===========
DILUTED 10,230,315 10,274,527 10,225,838 10,276,353
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands) (Unaudited)
<TABLE>
<CAPTION>
As Restated,
Three Months Ended see Note 5
June 30, Six Months Ended June 30,
-------------------- ------------------------
2000 1999 2000 1999
------- ------ -------- ---------
<S> <C> <C> <C> <C>
NET INCOME $ 7,556 $6,433 $ 15,973 $ 12,501
OTHER COMPREHENSIVE INCOME, Net of tax:
Net change in unrealized loss on securities available for sale during
period 542 70 2,157 414
Less: Reclassification adjustment for gains included in net income (750) -- (1,422) --
Less: Reclassification adjustment for write off of a foreign bank
stock -- -- -- (187)
------- ------ -------- --------
Total (208) 70 735 227
------- ------ -------- --------
COMPREHENSIVE INCOME $ 7,348 $6,503 $ 16,708 $ 12,728
======= ====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 5
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
As Restated, see Note 5
(Dollars in thousands, except per share data) (Unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
------------------------- Capital Retained Comprehensive Stockholders'
Shares Amount Surplus Earnings Income Equity
-------------- --------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 10,081,147 $101 $60,708 $67,871 $5,218 $133,898
Adjustment of tax liabilities
due to stock options excercized (6) (6)
Net change in unrealized gain on
securities available for sale, net of 735
taxes 735
Net income for the six months ended
June 30, 2000 15,973 15,973
-------------- --------- ----------- ----------- ----------------- -----------------
Balance as of June 30, 2000 10,081,147 $101 $60,702 $83,844 $5,953 $150,600
============== ========= =========== =========== ================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 6
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (Unaudited)
<TABLE>
<CAPTION>
As Restated,
see Note 5
For Six Months Ended June 30,
--------------------------------------------
2000 1999
----------------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,973 $ 12,501
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 749 665
Provision for credit losses 750 2,646
Deferred tax (credit) provision (385) 59
Write off of available for sale security -- 187
Net gain on sale of loans -- (188)
Net gain on sale of other real estate owned -- (26)
Net gain on sale of fixed assets (13) --
Net gain on sale of investments (2,378) --
Proceeds from the sale of bankers acceptances 6,510 14,397
Decrease (increase) in accrued interest receivable and other assets 3,525 (2,304)
Increase (decrease) in other liabilities 6,500 (1,550)
----------------------- -----------------
Net cash provided by operating activities 31,231 26,387
----------------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in interest-earning deposits with other banks 58,646 26,601
Purchase of securities available for sale (494,722) (401,679)
Purchase of securities held to maturity -- (10,760)
Proceeds from sales and maturities of securities available for sale 405,463 413,172
Proceeds from paydowns of securities held to maturity -- 1,864
Proceeds from sale of loans -- 11,148
Decrease (increase) in loans-net 7,128 (7,900)
Purchases of property and equipment-net (348) (581)
Proceeds from sale of other real estate owned -- 38
----------------------- -----------------
Net cash (used in) provided by investing activities (23,833) 31,903
----------------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in deposits (29,859) (64,064)
Proceeds from trust preferred securities offering -- 1,650
Payment of other borrowing -- (6,116)
Net proceeds from exercise of common stock options -- 188
----------------------- -----------------
Net cash used in financing activities (29,859) (68,342)
----------------------- -----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (22,461) (10,052)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 85,110 111,790
----------------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 62,649 $ 101,738
======================= =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 32,535 $ 37,002
======================= =================
Income taxes paid during the period $ 3,109 $ 7,569
======================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
HAMILTON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 1: BASIS OF PRESENTATION
The consolidated statements of condition for Hamilton Bancorp Inc. and
Subsidiary (the "Company") as of June 30, 2000 and December 31, 1999, the
related consolidated statements of income, comprehensive income stockholders'
equity and the cash flows for the six months ended June 30, 2000 and 1999
included in the Form 10-Q have been prepared by the Company in conformity with
the instructions to Form 10-Q 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, 1999.
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 Annual Report on Form 10-K/A for the year
ended December 31, 1999 as filed with the Securities and Exchange Commission.
NOTE 2: NET INCOME PER COMMON SHARE
Basic earnings per share is computed by dividing the Company's net income by the
weighted average number of shares outstanding during the period.
Diluted earnings per share is computed by dividing the Company's net income by
the weighted average number of shares outstanding and the dilutive impact of
potential common stock, primarily stock options. The dilutive impact of common
stock is determined by applying the treasury stock method.
NOTE 3: STOCK OPTIONS
On January 3, 2000, the Company granted 96,759 options at an exercise price of
$17.75. These options vest in thirds; twelve, eighteen and twenty-four months
after the grant if the individual is then employed with the Company.
NOTE 4: REGULATORY CAPITAL
The Company is subject to risk-based capital and leverage guidelines issued by
the Board of Governors of the Federal Reserve System. These guidelines are used
to evaluate capital adequacy and include required minimums. Following an
examination conducted by the Federal Reserve examiners, the Company was directed
by the Federal Reserve to file required reports following generally accepted
accounting principles and not in accordance with the regulatory accounting
interpretations of the Office of the Comptroller of the Currency ("OCC"). The
Bank was directed by the OCC to record certain adjustments for regulatory
reporting purposes discussed in the Capital Resources section. These adjustments
amount to $29,910,000 and $32,720,000 for June 30, 2000 and December 31, 1999,
respectively. During the first six months, these adjustments were reduced by a
reduction of the allocated transfer risk reserve of $2,810,000.
6
<PAGE> 8
NOTE 5: RESTATEMENT
Subsequent to the filing of the Company's quarterly report on Form 10Q for the
quarter ended June 30, 2000, the Company determined that the purchase of certain
securities and the sale of certain loans entered into by the Company in 1998
should have been recorded as an exchange transaction in accordance with SFAS No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and that a loss of $22,223,000 ($14,304,000
after tax) should have recorded on the exchange. The Company had previously
accounted for the purchases of the securities and sales of the loans as separate
unrelated transactions. The purchases were recorded at cost and the sales were
recorded based on the proceeds received for the loans sold, with no gain or loss
being recognized. During the second quarter of 2000 the OCC, through a temporary
cease and desist order dated April 25, 2000, required the Company to re-file its
regulatory reports to account for the purchase and sale transactions referred to
above as related transactions and to record a loss on such transactions. The
Company's Audit Committee, with the assistance of independent counsel, conducted
an investigation that began in August 2000 and was completed during December
2000 into these transactions, including the consideration of certain additional
information that the Company received from the OCC. After evaluating the results
of the investigation, the Company concluded that the above transactions should
have been accounted for as an exchange (i.e., one related transaction) rather
than as separate transactions and that a loss should be recorded. As a result,
the Company restated its 1998 consolidated financial statements. The loss on
exchange created a lower cost basis, by a like amount, for the assets purchased.
Such assets had been designated as available for sale as of December 31, 1999
and were marked to market at that date. As a result, accumulated other
comprehensive (loss) income as of December 31, 1999 has been restated, however,
total stockholders' equity as of June 30, 2000 remains unchanged. Certain of
those assets were also sold during the six months ended June 30, 2000 which
results in an increased gain on sale due to a lower restated basis and no change
in total stockholders' equity.
The following table summarizes the items that have been restated in the June 30,
2000 consolidated financial statements as a result of the loss on exchange in
1998, (dollars in thousands):
<TABLE>
<CAPTION>
As Previously As
Reported Restated
----------------- -----------------
<S> <C> <C>
AS OF JUNE 30, 2000:
Retained earnings $ 96,935 $ 83,844
Accumulated comprehensive (loss) income (7,138) 5,953
----------------- -----------------
Total 89,797 89,797
================= =================
FOR THE SIX MONTHS ENDED JUNE 30, 2000:
Gain on sale of assets 1,250 2,691
Income before provision for income taxes 23,450 24,891
Provision for income taxes 8,690 8,918
Net income 14,760 15,973
Net income per common share:
Basic 1.46 1.58
Diluted 1.44 1.56
Net change in unrealized gain (loss) on securities
available for sale, net of taxes 1,948 735
AS OF DECEMBER 31, 1999:
Retained earnings 82,175 67,871
Accumulated other comprehensive (loss) income (9,086) 5,218
----------------- -----------------
Total 73,089 73,089
================= =================
</TABLE>
7
<PAGE> 9
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 percent subsidiary, Hamilton Bank, N.A.
(the "Bank" and, collectively with Bancorp, the "Company"). The Bank is a
national bank which specializes in financing trade flows between domestic and
international companies on a global basis, with particular emphasis on trade
with and between South America, Central America, the Caribbean (collectively,
the "Region") and the United States. The Bank has a network of nine FDIC-insured
branches with eight Florida locations in Miami, Sarasota, Tampa, West Palm
Beach, Winter Haven and Weston, and a branch in San Juan, Puerto Rico.
RESTATEMENT
Subsequent to the filing of the Company's quarterly report on Form 10Q for the
quarter ended June 30, 2000, the Company determined that the purchase of certain
securities and the sale of certain loans entered into by the Company in 1998
should have been recorded as an exchange transaction in accordance with SFAS No.
125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, and that a loss of $22,223,000 ($14,304,000
after tax) should have recorded on the exchange. The Company had previously
accounted for the purchases of the securities and sales of the loans as separate
unrelated transactions. The purchases were recorded at cost and the sales were
recorded based on the proceeds received for the loans sold, with no gain or loss
being recognized. During the second quarter of 2000 the OCC, through a temporary
cease and desist order dated April 25, 2000, required the Company to re-file its
regulatory reports (the "Call Reports") to account for the purchase and sale
transactions referred to above as related transactions and to record a loss on
such transactions. The Company's Audit Committee, with the assistance of
independent counsel, conducted an investigation that began in August 2000 and
was completed during December 2000 into these transactions, including the
consideration of certain additional information that the Company received from
the OCC. After evaluating the results of the investigation, the Company
concluded that the above transactions should have been accounted for as an
exchange (i.e., one related transaction) rather than as separate transactions
and that a loss should be recorded. As a result, the Company restated its 1998
consolidated financial statements. The loss on exchange created a lower cost
basis, by a like amount, for the assets purchased. Such assets had been
designated as available for sale as of December 31, 1999 and were marked to
market at that date. As a result, accumulated other comprehensive (loss) income
as of December 31, 1999 has been restated, however, total stockholders' equity
as of June 30, 2000 remains unchanged. Certain of those assets were also sold
during the six months ended June 30, 2000 which results in an increased gain on
sale due to a lower restated basis and no change in total stockholders' equity.
See Note 5 of the notes to the unaudited consolidated financial statements for a
discussion of these restatements.
In addition, as part of this process, the Company will again re-file its Call
Reports to reflect the same accounting treatment and loss described above. This
action is being taken as the original loss of $24,602,000, which amount was
based on a directive of the OCC (under a temporary cease and desist order),
recorded by the Company for regulatory purposes in the previously re-filed Call
Reports differed from the Company's final conclusions and recording of the
$22,223,000 loss described above, which amount was based on management's
determination of the fair value of the assets acquired. The Company's
determination of the fair value was agreed to by the OCC in recent discussions
with the OCC. Therefore, the Company's restated consolidated financial
statements and the Company's re-filed Call Reports will be consistent as it
relates to this loss on exchange.
The Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three and six months ended June 30, 2000 presented herein
have been adjusted to reflect the restatement described above.
FINANCIAL CONDITION - JUNE 30, 2000 VS. DECEMBER 31, 1999.
Total consolidated assets remained relatively the same at $1.72 billion at June
30, 2000 although there were changes within the asset categories. Cash and cash
equivalents decreased by $22.5 million or 26.4 percent. Securities available for
sale increased by 34.1 percent to $367.8 million of which approximately $163.2
million represents additional liquidity.
8
<PAGE> 10
CASH, DEMAND DEPOSITS WITH OTHER 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 $62.6 million at June 30, 2000 compared to $85.1 million at
December 31, 1999.
INTEREST-EARNING DEPOSITS WITH OTHER BANKS AND INVESTMENT SECURITIES
Interest-earning deposits with other banks decreased to $129.0 million at
June 30, 2000 from $187.7 million at December 31, 1999. 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 diminished as
the exposure in the Region has decreased during the six months ended June
30, 2000. The short-term nature of these deposits allows the Company the
flexibility to later redeploy assets into higher yielding loans.
Investment securities increased to $367.8 million at June 30, 2000 from
$274.3 million at December 31, 1999. The increase has been primarily in
U.S. government agency securities and to a lesser extent U. S. government
mortgage backed securities. The government agency securities are short
term in nature and allow the Company the flexibility of liquidity and the
ability to convert these assets into higher yielding loans as these become
accessible. The mortgage backed securities diversify the Company's
portfolio, are eligible collateral for securing public funds and qualify
as a Community Reinvestment Act investment.
9
<PAGE> 11
LOANS
The Company's gross loan portfolio decreased by $16.0 million, during the
first six months of 2000 in relation to the year ended December 31, 1999.
This decrease was primarily in loans to banks and other financial
institutions - foreign which decreased by $23.3 million. Details on the
loans by type are shown in the table below. At June 30, 2000 approximately
43.6 percent of the Company's portfolio consisted of loans to domestic
borrowers and 56.4 percent of the Company's portfolio consisted of loans
to foreign borrowers. The Company's loan portfolio is relatively
short-term, as approximately 60.5 and 73.9 percent of loans at June 30,
2000 were short-term loans with average maturities of less than 180 and
less than 365 days, respectively.
The following table sets forth the loans by type in the Company's loan
portfolio at the dates indicated.
LOANS BY TYPE
(in thousands)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------ -----------------------
<S> <C> <C>
Domestic:
Commercial (1) $ 402,845 $ 394,841
Acceptances discounted 74,723 59,040
Residential mortgages 2,057 2,140
------------------------ -----------------------
Subtotal Domestic 479,625 456,021
------------------------ -----------------------
Foreign:
Banks and other financial institutions 200,859 224,155
Commercial and industrial (1) 337,630 338,411
Acceptances discounted 39,763 59,256
Government and official institutions 42,319 38,358
------------------------ -----------------------
Subtotal Foreign 620,571 660,180
------------------------ -----------------------
Total Loans $ 1,100,196 $ 1,116,201
======================== =======================
</TABLE>
(1) Includes pre-export financing, warehouse receipts and refinancing of letter
of credits.
10
<PAGE> 12
The following tables largely 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 outstandings by
country. The aggregate amount of the Company's crossborder outstandings 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 of related deposits. 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 June 30, 2000 approximately 27.1percent in principal amount of the
Company's loans were outstanding to borrowers in four countries other than
the United States: Panama (12.2 percent), Guatemala (6.2 percent), El
Salvador (4.9 percent) and Brazil (3.8 percent).
Panama loan exposure continues to be over 10 percent of loans and has
increased to 12.2 percent of total loans at June 30, 2000. The bulk of the
credit relationships in Panama are related to financing short-term trade
transactions with companies operating out of the Colon Free Zone. The
latter represents the second largest free trading zone in the world after
Hong Kong. The companies operate largely as importers and exporters of
consumer goods such as electronic goods and clothing.
LOANS BY COUNTRY
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------------------ --------------------------------------
Percent of Percent of
Country Amount Total Loans Amount Total Loans
--------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
United States $ 479,625 43.6% $ 456,021 40.9%
Argentina 22,910 2.1% 35,494 3.2%
Brazil 42,178 3.8% 49,214 4.4%
British West Indies (1) -- -- 22,082 2.0%
Colombia 24,722 2.2% 28,437 2.5%
Dominican Republic 38,740 3.5% 41,604 3.7%
Ecuador 40,912 3.7% 43,622 3.9%
El Salvador 53,383 4.9% 45,847 4.1%
Guatemala 67,897 6.2% 66,531 6.0%
Honduras 39,079 3.6% 42,352 3.8%
Jamaica 39,428 3.6% 28,628 2.6%
Panama 134,364 12.2% 127,419 11.4%
Peru 22,116 2.0% 29,648 2.7%
Venezuela 16,804 1.5% 17,842 1.6%
Other (2) 78,038 7.1% 81,460 7.2%
--------------- ----------------- ----------------- -----------------
Total $ 1,100,196 100.0% $ 1,116,201 100.0%
=============== ================= ================= =================
</TABLE>
(1) These countries had loans in periods presented which did not exceed 1
percent of total loans.
(2) Other consists of loans to borrowers in countries in which loans did not
exceed 1 percent of total loans.
11
<PAGE> 13
At June 30, 2000 approximately 26.3 percent of total assets were
cross-border outstandings to borrowers in five countries other than the
United States: Brazil (7.2 percent), Panama (7.1 percent), Guatemala (4.5
percent), Ecuador (4.2 percent) and Argentina (3.3 percent).
TOTAL CROSS-BORDER OUTSTANDINGS BY COUNTRY
(Dollars in millions)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
--------------------------- ----------------------------
% of Total % of Total
Amount Assets Amount Assets
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Argentina $57 3.3% $113 6.6%
Bahamas 17 1.0% 21 1.2%
Bolivia (1) -- -- 18 1.0%
Brazil 124 7.2% 173 10.1%
Colombia 45 2.6% 48 2.8%
Dominican Republic 44 2.5% 55 3.2%
Ecuador 72 4.2% 78 4.5%
El Salvador 52 3.0% 44 2.6%
Guatemala 78 4.5% 68 4.0%
Honduras 38 2.2% 43 2.5%
Jamaica 44 2.5% 35 2.0%
Mexico 13 0.8% 20 1.2%
Panama 122 7.1% 116 6.7%
Peru 30 1.7% 42 2.4%
Suriname 36 2.1% 32 1.9%
United Kingdom 15 0.9% 15 0.9%
Venezuela 19 1.1% 17 1.0%
Other (2) 77 4.5% 75 4.4%
------------ ------------ ------------- ------------
Total $ 883 51.2% $ 1,013 59.0%
============ ============ ============= ============
</TABLE>
(1) These countries had outstandings in periods presented which did not exceed
1 percent of total assets.
(2) Other consists of cross-border outstandings to countries in which such
cross-border outstandings did not exceed 0.75 percent of the Company's
total assets at any of the dates shown.
(3) Cross-border outstandings could be less than loans by country since
cross-border outstandings may be netted against legally enforceable,
written guarantees of principal or interest by domestic or other non-local
third parties. In addition, balances of any tangible, liquid collateral may
also be netted against cross-border outstandings of a country if they are
held and realizable by the lender outside of the borrower's country.
12
<PAGE> 14
CONTINGENCIES - COMMERCIAL LETTERS OF CREDIT
(in thousands)
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. As shown by the table, the volume of commercial letters of credit
increased by 21.7 percent to $280.4 million for the six months ended June 30,
2000 when compared to the same period in 1999. This increase is due to greater
domestic import activities, which increased by 30.0 percent, and to a lesser
extent, export activities, which increased by 11.7 percent.
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended
----------------------------------------------------- ------------------------------
2000 1999 December 31, 1999
-------------------------- -------------------------- ------------------------------
Average Average Average
Total Monthly Total Monthly Total Monthly
Volume Volume Volume Volume Volume Volume
-------------------------- -------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Export Letters of Credit (1) $ 116,522 $ 19,420 $ 104,352 $ 17,392 $ 227,904 $ 18,992
Import Letters of Credit (1) 163,862 27,310 126,031 21,005 296,943 24,745
-------------------------- -------------------------- ------------------------------
Total $ 280,384 $ 46,730 $ 230,383 $ 38,397 $ 524,847 $ 43,737
========================== ========================== ==============================
</TABLE>
(1) Represents certain contingent liabilities not reflected on the Company's
balance sheet.
13
<PAGE> 15
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
decreased by 1.5 percent from December 31, 1999 to June 30, 2000. Individual
fluctuations reflect relative changes in the flow of trade or instruments used
in financing such trade as well as the cyclical nature of certain trade
activities.
CONTINGENT LIABILITIES (1)
(in thousands)
June 30, 2000 December 31, 1999
------------- -----------------
Aruba (2) $ -- $ 3,720
Costa Rica(2) -- 9,893
Dominican Republic 5,879 4,707
El Salvador 2,172 2,734
Guatemala 6,235 9,475
Guyana 3,155 4,165
Haiti(2) -- 5,705
Honduras 4,097 4,174
Jamaica(2) 9,703 --
Panama 7,173 14,242
Paraguay(2) 4,317 --
Peru 3,431 3,573
Suriname 2,282 5,677
United States 95,895 74,643
Venezuela(2) -- 2,593
Other(3) 4,841 6,143
-------- --------
Total $149,180 $151,444
======== ========
(1) Includes export and import letters of credit, standby letters of credit and
letters of indemnity.
(2) These countries had contingencies which represented less than 1 percent of
the Company's total contingencies at periods presented in the above dates.
(3) Other includes those countries in which contingencies represent less than 1
percent of the Company's total contingencies at each of the above dates.
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; (iii) historical experience; and (iv) the average maturity
of its loan portfolio.
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.
14
<PAGE> 16
In addition to the factors previously mentioned as well as management's ongoing
review of the Bank's assets, the Company's board of directors meets on a monthly
basis through its Loan Review Committee to assess the overall credit quality of
the loan portfolio. This Committee reviews: 1) loans greater than 30 days past
due, 2) overdrafts greater than 30 days, 3) criticized assets based on an
internal grading system, this process includes reviewing the appropriate level
of allowance for any specific loan based on the underlying collateral and
financial strength of each borrower, and 4) reviewing country limits and
exposures as well as consideration of appropriate country ratings.
On a quarterly basis, the Bank will assess the adequacy of the allowance for
credit losses utilizing a disciplined and systematic approach which includes the
application of various methodologies that consider historical loss factors such
as charge-offs to average loans, portfolio composition including borrowers by
type as well as security and the duration of the portfolio. These methodologies
are impacted by loan growth, the level of criticized assets and loan write-offs.
In addition, to the aforementioned methodologies, management conducts a review
of the criticized loans and allocates a portion of the allowance based on the
underlying security and financial condition of the borrower. In general, the
Bank assigns an allowance factor to a criticized loan and if loan is down graded
due to deteriorating conditions the allowance factor is increased.
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. The allowance for credit
losses decreased from $21.4 million at December 31, 1999 to $20.2 million as of
June 30, 2000, or 5.6%. No significant change was experienced in the allowance
due to the following factors: a) decrease in loans from December 31, 1999 to
June 30, 2000, b) the relatively low level of charge-offs to average loans
during the period, c) the application of the Bank's methodologies utilized in
estimating the adequacy of the allowance for credit losses did not reveal a need
to increase the allowance and d) a reallocation of specific reserves due to the
payment of certain criticized foreign loans supported the increase in
nonperforming loans without the need for additional reserves.
The following table provides certain information with respect to the Company's
allowance for credit losses, provision for credit losses, charge-off and
recovery activity for the periods shown.
15
<PAGE> 17
CREDIT LOSS EXPERIENCE
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
------------------------ -------------------------
<S> <C> <C>
Balance of allowance for credit losses at beginning of
period $ 21,411 $ 12,794
Charge-offs:
Domestic:
Commercial (87) (3,299)
Acceptances (297) --
Installment -- (5)
----------- -----------
Total Domestic (384) (3,304)
----------- -----------
Foreign:
Banks and other financial institutions (200) (2,330)
Commercial and industrial (1,393) (6,216)
----------- -----------
Total Foreign (1,593) (8,546)
----------- -----------
Total charge-offs (1,977) (11,850)
----------- -----------
Recoveries:
Domestic:
Commercial 2 4
Foreign:
Banks and other financial institutions 41 163
----------- -----------
Total recoveries 43 167
----------- -----------
Net (charge-offs) recoveries (1,934) (11,683)
Provision for credit losses 750 20,300
----------- -----------
Balance at end of the period $ 20,227 $ 21,411
=========== ===========
Average loans $ 1,182,161 $ 1,181,865
Total loans $ 1,100,196 $ 1,116,201
Net charge-offs to average loans 0.17% 1.00%
Allowance to total loans 1.84% 1.92%
</TABLE>
16
<PAGE> 18
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. Because of the decrease in foreign loans,
the allowance allocated to foreign loans was also reduced which reflects a
negative provision for credit losses attributable to foreign loans. The level of
the allowance allocated to foreign loans was also influenced by the
strengthening of the Latin American economies, the collateral composition of the
non-performing loans, the reduction of in Ecuadorian loans and the low loan
growth during the period.
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
(in thousands)
<TABLE>
<CAPTION>
As of As of
June 30, 2000 December 31, 1999
------------------------ -----------------------
<S> <C> <C>
Allocation of the allowance by category of loans:
Domestic:
Commercial $ 9,047 $ 3,199
Acceptances 299 269
Residential 10 10
------------------------ -----------------------
Total domestic 9,356 3,478
Foreign:
Government and official institutions 169 1,496
Banks and other financial institutions 1,105 5,152
Commercial and industrial 9,438 11,015
Acceptances discounted 159 270
------------------------ -----------------------
Total foreign 10,871 17,933
Total $ 20,227 $ 21,411
======================== =======================
Percent of loans in each category to total loans:
Domestic:
Commercial 36.6% 35.4%
Acceptances 6.8% 5.3%
Residential 0.2% 0.2%
------------------------ -----------------------
Total domestic 43.6% 40.9%
Foreign:
Banks and other financial institutions 18.3% 20.1%
Commercial and industrial 30.7% 30.3%
Acceptances discounted 3.6% 5.3%
Government and official Institutions 3.8% 3.4%
------------------------ -----------------------
Total foreign 56.4% 59.1%
Total 100.0% 100.0%
======================== =======================
</TABLE>
17
<PAGE> 19
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES ALLOCATED TO FOREIGN LOANS
(in thousands)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------ -----------------------
<S> <C> <C>
Balance, beginning of year $ 17,933 $ 11,379
Provision for credit losses (5,510) 14,937
Net charge-offs (1,552) (8,383)
------------------------ -----------------------
Balance, end of period $ 10,871 $ 17,933
======================== =======================
</TABLE>
The Company does not have a rigid charge-off 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 the Company's loan underwriting policies.
The Company accounts for impaired loans in accordance with Statement of
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.
The following table sets forth information regarding the Company's nonperforming
loans at the dates indicated.
NONPERFORMING LOANS
(in thousands)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------ -----------------------
<S> <C> <C>
Domestic:
Non accrual $ 16,383 $ 6,995
Past due over 90 days and accruing 1,851 --
------------------------ -----------------------
Total domestic nonperforming loans
18,234 6,995
------------------------ -----------------------
Foreign:
Non accrual 16,608 9,588
Past due over 90 days and accruing -- 1,992
------------------------ -----------------------
Total foreign nonperforming loans 16,608 11,580
------------------------ -----------------------
Total nonperforming loans $ 34,842 $ 18,575
======================== =======================
Total nonperforming loans to total loans 3.17% 1.66%
Total nonperforming assets to total assets 2.29% 1.08%
</TABLE>
Nonperforming loans increased from $18.6 million at December 31, 1999 to $34.8
million at June 30, 2000. This was due to an increase in domestic nonperforming
loans from $7.0 million at December 31, 1999 to $18.2 million at June 30, 2000.
The increase was substantially related to one credit relationship for the
approximate amount of $16 million involving a domestic customer in the
import/export business. This amount was offset by a decrease of approximately
18
<PAGE> 20
$6.4 million due to a reclassification of a domestic loan to a foreign loan
status due to the underlying security and primary source of repayment for the
obligation. Total nonperforming loans was also affected by an increase in
foreign nonperforming loans from $11.6 million to $15.9 million for the periods
ended December 31, 1999 and June 30, 2000, respectively. This increase was due
to the aforementioned reclassification of a domestic loan to a foreign loan.
This amount represented approximately $6.4 million that was offset by foreign
charge-offs of approximately $1.6 million.
At June 30, 2000, the Company had $4.7 million in nonperforming investment
securities and other assets compared to no nonperforming investment securities
and other assets at December 31, 1999. Nonperforming investment securities at
June 30, 2000 totaled $1.2 million and consisted of a foreign debt security
available for sale. The value of this security was determined by applying SFAS
115 and a write-off was not deemed necessary.
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 $43.0 million and $1.6 million, respectively, at June 30, 2000
compared to $27.8 million and $5.8 million, respectively, at December 31, 1999.
These assets represent a customer's 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
The primary sources of the Company's domestic time deposits are its eight Bank
branches located in Florida and one in Puerto Rico. In pricing its deposits, the
Company analyzes the market carefully, attempting to price its deposits
competitively with the other financial institutions in the area.
Total deposits were $1.505 billion at June 30, 2000 compared to $1.536 billion
at December 31, 1999. The decrease in deposits during the six month period was
largely in certificates of deposits under $100,000 which decreased by $75.9
million . This decrease was offset by increases in overnight funds and
certificates of deposit over $100,000 of $37.6 and $16.0 million, respectively.
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, 2000:
MATURITIES OF AND AMOUNTS OF CERTIFICATES OF DEPOSIT AND OTHER TIME DEPOSITS
$100,000 OR MORE
(in thousands)
<TABLE>
<CAPTION>
Certificates of Deposit Other Time Deposits
$100,000 or More $100,000 or More Total
---------------------- ---------------------- -------------------
<S> <C> <C> <C>
Three months or less $ 125,878 $ 21,482 $ 147,360
Over 3 through 6 months 91,255 336 91,591
Over 6 through 12 months 140,511 4,151 144,662
Over 12 months 67,839 - 67,839
---------------------- ---------------------- -------------------
Total $ 425,483 $ 25,969 $ 451,452
====================== ====================== ===================
</TABLE>
19
<PAGE> 21
STOCKHOLDERS' EQUITY
The Company's stockholders' equity at June 30, 2000 was $150.6 million compared
to $133.9 million at December 31, 1999. During this period stockholders' equity
increased by $16.7 million primarily due to the retention of net income and the
recovery in market value of the securities available for sale.
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 June 30, 2000. 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.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY REPORT
(Dollars in thousands)
------------------------------------------------------------------------------------------
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 $ 563,390 $ 162,947 $ 108,094 $ 79,613 $ 167,544 $ 18,608 $ 1,100,196
Federal funds sold 39,933 39,933
Investment securities 139,458 72,282 27,593 25,176 11,966 86,125 362,600
Interest earning deposits with
other banks 30,064 39,877 16,333 38,765 4,000 129,039
------------------------------------------------------------------------------------------
Total 772,845 275,106 152,020 143,554 183,510 104,733 1,631,768
------------------------------------------------------------------------------------------
Funding Sources:
Savings and transaction deposits 30,023 75,764 36,750 142,537
Certificates of deposits of $100K
or more 46,349 79,529 91,255 140,511 67,839 425,483
Certificates of deposits under $100K 42,706 137,314 216,536 220,732 123,611 38 740,937
Other time deposits 18,480 3,002 336 4,151 25,969
Funds overnight 101,085 101,085
Trust preferred securities 12,650 12,650
------------------------------------------------------------------------------------------
Total $ 238,643 $ 295,609 $ 344,877 $ 365,394 $ 191,450 $ 12,688 $ 1,448,661
==========================================================================================
Interest sensitivity gap $ 534,202 $ (20,503) $ (192,857) $ (221,840) $ (7,940) $ 92,045 $ 183,107
==========================================================================================
Cumulative gap $ 534,202 $ 513,699 $ 320,842 $ 99,002 $ 91,062 $ 183,107
============================================================================
Cumulative gap as a percentage
of total earning assets 32.74% 31.48% 19.66% 6.07% 5.58% 11.22%
============================================================================
</TABLE>
20
<PAGE> 22
LIQUIDITY
Cash and cash equivalents decreased by $22.5 million from December 31, 1999 to
June 30, 2000. During the first six months of 2000, net cash provided by
operating activities was $31.2 million, net cash used in investing activities
was $23.8 million and net cash used in financing activities was $29.9 million.
For further information on cash flows, see the Consolidated Statement of Cash
Flows.
The Company's principal sources of liquidity and funding are its diverse deposit
base and the sale 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, but are not limited to, 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.
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 June 30, 2000 interest-earning assets maturing or repricing within
six months were $1.200 billion, representing 73.5 percent of total earning
assets. Earning assets maturing or repricing within one year were $1.344 billion
or 82.3 percent of total earning assets. The interest bearing liabilities
maturing within six months were $879.1 million or 60.7 percent of total interest
bearing liabilities and maturing within one year were $1.244 billion or 85.9
percent of the total at June 30, 2000.
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 June 30, 2000 were $404.6 million, 23.5 percent of
total assets, and consisted of cash and cash equivalents, interest earning
deposits in other banks and available for sale investment securities maturing
within one year or less that are unpledged. At June 30, 2000 the Company had
been advised of $34 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 initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company and the Bank must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
As part of its examination process, the OCC required the Bank on April 25, 2000,
among other things, to take $32 million in transfer risk reserves related to the
Bank's exposure in Ecuador. The Bank had already established such transfer risk
reserves in its regulatory Call Reports as of December 31, 1999. Pursuant to the
OCC requirement, however, the Bank during the second quarter 2000 refiled the
relevant 1998 and 1999 Call Reports as directed by the OCC. While the Bank has
taken the actions directed by the OCC for regulatory reporting purposes only, it
disagrees with the OCC's interpretations of the regulatory accounting rules and
is appealing such directions to an Administrative Law Judge within the OCC in
the formal administrative proceeding described below.
The OCC initiated formal administrative action in February 2000 under Section 8
of the Federal Deposit Insurance Act which the Bank has not agreed to and which
the Bank is appealing and disputing in appropriate administrative actions within
the OCC. As a part of the formal administrative action, the OCC has issued a
temporary cease and desist order to the Bank containing certain accounting and
capital requirements and requiring certain reports and filings, all of which the
21
<PAGE> 23
Bank believes it has complied with or was already in compliance with, except for
certain reports which it will prepare and deliver in a timely manner under the
order. In the formal administrative action proceeding the OCC is seeking a cease
and desist order to permanently order the actions required in the temporary
cease and desist order. Inasmuch as the Bank had already taken the transfer risk
reserve directed by the OCC, if the Bank is unsuccessful in its appeal the Bank
does not expect any material effect on the Bank's financial statements. The
capital ratios set forth below also reflect the transfer risk reserve directed
by the OCC and, accordingly, will not change if the Bank is unsuccessful in its
appeal. Under applicable regulatory guidelines, however, the Bank may not
appoint new directors or senior officers without the prior consent of the OCC or
accept new, or renew, "brokered deposits" without the prior approval of the
Federal Deposit Insurance Corporation. The Bank does not anticipate that either
of such restrictions will have any material adverse effect on its business or
operations.
The Company is required by the Board of Governors of the Federal Reserve System
to file its reports with the Federal Reserve in accordance with GAAP, not in
accordance with the OCC's regulatory accounting interpretations. As such, the
capital ratios presented for the Company are calculated on a different basis
than those presented for the Bank because of the aforementioned adjustments.
COMPANY CAPITAL RATIOS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------------------------------ ------------------------------------
Amount Ratio Amount Ratio
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Tier 1 risk-weighted
Capital:
Actual $ 133,577 11.3% $ 116,769 10.0%
Minimum 47,266 4.0% 46,553 4.0%
Total risk-weighted
Capital:
Actual 148,833 12.6% 131,854 11.3%
Minimum 94,531 8.0% 93,106 8.0%
Leverage:
Actual 133,577 7.9% 116,769 6.9%
Minimum 50,906 3.0% 50,685 3.0%
</TABLE>
BANK CAPITAL RATIOS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
---------------------------------- ----------------------------------
Amount Ratio Amount Ratio
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Tier 1 risk-weighted capital:
Actual $ 124,760 11.0% $ 109,147 9.4%
Minimum to be well capitalized 69,349 6.0% 69,721 6.0%
Minimum to be adequately capitalized 46,233 4.0% 46,481 4.0%
Total risk-weighted capital:
Actual 139,492 12.2% 124,209 10.7%
Minimum to be well capitalized 115,582 10.0% 116,202 10.0%
Minimum to be adequately capitalized 92,466 8.0% 92,962 8.0%
Aeverage:
Actual 124,760 7.4% 109,147 6.5%
Minimum to be well capitalized 84,843 5.0% 84,187 4.0%
Minimum to be adequately capitalized 67,874 4.0% 67,350 4.0%
</TABLE>
22
<PAGE> 24
MARKET RISK MANAGEMENT
In the normal course of conducting business activities, the Company is exposed
to market risk which includes both price and liquidity risk. The Company's price
risk arises from fluctuations in interest rates, and foreign exchange rates that
may result in changes in values of financial instruments. The Company does not
have material direct market risk related to commodity and equity prices.
Liquidity risk arises from the possibility that the Company may not be able to
satisfy current and future financial commitments or that the Company may not be
able to liquidate financial instruments at market prices. Risk management
policies and procedures have been established and are utilized to manage the
Company's exposure to market risk. The strategy of the Company is to operate at
an acceptable risk environment while maximizing its earnings.
Market risk is managed by the Asset Liability Committee which formulates and
monitors the performance of the Company based on established levels of market
risk as dictated by policy. In setting the tolerance levels of market risk, the
Committee considers the impact on both earnings and capital, based on potential
changes in the outlook in market rates, global and regional economies,
liquidity, business strategies and other factors.
The Company's asset and liability management process is utilized to manage
interest rate risk through the structuring of balance sheet and off-balance
sheet portfolios. It is the strategy of the Company to maintain as neutral an
interest rate risk position as possible. By utilizing this strategy the Company
"locks in" a spread between interest earning assets and interest-bearing
liabilities. Given the matching strategy of the Company and the fact that it
does not maintain significant medium and/or long-term exposure positions, the
Company's interest rate risk will be measured and quantified through an interest
rate sensitivity report. An excess of assets or liabilities over these matched
items results in a gap or mismatch. A positive gap denotes asset sensitivity and
normally means that an increase in interest rates would have a positive effect
on net interest income. On the other hand a negative gap denotes liability
sensitivity and normally means that a decline in interest rates would have a
positive effect in net interest income. However, because different types of
assets and liabilities with similar maturities may reprice at different rates or
may otherwise react differently to changes in overall market rates or
conditions, changes in prevailing interest rates may not necessarily have such
effects on net interest income.
Interest Rate Sensitivity Report as of June 30, 2000 shows that interest earning
assets maturing or repricing within one year exceed interest bearing liabilities
by $99.0 million. The Company monitors that the assets and liabilities are
closely matched to minimize interest rate risk.
The level of imbalance between the repricing of rate sensitive assets and rate
sensitive liabilities will be measured through a series of ratios. Substantially
all of the Company's assets and liabilities are denominated in dollars,
therefore the Company has no material foreign exchange risk. In addition, the
Company has no trading account securities, therefore it is not exposed to market
risk resulting from trading activities.
On a daily basis the Bank's Controller and the Bank's Treasurer are responsible
for measuring and managing market risk.
RESULTS OF OPERATIONS-SIX 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. It
constitutes the Company's principal source of income. Net interest income
increased to $32.3 million for the six months ended June 30, 2000 from $27.7
million for the same period in 1999, a 16.6 percent increase. The increase was
due largely to an increase in the net interest margin as well as an increase in
average earning assets. Average earning assets increased to $1.646 billion for
the six months ended June 30, 2000 from $1.517 billion for the same period in
1999, an 8.5 percent increase. Average loans and acceptances discounted
23
<PAGE> 25
increased to $1.182 billion for the six months ended June 30, 2000 from $1.165
billion for the same period in 1999, a 1.5 percent increase, despite the
reclassification of bearer debt securities underwritten as loans and considered
in the loan portfolio during 1999. Management changed its original intent to
hold these securities to maturity and approximately $166 million in foreign debt
securities were reclassified to investments available for sale. The overall
increase in loans was largely attributable to trade finance activities within
the Region. Net interest margin increased to 3.94 percent for the six months
ended June 30, 2000 from 3.68 percent for the same period in 1999, a 26 basis
point increase. This increase is due primarily to the increases in the prime
rate during the last six months which has in turn increased the base for pricing
commercial loans.
Interest income increased to $74.6 million for the six months ended June 30,
2000 from $63.5 million for the same period in 1999, a 17.5 percent increase,
reflecting the increase in commercial loan balances and the increase in
prevailing interest rates. Interest expense increased to $42.3 million for the
six months ended June 30, 2000 from $35.8 million for the same period in 1999,
an 18.2 percent increase. Average interest-bearing deposits increased to $1.440
billion for the six months ended June 30, 2000 from $1.329 billion for the same
period in 1999, an 8.4 percent increase. The growth in deposits was primarily a
result of the Company seeking additional deposits to fund asset growth.
24
<PAGE> 26
<TABLE>
<CAPTION>
YIELDS EARNED AND RATE PAID
-----------------------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------------------------------ --------------------------------------------
AVERAGE REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------------------------------------------ --------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL EARNING ASSETS
LOANS:
Commercial loans $1,058,511 $49,927 9.33% $1,038,509 $45,004 8.62%
Acceptances Discounted 114,067 5,455 9.46% 113,276 5,031 8.83%
Overdraft 7,475 878 23.23% 9,271 985 21.13%
Mortgage loans 2,108 85 7.98% 3,711 116 6.22%
------------------------------ ------------------------------
TOTAL LOANS 1,182,161 56,345 9.43% 1,164,767 51,136 8.73%
Time Deposit with Banks 153,161 7,278 9.40% 158,758 6,995 8.76%
Investments 259,924 9,466 7.20% 159,007 4,499 5.63%
Federal funds sold 51,137 1,518 5.87% 34,764 849 4.86%
------------------------------ --------- ------------------------------ -----------
Total Investments and Time Deposit
with Banks 464,222 18,262 7.78% 352,529 12,343 6.96%
Total Interest Earning assets 1,646,383 74,607 8.96% 1,517,296 63,479 8.32%
-------------- --------- ------------- -----------
Total non interest earning assets 86,765 104,533
---------------- -----------------
TOTAL ASSETS $1,733,148 $1,621,829
================ =================
Interest Bearing Liabilities
DEPOSITS:
NOW and savings accounts $21,916 265 2.39% $22,756 271 2.37%
Money Market 44,817 1,310 5.78% 44,762 1,028 4.57%
Presidential Money Market 68,578 1,921 5.54% 33,119 789 4.74%
Certificate of Deposits (including IRA) 1,217,235 35,794 5.82% 1,121,146 30,444 5.40%
Time Deposits with Banks (IBF) 87,530 2,365 5.34% 107,695 2,482 4.58%
------------------------------ --------- ------------------------------ -----------
TOTAL DEPOSITS 1,440,076 41,655 5.72% 1,329,478 35,014 5.24%
Trust preferred securities 12,650 617 9.75% 12,522 615 9.77%
Federal Funds Purchased 27 1 6.48% 2,734 103 7.49%
Other Borrowings -- -- --% 1,614 41 5.05%
------------------------------ --------- ------------------------------ -----------
Total interest bearing liabilities 1,452,753 42,273 5.76% 1,346,348 35,773 5.28%
------------------------------ --------- ------------------------------ -----------
Non interest bearing liabilities
Demand Deposits 78,032 73,940
Other Liabilities 56,076 71,832
---------------- -----------------
Total non interest bearing liabilities 134,108 145,772
Stockholders' equity 146,287 129,709
---------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,733,148 $1,621,829
================ =================
NET INTEREST INCOME/NET INTEREST SPREAD $32,334 3.21% $27,706 3.04%
============== ========= ============= ===========
MARGIN:
INTEREST INCOME/INTEREST EARNING ASSETS 9.09% 8.44%
INTEREST EXPENSE/INTEREST EARNING ASSETS 5.15% 4.76%
--------- -----------
NET INTEREST MARGIN 3.94% 3.68%
========= ===========
</TABLE>
25
<PAGE> 27
PROVISION FOR CREDIT LOSSES
The Company's provision for credit losses decreased to $750 thousand for the six
months ended June 30, 2000 from $2.6 million for the same period in 1999. The
level of the provision for the period decreased due to the following factors: a)
decrease in loans from December 31, 1999 to June 30, 2000, b) the relatively low
level of charge-offs to average loans during the period, c) the application of
the Bank's methodologies utilized in estimating the adequacy of the allowance
for loan losses did not reveal a need to increase the allowance and d) a
reallocation of specific reserves due to the payoff of certain criticized
foreign loans supported the increase in nonperforming loans without the need for
additional reserves. Net loan charge-offs during the first six months of 2000
amounted to $1.93 million compared to $2.74 million for the same period in 1999.
The allowance for credit losses increased from $12.7 million at June 30, 1999 to
$20.2 million at June 30, 2000.
NON-INTEREST INCOME
Non-interest income increased to $10.9 million for the six months ended June 30,
2000 compared to $9.4 million for the same period in 1999. The increase in gain
on sale of assets of $2.0 million related to the sale of foreign debt securities
previously written down. The increase in structuring and syndication fees of
$390 thousand, was offset by a decrease in trade finance fees and commissions of
$1.4 million.
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 Six Months Ended June 30,
-----------------------------------------------
1999 to 2000
2000 Percent Change 1999
------------- ---------------- -------------
<S> <C> <C> <C>
Trade finance fees and commissions $ 4,984 -22.5% $ 6,432
Structuring and syndication fees 2,187 21.7% 1,797
Customer service fees 849 10.1% 771
Gain on sale of assets 2,691 1157.5% 214
Other 188 7.4% 175
------------- ---------------- -------------
Total non-interest income $ 10,899 16.1% $ 9,389
============= ================ =============
</TABLE>
OPERATING EXPENSES
Operating expenses increased to $17.6 million for the six months ended June 30,
2000 from $14.6 million for the same period in 1999, a 20.6 percent increase.
The majority of this increase was in other losses and charge-offs which
increased to $2.6 million from $1.1 million largely as a result of a write off
of a receivable. This miscellaneous receivable represented $1.7 million due for
structuring and syndication services provided by the Bank, of which the customer
had made a partial payment. A dispute arose between the Bank and the customer
regarding the balance owed, which was settled and resulted in a write-off of $1
million and payment in full of the balance. The Company's efficiency ratio
increased to 41.6 percent for the six month period ended June 30, 2000 from 38.5
percent for the same period in 1999.
The following table sets forth details regarding the components of operating
expenses for the periods indicated.
26
<PAGE> 28
OPERATING EXPENSES
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------------------
1999 to 2000
2000 Percent Change 1999
----------- ----------------- -----------
<S> <C> <C> <C>
Employee compensation and benefits $ 7,069 8.6% $ 6,511
Occupancy and equipment 2,452 22.8% 1,997
Legal Expenses 1,071 -12.3% 1,221
Other losses & charge-offs 2,581 136.1% 1,093
Other operating expenses 4,419 16.0% 3,808
----------- ----------------- -----------
Total operating expenses $ 17,592 20.2% $ 14,630
=========== ================= ===========
</TABLE>
QUARTER OVERVIEW
The Company continued to experience growth in its core business resulting in Net
Income increasing by 17.5 percent when compared the quarter ended June 30, 2000
to the same period in 1999. The results were primarily affected by net interest
income after the provision for credit losses increased by 26.0 percent, offset
by non-interest income decreasing by 6 percent to $4.8 million for the three
months ended June 30, 2000, compared to $5.1 million for the same period in
1999. In addition, operating expenses increased to $8.6 million for the quarter
ended June 30, 2000 from $7.5 million for the same period in 1999. Below is a
detailed discussion of the specific changes in the results of operations.
RESULTS OF OPERATIONS - SECOND QUARTER
Net interest income increased to $15.8 million for the quarter ended June 30,
2000 from $14.3 million for the same period in 1999, a 10.5 percent increase.
This increase was due to an increase in average earning assets of 12.1 percent
to $1.663 billion, from $1.483 billion for the same period in 1999. Average
loans decreased to $1.121 billion after excluding $136 million in loans
reclassified to investments available for sale discussed earlier. In addition,
average investments increased by approximately $86 million to $344.9 million
after considering the reclassification of investments recorded at December 31,
1999. Net interest margin decreased by 10 basis points to 3.81 percent for the
quarter ended June 30, 2000, from 3.91 percent for the same period in 1999. The
primary reason for the decrease in the net interest margin is a result of
increased liquidity during the quarter ended June 30, 2000.
Interest income increased to $37.6 million for the quarter ended June 30, 2000
from $31.5 for the same period in 1999 a 19.4 percent increase reflecting the
increase in average investments. In addition, the yield earned on loans
increased by 73 basis points to 9.50 percent at June 30, 2000 from 8.77 percent
at the same period in 1999. Interest expense increased to $21.8 million, an
increase of 26.7 percent when compared to the same period in 1999. Average
interest bearing liabilities increased by 12.0 percent to $1.465 billion when
compared to the same period in 1999. The increase in average interest bearing
deposits was primarily in certificate of deposits which increased by 12.5
percent to $1.218 billion at June 30, 2000 when compared to the same period in
1999. In addition, the yield paid on interest bearing liabilities increased by
63 basis points to 5.89 percent for the three months ended June 30, 2000 when
compared to the same period in 1999.
27
<PAGE> 29
<TABLE>
<CAPTION>
YIELDS EARNED AND RATE PAID
----------------------------------------------------------------------------------------------------------------------------------
For The Quarter Ended
--------------------------------------------------------------------------------------
June 30, 2000 June 30, 1999
------------------------------------------- -----------------------------------------
Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate
------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL EARNING ASSETS
LOANS:
Commercial loans $996,724 $23,674 9.40% $1,048,923 $22,883 8.73%
Acceptances Discounted 113,569 2,733 9.52% 109,550 2,389 8.72%
Overdraft 9,191 491 21.13% 6,505 289 17.77%
Mortgage loans 2,089 42 7.95% 2,322 45 7.75%
------------------------------ ---------------------------
TOTAL LOANS 1,121,573 26,940 9.50% 1,167,300 25,606 8.77%
Time Deposit with Banks 144,214 3,437 9.43% 162,295 3,754 9.25%
Investments 344,565 6,414 7.36% 122,672 1,744 5.69%
Federal funds sold 52,386 815 6.15% 31,084 383 4.93%
------------------------------ ----------- --------------------------- ------------
Total Investments and Time Deposit
with Banks 541,165 10,666 7.80% 316,051 5,881 7.44%
Total Interest Earning assets 1,662,738 37,606 8.95% 1,483,351 31,487 8.49%
---------------- ----------- -------------- ------------
Total non interest earning assets 84,877 87,781
-------------- -------------
TOTAL ASSETS $1,747,615 $1,571,132
============== =============
INTEREST BEARING LIABILITIES
DEPOSITS:
NOW and savings accounts $21,663 133 2.43% $23,847 162 2.72%
Money Market 45,578 680 5.90% 43,686 499 4.57%
Presidential Money Market 71,577 1,015 5.61% 40,482 484 4.78%
Certificate of Deposits (including IRA) 1,218,136 18,301 5.94% 1,082,645 14,556 5.38%
Time Deposits with Banks (IBF)
and Other 95,344 1,361 5.65% 102,145 1,145 4.48%
------------------------------ ----------- --------------------------- ------------
TOTAL DEPOSITS 1,452,298 21,490 5.85% 1,292,805 16,846 5.21%
Trust preferred securities 12,650 308 9.74% 12,650 313 9.90%
Federal Funds Purchased -- -- --% -- -- 0.00%
Other Borrowings -- -- --% 3,101 39 5.03%
------------------------------ ----------- --------------------------- ------------
Total interest bearing liabilities 1,464,948 21,798 5.89% 1,308,556 17,198 5.26%
------------------------------ ----------- --------------------------- ------------
Non interest bearing liabilities
Demand Deposits 74,893 72,389
Other Liabilities 59,691 57,126
-------------- -------------
Total non interest bearing liabilities 134,584 129,515
Stockholders' equity 148,083 133,061
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,747,615 $1,571,132
============== =============
NET INTEREST INCOME/NET INTEREST SPREAD $15,808 3.06% $14,289 3.23%
================ =========== ============== ============
MARGIN
INTEREST INCOME/INTEREST EARNING ASSETS 9.07% 8.61%
INTEREST EXPENSE/INTEREST EARNING ASSETS 5.26% 4.70%
----------- ------------
NET INTEREST MARGIN 3.81% 3.91%
=========== ============
</TABLE>
28
<PAGE> 30
NON-INTEREST INCOME
Non-interest income decreased by six percent, $4.8 million for the three months
ended June 30, 2000 compared to $5.1 million for the same period in 1999. The
Company realized a gain on the sale of foreign debt securities of $1.2 million
during the three month period which offset decreases in trade finance fees and
structuring and syndication fees.
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 Three Months Ended June 30,
--------------------------------------------------------
2000 to 1999
2000 Percent Change 1999
---------------- ----------------- ------------
<S> <C> <C> <C>
Trade finance fees and commissions $ 2,219 -35.5% $ 3,442
Structuring and syndication fees 699 -42.7% 1,220
Customer service fees 449 26.1% 356
Gain on sale of assets 1,343 4874.1% 27
Other 84 50.0% 56
---------------- ----------------- ------------
Total non-interest income $ 4,794 -6.0% $ 5,101
================ ================= ============
</TABLE>
OPERATING EXPENSES
Operating expenses increased to $8.6 million for the quarter ended June 30, 2000
from $7.5 million for the same period in 1999 an increase of 15.0 percent. The
increase was primarily in employee compensation and benefits attributable to an
increase in the domestic commercial lending department that was added in the
second quarter to expand the Company's domestic loan activities.
OPERATING EXPENSES
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended June 30,
---------------------------------------------------
2000 to 1999
2000 Percent Change 1999
-------------- ---------------- -------------
<S> <C> <C> <C>
Employee compensation and benefits $ 3,783 19.5% $ 3,167
Occupancy and equipment 1,154 11.3% 1,037
Other operating expenses 3,641 11.8% 3,257
-------------- ---------------- -------------
Total operating expenses $ 8,578 15.0% $ 7,461
============== ================ =============
</TABLE>
29
<PAGE> 31
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On January 13, 1998 Development Specialists, Inc., the Liquidating Trustee of
the Model Imperial Liquidating Trust established under the Plan of
Reorganization in the Model Imperial, Inc. Chapter 11 Bankruptcy proceeding,
filed an action against Hamilton Bank in the United States Bankruptcy Court for
the Southern District of Florida objecting to Hamilton Bank's proof of claim in
the Chapter 11 proceeding and affirmatively seeking damages against Hamilton
Bank in excess of $34 million for alleged involvement with former officers and
directors of Model Imperial, Inc. in a scheme to defraud Model Imperial, Inc.
and its bank lenders. The action is one of several similar actions that were
filed by the Trustee against other defendants that were involved with Model
Imperial seeking essentially the same amount of damages as in the action against
Hamilton Bank. The Company believes the claims are without merit and is
vigorously defending the action. A trial of various bankruptcy preference claims
in excess of $12,000,000 was held in November, 1999. The Judge rendered a
decision on May 16, 2000 holding Hamilton Bank's proof of claim was subordinate
to DSI's and granting monetary bankruptcy preference damages against Hamilton
Bank in the amount of $2,448,148. A $600 thousand accrual for a probable loss
was recorded June 30, 2000. Following the Guidance of SFAS 5 and based on the
conclusions reached by our counsel, we estimated that it was probable that a
$600 thousand loss occurred. Both Hamilton Bank and DSI have appealed this
decision.
30
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 18, 2000 Hamilton Bancorp Inc.
/s/ J. Carlos Bernace
------------------------------------
J. Carlos Bernace,
Executive Vice President
/s/ Eva Lynn Hernandez
--------------------------------------
Eva Lynn Hernandez
Vice President - Finance, Controller
and Chief Accounting Officer
31
<PAGE> 33
Exhibit 1 of the Registrant's Form 10Q for the quarterly period ended June 30,
2000 is hereby amended to read as follows:
EXHIBIT 1
HAMILTON BANCORP INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
As Restated,
see Note 5
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ -------------------------------
2000 1999 2000 1999
--------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Basic
Weighted average number of common shares outstanding 10,081,147 10,065,908 10,081,147 10,061,037
Net income $7,556 $6,433 $15,973 $12,501
Basic earnings $0.75 $0.64 $1.58 $1.24
Diluted:
Weighted average number of common shares outstanding 10,081,147 10,065,908 10,081,147 10,061,037
Potential common shares outstanding - options 149,168 208,619 144,691 215,316
--------------- -------------- -------------- ----------------
Total common and potential common shares outstanding 10,230,315 10,274,527 10,225,838 10,276,353
Net income $7,556 $6,433 $15,973 $12,501
Diluted earnings per share $0.74 $0.63 $1.56 $1.22
</TABLE>
32
