<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(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, 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 (I.R.S. Employer
of 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 [ ]
1
<PAGE> 2
ITEM 1
The following interim financial statements have not been reviewed by the
Company's independent public accountants as required by Rule 10-01(d) of
Regulation S-X (see Note 1).
PART I. FINANCIAL INFORMATION
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CASH AND DEMAND DEPOSITS WITH OTHER BANKS $ 23,613 $ 21,710
FEDERAL FUNDS SOLD 41,718 63,400
----------- -----------
Total cash and cash equivalents 65,331 85,110
INTEREST EARNING DEPOSITS WITH OTHER BANKS 119,472 187,685
SECURITIES AVAILABLE FOR SALE 314,136 274,277
LOANS-NET 1,152,826 1,091,976
DUE FROM CUSTOMERS ON BANKERS ACCEPTANCES 33,987 27,767
DUE FROM CUSTOMERS ON DEFERRED PAYMENT LETTERS OF CREDIT 842 5,835
PROPERTY AND EQUIPMENT-NET 4,659 5,209
ACCRUED INTEREST RECEIVABLE 16,446 19,111
GOODWILL-NET 1,527 1,658
OTHER ASSETS 23,690 22,672
----------- -----------
TOTAL $ 1,732,916 $ 1,721,300
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 1,528,841 $ 1,535,606
TRUST PREFERRED SECURITIES 12,650 12,650
BANKERS ACCEPTANCES OUTSTANDING 33,987 27,767
DEFERRED PAYMENT LETTERS OF CREDIT OUTSTANDING 842 5,835
OTHER LIABILITIES 10,984 5,544
----------- -----------
Total liabilities 1,587,304 1,587,402
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 75,000,000 shares authorized, 10,081,147 shares
issued and outstanding at September 30, 2000 and December 31, 1999 101 101
Capital surplus 60,701 60,708
Retained earnings 91,349 82,175
Accumulated other comprehensive loss (6,539) (9,086)
----------- -----------
Total stockholders' equity 145,612 133,898
----------- -----------
TOTAL $ 1,732,916 $ 1,721,300
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
2000 1999 2000 1999
------------ ------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 28,679 $ 27,490 $ 85,005 $ 78,627
Deposits with other banks 2,884 4,527 10,162 11,522
Investment securities 6,622 1,970 16,107 6,469
Federal funds sold 731 255 2,249 1,104
------------ ------------ ----------- -----------
Total 38,916 34,242 113,523 97,722
INTEREST EXPENSE:
Deposits 22,639 17,544 64,294 52,558
Trust preferred securities 308 308 925 923
Federal funds purchased and other borrowing 1 33 2 178
------------ ------------ ----------- -----------
Total 22,948 17,885 65,221 53,659
------------ ------------ ----------- -----------
NET INTEREST INCOME 15,968 16,357 48,302 44,063
PROVISION FOR CREDIT LOSSES 13,300 15,019 12,250 17,665
------------ ------------ ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES 4,468 1,338 36,052 26,398
------------ ------------ ----------- -----------
NON-INTEREST INCOME:
Trade finance fees and commissions 2,152 2,948 7,136 9,380
Structuring and syndication fees 531 1,102 2,718 2,899
Customer service fees 363 363 1,213 1,136
Gain on sale of assets 549 346 1,799 560
Other 101 63 288 236
------------ ------------ ----------- -----------
Total 3,696 4,822 13,154 14,211
------------ ------------ ----------- -----------
OPERATING EXPENSES:
Employee compensation and benefits 3,630 3,258 10,698 9,769
Occupancy and equipment 1,217 1,118 3,670 3,115
Legal Reserve 3,924 4,524
Write down of Available for Sale Security 4,320 4,320
Other 4,561 2,934 12,032 9,056
------------ ------------ ----------- -----------
Total 17,652 7,310 35,244 21,940
------------ ------------ ----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (11,288) (1,150) 13,962 18,669
PROVISION FOR (CREDIT) INCOME TAXES (5,702) (414) 5,181 6,904
------------ ------------ ----------- -----------
NET INCOME (LOSS) $ (5,586) $ (736) $ 8,781 $ 11,765
============ ============ =========== ===========
NET INCOME (LOSS) PER COMMON SHARE:
BASIC $ (0.55) $ (0.07) $ 0.91 $ 1.17
============ ============ =========== ===========
DILUTED $ (0.55) $ (0.07) $ 0.90 $ 1.14
============ ============ =========== ===========
AVERAGE SHARES OUTSTANDING:
BASIC 10,081,147 10,076,147 10,081,147 10,066,107
============ ============ =========== ===========
DILUTED 10,219,678 10,284,150 10,223,832 10,278,347
============ ============ =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2000 1999 2000 1999
-------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $ (5,586) $ (736) $ 9,174 $ 11,765
OTHER COMPREHENSIVE INCOME (LOSS), Net of tax:
Net change in unrealized loss on securities available for sale
during the period 3,125 213 5,375 627
Less: Reclassification adjustment for gains included in
net income (228) -- (266) --
Less: Reclassification adjustment for write off of a foreign
bank stock -- -- -- (187)
Less: Reclassification adjustment for write down of a foreign
debt security (2,298) -- (2,570) --
-------- -------- -------- --------
Total 599 213 2,539 440
-------- -------- -------- --------
COMPREHENSIVE INCOME (LOSS) $ (4,987) $ (523) $ 11,713 $ 12,205
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Accumulated
Common Stock Other Total
------------------------ Capital Retained Comprehensive Stockholders'
Shares Amount Surplus Earnings Loss Equity
----------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 (audited) 10,081,147 $ 101 $60,708 $82,175 ($9,086) $133,898
Adjustment of tax liabilities
due to stock options excercized (6) (6)
Net change in unrealized loss on
securities available for sale, net of taxes 2,547 2,547
Net income for the nine months ended
September 30, 2000 9,174 9,174
----------- ------- ------- ------- ------- --------
Balance as of September 30, 2000
(Unaudited) 10,081,147 $ 101 $60,702 $91,348 ($6,539) $145,612
=========== ======= ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For Nine Months Ended
September 30,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,174 $ 11,765
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,110 928
Provision for credit losses 14,050 17,665
Deferred tax provision (credit) 371 (4,686)
Write down/write off of available for sale security 4,320 187
Net gain on sale of loans 0 (534)
Net gain on sale of other real estate owned 0 (26)
Net gain on sale of fixed assets (13) 0
Net gain on sale of investments (1,714) 0
Proceeds from the sale of bankers acceptances 54,329 18,373
Increase in accrued interest receivable and other assets (229) (11,779)
Increase (decrease) in other liabilities 5,431 (673)
--------- ---------
Net cash provided by operating activities 86,829 31,220
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in interest-earning deposits with other banks 68,213 (19,959)
Purchase of securities available for sale (800,021) (572,029)
Purchase of securities held to maturity 0 (14,703)
Proceeds from sales and maturities of securities available for sale 761,647 593,819
Purchase of loan participations 0 (55,815)
Proceeds from paydowns of securities held to maturity 0 2,607
Proceeds from sale of loans 0 18,186
Increase in loans-net (129,228) (37,939)
Purchases of property and equipment-net (454) (1,230)
Proceeds from sale of other real estate owned 0 38
--------- ---------
Net cash used in investing activities (99,843) (87,025)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (6,765) 7,218
Proceeds from trust preferred securities offering 0 1,650
Payment of other borrowing 0 (6,116)
Net proceeds from exercise of common stock options 0 118
--------- ---------
Net cash (used in) provided by financing activities (6,765) 2,870
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (19,779) (52,935)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 85,110 111,790
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 65,331 $ 58,855
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 65,124 $ 54,625
========= =========
Income taxes paid during the period $ 7,548 $ 10,845
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
HAMILTON BANCORP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1: BASIS OF PRESENTATION
The consolidated statements of condition for Hamilton Bancorp Inc. and
Subsidiaries (the "Company") as of September 30, 2000 and December 31, 1999, the
related consolidated statements of income, stockholders' equity and the cash
flows for the nine months ended September 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 Company and the Office of the Comptroller of the Currency ("OCC"), a
regulatory agency regulating the Company's subsidiary, Hamilton Bank, N.A. (the
"Bank"), have differing interpretations as to the accounting treatment for
certain transactions involving the Bank. While the Bank has taken the actions
directed by the OCC for regulatory reporting purposes only, it has disagreed
with the OCC's interpretations of the regulatory accounting rules. The OCC
believes the accounting for certain transactions recorded in the Bank's amended
regulatory filings should also be reflected in its financial statements prepared
in accordance with Generally Accepted Accounting Principals ("The Financial
Statements"). If such adjustments were made to the financial statements, 1998
net income would decrease by approximately $15 million and 1999 other
comprehensive income would increase by $15 million. Total stockholder's equity
would remain unchanged. The Company and the Bank's audit committees have
received a report from independent counsel relating to such transactions. The
report has been delivered to the Company's independent accountants. In addition,
the Company received comments from the Securities and Exchange Commission
("SEC") with respect to its Form 10-K for the year ended December 31, 1999 and
its Form 10-Qs for the quarters ended March 31, 2000 and June 30, 2000, shortly
prior to the filing deadline for the September Form 10-Q. The Company and its
independent accountants are in the process of reviewing the independent
counsel's report. Until this review is completed, the independent accountants
will not complete their review of the September 30 Form 10-Q. This review is
required by Rule 10-01(d) of Regulation S-X, a requirement that became effective
only earlier this year. Accordingly, this Form 10-Q is being filed without such
required review. The Company does not believe that changes, if any, will either
adversely affect 2000 earnings or have any material adverse effect on its
business or operations.
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 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 are computed by dividing the Company's net income by
the weighted average number of shares outstanding during the period.
Diluted earnings per share are 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 on April 27, 2000, the
Company was directed by the Federal Reserve to file required reports following
generally accepted accounting principles and not in accordance with the
regulatory account interpretations of the OCC. On August 28, 2000, the Company
was directed by the Federal Reserve System to re-file its reports in accordance
with the primary regulator's interpretations of GAAP. The Hamilton Bank's
primary regulator is the OCC.
Hamilton Bank was directed by the OCC to record certain adjustments for
regulatory reporting purposes discussed in the Capital Resources section. These
adjustments amount to $34,218,000 and $42,651,000 for September 30, 2000 and
December 31, 1999, respectively. The notes to the financial statements of
December 31, 1999 discussed additional adjustments as disputed items not
recorded by Hamilton Bank. Subsequently and in the interest of regulatory
compliance, these adjustments in the amount of $17,776,000 were recorded for
regulatory reporting purposes and the corresponding reports were amended as
mandated by the OCC. During the first nine months, these adjustments were
reduced by the following events: (i) a reduction of the allocated transfer risk
reserve of $915,000 and (ii) realized gains in the sales of assets previously
written down of $6,301,000.
On October 26, 2000, the OCC directed Hamilton Bank to take an additional
$9,036,000 in allocated transfer risk reserves; specifically a 90% allocated
reserve on one borrower. This amount was required by the OCC because certain
obligations of one Ecuadorian borrower became past due greater than 30 days.
Hamilton Bank has appealed this decision because the borrower brought these
obligations current prior to the end of the regulatory reporting period.
Hamilton Bank has appealed this action under OCC Bulletin 96-18.
7
<PAGE> 8
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.
FINANCIAL CONDITION - SEPTEMBER 30, 2000 VS. DECEMBER 31, 1999.
Total consolidated assets remained relatively the same at $1.73 billion at
September 30, 2000 although there were changes within the asset categories. Cash
and cash equivalents decreased by $19.8 million or 23.2 percent. Securities
available for sale increased by 14.5 percent to $314.1 million of which
approximately $109 million represents additional liquidity. Total loans
increased by $61.6 million or 5.5 percent, primarily domestic loans.
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 $65.3 million at September
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 $119.5 million at
September 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 nine months ended September 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 $314.1 million at September 30, 2000 from
$274.3 million at December 31, 1999. The increase has been primarily in U.S.
treasury and government agency securities and to a lesser extent U.S.
government mortgage backed securities. The U.S. treasury and 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.
8
<PAGE> 9
LOANS
The Company's gross loan portfolio increased by $61.6 million, during the first
nine months of 2000 in relation to the year ended December 31, 1999. This
increase was primarily in domestic commercial loans and acceptances and to a
lesser extent, foreign commercial loans. Details on the loans by type are shown
in the table below. At September 30, 2000 approximately 45.0 percent of the
Company's portfolio consisted of loans to domestic borrowers and 55.0 percent of
the Company's portfolio consisted of loans to foreign borrowers. The Company's
loan portfolio is relatively short-term, as approximately 58.8 and 72.6 percent
of loans at September 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>
September 30, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Domestic:
Commercial (1) $ 446,177 $ 394,841
Acceptances discounted 81,963 59,040
Residential mortgages 2,025 2,140
---------- ----------
Subtotal Domestic 530,165 456,021
---------- ----------
Foreign:
Banks and other financial institutions 184,139 224,155
Commercial and industrial (1) 380,544 338,411
Acceptances discounted 41,522 59,256
Government and official institutions 41,410 38,358
---------- ----------
Subtotal Foreign 647,615 660,180
---------- ----------
Total Loans $1,177,780 $1,116,201
========== ==========
</TABLE>
(1) Includes pre-export financing, warehouse receipts and refinancing of letter
of credits.
9
<PAGE> 10
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 cross-border 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 September 30, 2000 approximately 32.5 percent in principal amount of the
Company's loans were outstanding to borrowers in five countries other than the
United States: Panama (11.5 percent), Guatemala (8.9 percent), El Salvador (4.7
percent), Jamaica (3.7 percent) and Dominican Republic (3.7 percent).
Panama loan exposure continues to be over 10 percent of loans and has increased
to 12.4 percent of total loans at September 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>
September 30, 2000 December 31, 1999
-------------------------- -------------------------
Percent of Percent of
Country Amount Total Loans Amount Total Loans
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
United States $ 530,165 45.0% $ 456,021 40.9%
Argentina (1) -- -- 35,494 3.2%
Brazil 12,859 1.1% 49,214 4.4%
British West Indies (1) -- 22,082 2.0%
Colombia 23,299 2.0% 28,437 2.5%
Dominican Republic 43,480 3.7% 41,604 3.7%
Ecuador 40,930 3.5% 43,622 3.9%
El Salvador 54,979 4.7% 45,847 4.1%
Guatemala 105,290 8.9% 66,531 6.0%
Honduras 40,500 3.4% 42,352 3.8%
Jamaica 44,091 3.7% 28,628 2.6%
Panama 134,961 11.5% 127,419 11.4%
Peru 37,687 3.2% 29,648 2.7%
Venezuela 16,134 1.4% 17,842 1.6%
Other (2) 93,405 7.9% 81,460 7.3%
---------- ----- ---------- ----------
Total $1,177,780 100.0% $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.
10
<PAGE> 11
At September 30, 2000 approximately 25.1 percent of total assets were
cross-border outstandings to borrowers in five countries other than the United
States: Panama (7.7 percent), Guatemala (6.5 percent), Ecuador (4.2 percent), El
Salvador (3.6 percent) and Dominican Republic (3.1 percent).
Cross-border outstandings could be less than loans by country since cross-border
outstandings may be netted against legally enforceable, written guarantees of
principles 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 it is held and realizable by the
lender outside of the borrower's country.
TOTAL CROSS-BORDER OUTSTANDINGS BY COUNTRY
(Dollars in millions)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ ------------------
% of Total % of Total
Amount Assets Amount Assets
------ ------ ------ ------
<S> <C> <C> <C> <C>
Argentina $ 48 2.8% $ 113 6.6%
Bahamas (1) -- -- 21 1.2%
Bolivia 13 0.8% 18 1.0%
Brazil 50 2.9% 173 10.1%
Colombia 39 2.3% 48 2.8%
Dominican Republic 54 3.1% 55 3.2%
Ecuador 72 4.2% 78 4.5%
El Salvador 62 3.6% 44 2.6%
Guatemala 113 6.5% 68 4.0%
Honduras 32 1.9% 43 2.5%
Jamaica 47 2.7% 35 2.0%
Mexico (1) -- 0.0% 20 1.2%
Panama 133 7.7% 116 6.7%
Peru 37 2.1% 42 2.4%
Suriname 33 1.9% 32 1.9%
United Kingdom (1) -- -- 15 0.9%
Venezuela 16 0.9% 17 1.0%
Other (2) 85 4.9% 75 4.4%
---- ---- ------ ----
Total $834 48.3% $1,013 58.9%
==== ==== ====== ====
</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.
11
<PAGE> 12
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 9.6 percent to $418.7 million for the nine months ended September
30, 2000 when compared to the same period in 1999. This increase is due to
greater domestic import financing activities, which increased by 20.9 percent,
offset by export financing activities, which decreased by 3.5 percent.
<TABLE>
<CAPTION>
Nine Months Ended September 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) $170,265 $18,918 $176,363 $19,596 $227,904 $18,992
Import Letters of Credit (1) 248,425 27,603 205,554 22,839 296,943 24,745
-------- ------- -------- ------- -------- -------
Total $418,690 $46,520 $381,917 $42,435 $524,847 $43,737
======== ======= ======== ======= ======== =======
</TABLE>
(1) Represents certain contingent liabilities not reflected on the
Company's balance sheet.
12
<PAGE> 13
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 9.9 percent from December 31, 1999 to September 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)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
-------- --------
<S> <C> <C>
Aruba (2) $ -- $ 3,720
Costa Rica 2,006 9,893
Dominican Republic 23,969 4,707
El Salvador (2) -- 2,734
Guatemala 8,686 9,475
Guyana 1,419 4,165
Haiti 1,884 5,705
Honduras 2,055 4,174
Jamaica (2) 10,199 --
Panama 12,193 14,242
Paraguay (2) 2,462 --
Peru 1,950 3,573
Suriname 2,367 5,677
United States 60,769 74,643
Venezuela (2) -- 2,593
Other (3) 6,456 6,143
-------- --------
Total $136,415 $151,444
======== ========
</TABLE>
(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.
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, 2000
the allowance for credit losses was approximately $22.1 million.
13
<PAGE> 14
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) 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
loan 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.
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.
14
<PAGE> 15
CREDIT LOSS EXPERIENCE
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Balance of allowance for credit losses at beginning of period $ 21,411 $ 12,794
Charge-offs:
Domestic:
Commercial (9,274) (3,299)
Acceptances (297) --
Installment -- (5)
----------- -----------
Total Domestic (9,571) (3,304)
----------- -----------
Foreign:
Banks and other financial institutions (200) (2,330)
Commercial and industrial (3,693) (6,216)
----------- -----------
Total Foreign (3,893) (8,546)
----------- -----------
Total charge-offs (13,464) (11,850)
----------- -----------
Recoveries:
Domestic:
Commercial 2 4
Foreign:
Banks and other financial institutions 70 163
----------- -----------
Total recoveries 72 167
----------- -----------
Net (charge-offs) recoveries (13,392) (11,683)
Provision for credit losses 14,050 20,300
----------- -----------
Balance at end of the period $ 22,069 $ 21,411
=========== ===========
Average loans $ 1,165,839 $ 1,194,667
Total loans $ 1,177,780 $ 1,116,201
Net charge-offs to average loans 1.15% 0.98%
Allowance to total loans 1.87% 1.92%
</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. Because of the decrease in foreign loans,
the allowance allocated to foreign loans was also reduced. The level of the
allowance allocated to foreign loans was influenced by the strengthening of the
Latin American economies, the collateral composition of the non-performing
loans, and the reduction of Ecuadorian loans.
15
<PAGE> 16
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
(In thousands)
<TABLE>
<CAPTION>
As of As of
September 30, December 31,
2000 1999
--------- ---------
<S> <C> <C>
Allocation of the allowance by category of loans:
Domestic:
Commercial $ 5,918 $ 3,199
Acceptances 436 269
Residential 8 10
--------- ---------
Total domestic 6,362 3,478
Foreign:
Banks and other financial institutions 2,510 5,152
Commercial and industrial 12,816 11,015
Acceptances discounted 222 270
Government and official institutions 159 1,496
--------- ---------
Total foreign 15,707 17,933
Total $ 22,069 $ 21,411
========= =========
Percent of loans in each category to total loans:
Domestic:
Commercial 37.9% 35.4%
Acceptances 6.9% 5.3%
Residential 0.2% 0.2%
--------- ---------
Total domestic 45.0% 40.9%
Foreign:
Banks and other financial institutions 15.6% 20.1%
Commercial and industrial 32.4% 30.3%
Acceptances discounted 3.5% 5.3%
Government and official Institutions 3.5% 3.4%
--------- ---------
Total foreign 55.0% 59.1%
Total 100.0% 100.0%
========= =========
</TABLE>
16
<PAGE> 17
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES ALLOCATED TO FOREIGN LOANS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------- ---------
<S> <C> <C>
Balance, beginning of year $ 17,933 $ 11,379
Provision for credit losses 1,597 14,937
Net charge-offs (3,823) (8,383)
--------- ---------
Balance, end of period $ 15,707 $ 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 historically 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
non-performing loans at the dates indicated.
NON-PERFORMING LOANS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------- ---------
<S> <C> <C>
Domestic:
Non accrual $ 7,247 $ 6,995
Past due over 90 days and accruing 134 --
--------- ---------
Total domestic nonperforming loans 7,381 6,995
--------- ---------
Foreign:
Non accrual 16,165 9,588
Past due over 90 days and accruing 1,284 1,992
--------- ---------
Total foreign nonperforming loans 17,449 11,580
--------- ---------
Total nonperforming loans $ 24,830 $ 18,575
========= =========
Total nonperforming loans to total loans 1.98% 1.66%
Total nonperforming assets to total assets 1.59% 1.08%
</TABLE>
Total non-performing loans increased from $18.6 million at December 31, 1999 to
$24.8 million at September 30, 2000, or a $6.2 million increase. Total
non-performing loans were impacted by foreign non-performing loans increasing
from $11.6 million to $17.4 million from December 31, 1999 to September 30,
2000, respectively. This increase was largely due to a $6.4 million
reclassification of a non-performing domestic loan to foreign because the
underlying security and primary source of repayment for this obligation was
foreign. Total non-performing loans was also affected by an increase in domestic
non-performing loans. Domestic non-performing loans increased from $7.0 million
at December 31, 1999 to $7.3 million at September 30, 2000. This change of $300
thousand was the result of an increase of $17.5 million in non-
17
<PAGE> 18
performing domestic loans during the first six months of 2000 offset by a
charge-off totaling $9.2 million during the third quarter, the collection of a
non-performing loan of $1.7 million and the $6.4 million reclassification of a
domestic non-performing loan to a foreign non-performing loan status. The
substantial increase in non-performing domestic loans during the first six
months was largely attributable to one domestic relationship. Subsequent to
September 30, 2000, approximately $1 million of the foreign loans past due over
90 days and accruing was paid off.
At September 30, 2000, the Company had $4.0 million in non-performing investment
securities and other assets compared to no non-performing investment securities
and other assets at December 31, 1999. During the third quarter management
determined that a non-performing investment had an other than temporary decline
in its fair value, therefore a write-off of $4.3 million was recorded in
September 30, 2000. This write-off was recorded by a decrease in the amortized
cost of the security and charging $4.3 million to other operating expenses.
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 $34.0 million and $842 thousand, respectively, at September 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 each respective branch
area.
Total deposits were $1.529 billion at September 30, 2000 compared to $1.536
billion at December 31, 1999. The decrease in deposits during the nine month
period was largely in certificates of deposits under $100,000, which decreased
by $65.8 million. This decrease was offset by increases in certificates of
deposit over $100,000 and overnight funds of $42.1 and $34.7 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 September 30, 2000:
MATURITIES OF AND AMOUNTS OF CERTIFICATES OF DEPOSIT AND OTHER TIME DEPOSITS
$100,000 OR MORE
(In thousands)
<TABLE>
<CAPTION>
Certificates Other Time
of Deposit Deposits
$100,000 $100,000
or More or More Total
-------- ------- --------
<S> <C> <C> <C>
Three months or less $107,456 $12,116 $119,572
Over 3 through 6 months 91,818 1,178 92,996
Over 6 through 12 months 193,015 7,043 200,058
Over 12 months 59,220 -- 59,220
-------- ------- --------
Total $451,509 $20,337 $471,846
======== ======= ========
</TABLE>
Stockholders' Equity
The Company's stockholders' equity at September 30, 2000 was $145.2 million
compared to $133.9 million at December 31, 1999. During this period
stockholders' equity increased by $11.3 million primarily due to the retention
of net income of $8.8 million for the nine months ended September 30, 2000 and
the recovery in market value of the securities available for sale which reduced
the accumulated other comprehensive loss by $2.5 million.
18
<PAGE> 19
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, 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.
INTEREST RATE SENSITIVITY REPORT
(Dollars in thousands)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
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 $619,839 $114,990 $134,028 $ 99,654 $186,565 $ 22,704 $1,177,780
Federal funds sold 41,718 41,718
Investment securities 47,661 107,072 39,694 32,463 23,453 58,579 308,922
Interest earning deposits with
other banks 30,466 22,333 45,895 19,500 1,278 -- 119,472
---------------------------------------------------------------------------------------
Total 739,684 244,395 219,617 151,617 211,296 81,283 1,647,892
---------------------------------------------------------------------------------------
Funding Sources:
Savings and transaction deposits 114,215 -- -- 114,215
Certificates of deposits of $100K or more 42,239 65,217 91,818 193,015 59,220 451,509
Certificates of deposits under $100K 68,772 154,355 110,294 278,736 138,839 10 751,006
Other time deposits 6,139 5,977 1,178 7,043 20,337
Funds overnight 98,100 98,100
Trust preferred securities 12,650 12,650
---------------------------------------------------------------------------------------
Total $329,465 $225,549 $203,290 $ 478,794 $198,059 $ 12,660 $1,447,817
=======================================================================================
Interest sensitivity gap $410,219 $ 18,846 $ 16,327 $(327,177) $ 13,237 $ 68,623 $ 200,075
=======================================================================================
Cumulative gap $410,219 $429,065 $445,392 $ 118,215 $131,452 $200,075
==========================================================================
Cumulative gap as a percentage
of total earning assets 24.89% 26.04% 27.03% 7.17% 7.98% 12.14%
==========================================================================
</TABLE>
19
<PAGE> 20
LIQUIDITY
Cash and cash equivalents decreased by $19.8 million from December 31, 1999 to
September 30, 2000. During the first nine months of 2000, net cash provided by
operating activities was $86.8 million, net cash used in investing activities
was $99.8 million and net cash used in financing activities was $6.8 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 September 30, 2000 interest-earning assets maturing or repricing
within six months were $1.204 billion, representing 73.0 percent of total
earning assets. Earning assets maturing or repricing within one year were $1.355
billion or 82.3 percent of total earning assets. The interest bearing
liabilities maturing within six months were $758.3 million or 52.4 percent of
total interest bearing liabilities and maturing within one year were $1.237
billion or 85.5 percent of the total at September 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 September 30, 2000 were $317.6 million, 18.4
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 September 30, 2000 the
Company had been advised of $27 million in available interbank funding.
CAPITAL RESOURCES
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 and to take write downs in its regulatory Call
Reports on certain debt instruments retroactive to 1999 and 1998. The Bank had
already established such transfer risk reserves and took such write downs in its
regulatory Call Reports for the year ended December 31, 1999. Pursuant to the
OCC requirements, 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 continuing discussions with the OCC regarding the correct interpretation of
various definitions in the transfer risk reserves regulations. In an attempt to
resolve the "write down" issue, the Company and the Bank have asked their
counsel, Greenberg Traurig, to independently review the facts underlying the
events that led to the accounting disagreement and render a report issued in
November 2000 which the Bank has shared with its accountants. The Accountants
review and overall conclusions may possibly result in an amendment which the
Company believes would have no adverse effect to 2000 earnings. The OCC
initiated formal administrative action in February 2000 under Section 8 of the
Federal Deposit Insurance Act which the Bank contested in appropriate
administrative actions within the OCC. On September 8, 2000 the Bank and the OCC
settled the formal administrative action by entering into a cease and desist
order by consent. Among other things, the consent order contains certain
accounting and capital requirements and requires certain reports and filings,
all of which the Bank believes it either has complied with or will be in
compliance with by December 31, 2000, except for certain reports which it will
prepare and deliver in a timely manner under the consent order. Inasmuch as the
Bank had already taken the transfer risk reserve and write downs directed by the
OCC, the consent order does not have any material effect on the Company's
financial statements prepared in accordance with generally accepted accounting
principles. The capital ratios set forth below also reflect the transfer risk
reserve and write downs directed by the OCC. Under applicable regulatory
guidelines, 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
("FDIC"). The Bank has received approval from the FDIC for up to $50,000,000 in
"brokered deposits." The Bank does not anticipate that either of such
restrictions will have any material adverse effect on its business or
operations.
20
<PAGE> 21
COMPANY CAPITAL RATIOS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
-------------------- -----------------------
Amount Ratio Amount Ratio
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Tier 1 risk-weighted
Capital:
Actual $130,919 10.7% $115,273 9.9%
Minimum 49,112 4.0% 46,457 4.0%
Total risk-weighted
Capital:
Actual 146,789 12.0% 130,328 11.2%
Minimum 98,224 8.0% 94,037 8.0%
Leverage:
Actual 130,919 7.7% 115,273 6.8%
Minimum 51,123 3.0% 50,685 3.0%
</TABLE>
BANK CAPITAL RATIOS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
-------------------- -----------------------
Amount Ratio Amount Ratio
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Tier 1 risk-weighted capital:
Actual $127,576 10.5% $121,497 10.2%
Minimum required by OCC Consent Order 121,867 10.0%
Minimum to be well capitalized 73,120 6.0% 71,633 6.0%
Minimum to be adequately capitalized 48,747 4.0% 47,755 4.0%
Total risk-weighted capital:
Actual 143,333 11.8% 136,501 11.4%
Minimum required by OCC Consent Order 146,241 12.0%
Minimum to be well capitalized 121,867 10.0% 119,389 10.0%
Minimum to be adequately capitalized 97,494 8.0% 95,511 8.0%
Leverage:
Actual 127,576 7.5% 121,497 7.1%
Minimum required by OCC Consent Order 118,774 7.0%
Minimum to be well capitalized 84,839 5.0% 85,629 5.0%
Minimum to be adequately capitalized 67,871 4.0% 68,503 4.0%
</TABLE>
As part of the consent order executed between the Bank and the OCC on September
8, 2000, the Bank is required to maintain minimum capital ratios beyond those of
a "well capitalized" bank as defined by the regulatory agencies. As of September
30, 2000, the Bank met these minimum requirements with the exception of the
total risk-weighted capital ratio. The Bank began taking action to be in
compliance with this minimum ratio
21
<PAGE> 22
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 if the
instrument is payable in a currency other than dollars. The Company generally
does not hold a substantial amount of instruments denominated in currency other
than U.S. dollars. When it does, however, it mitigates this risk by hedging the
currency through forward contracts."
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 September 30, 2000 shows that interest
earning assets maturing or repricing within one year exceed interest bearing
liabilities by $118.2 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.
The Company holds substantially all of its assets in U.S. dollars; therefore the
risk related to changes in foreign exchange rates is minimal. Changes in
exchange rates in the Region would not expose the assets to foreign exchange
risk, since the obligations are to be repaid in dollars. However, the change in
foreign exchange rates could affect the ability of the borrower to repay their
obligation, which would be addressed in the Company's credit risk analysis.
Credit risk analysis related to the assets is discussed in the Allowance for
Credit Losses section.
RESULTS OF OPERATIONS-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. It
constitutes the Company's principal source of income. Net interest income
increased to $48.3 million for the nine months ended September 30, 2000 from
$44.1 million for the same period in 1999, a 9.6 percent increase. The increase
was due largely to an increase in average earning assets. Average earning assets
increased to $1.650 billion for the
22
<PAGE> 23
nine months ended September 30, 2000 from $1.523 billion for the same period in
1999, an 8.4 percent increase. Average loans and acceptances discounted
decreased slightly to $1.167 billion for the nine months ended September 30,
2000 from $1.173 billion for the same period in 1999, this was due primarily to
the reclassification of foreign debt securities from loans to available for
sale. 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 at December 31, 1999. The overall
increase in loans was largely attributable to domestic loan growth. Net interest
margin was relatively flat increasing to 3.90 percent for the nine months ended
September 30, 2000 from 3.87 percent for the same period in 1999, a three basis
point increase.
Interest income increased to $113.5 million for the nine months ended September
30, 2000 from $97.7 million for the same period in 1999, a 16.2 percent
increase, reflecting the increase in average earning assets as well as an
increase in prevailing interest rates. Interest expense increased to $65.2
million for the nine months ended September 30, 2000 from $53.7 million for the
same period in 1999, a 21.6 percent increase. Cost of deposits increased 65
basis points from 5.21% for the nine months ended September 30, 1999 to 5.86% in
2000. This was caused primarily by rising rates in the Florida certificate of
deposit market as a result of rising interest rates in the United States during
the past twelve months. Average interest-bearing deposits increased to $1.441
billion for the nine months ended September 30, 2000 from $1.331 billion for the
same period in 1999, an 8.2 percent increase. The growth in deposits was
primarily a result of the Company seeking additional deposits to fund asset
growth.
23
<PAGE> 24
<TABLE>
<CAPTION>
YIELDS EARNED AND RATE PAID
----------------------------------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 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 $1,042,993 $ 75,258 9.48% $1,051,134 $ 69,703 8.74%
Acceptances Discounted 114,013 8,422 9.71% 110,611 7,417 8.84%
Overdraft 8,389 1,199 18.78% 8,022 1,347 22.14%
Mortgage loans 2,086 126 7.94% 3,194 160 6.61%
---------- -------- ---------- --------
TOTAL LOANS 1,167,481 85,005 9.57% 1,172,961 78,627 8.84%
Time Deposit with Banks 143,042 10,162 9.33% 171,931 11,522 8.84%
Investments 290,875 16,107 7.28% 148,120 6,469 5.76%
Federal funds sold 48,515 2,249 6.09% 29,659 1,104 4.91%
---------- -------- ----- ---------- -------- ----
Total Investments and Time Deposit
with Banks 482,432 28,518 7.77% 349,710 19,095 7.20%
Total Interest Earning assets 1,649,913 113,523 9.04% 1,522,671 97,722 8.46%
-------- ----- -------- ----
Total non interest earning assets 85,674 104,533
---------- ----------
TOTAL ASSETS $1,735,587 $1,627,204
========== ==========
INTEREST BEARING LIABILITIES
DEPOSITS:
NOW and savings accounts $ 21,660 400 2.43% $ 23,398 425 2.40%
Money Market 44,650 2,008 5.91% 44,081 1,558 4.66%
Presidential Money Market 69,427 2,961 5.60% 38,797 1,391 4.73%
Certificate of Deposits
(including IRA) 1,203,968 54,628 5.96% 1,126,761 45,750 5.35%
Time Deposits with Banks (IBF) 101,043 4,297 5.59% 98,129 3,434 4.61%
---------- -------- ----- ---------- -------- ----
TOTAL DEPOSITS 1,440,748 64,294 5.86% 1,331,166 52,558 5.21%
Trust preferred securities 12,650 925 9.75% 12,565 923 9.69%
Federal Funds Purchased 47 2 6.57% 1,813 104 5.20%
Other Borrowings 0 0 0.00% 1,876 74 7.56%
---------- -------- ----- ---------- -------- ----
Total interest bearing liabilities 1,453,445 65,221 5.90% 1,347,420 53,659 5.25%
---------- -------- ----- ---------- -------- ----
Non interest bearing liabilities
Demand Deposits 76,547 75,097
Other Liabilities 56,670 65,817
---------- ----------
Total non interest bearing liabilities 133,217 140,914
Stockholders' equity 148,925 133,178
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,735,587 $1,621,512
========== ==========
NET INTEREST INCOME / NET INTEREST SPREAD $ 48,302 3.14% $ 44,063 3.21%
======== ==== ======== ====
MARGIN
INTEREST INCOME / INTEREST EARNING ASSETS 9.17% 8.58%
INTEREST EXPENSE / INTEREST EARNING ASSETS 5.27% 4.71%
---- ----
NET INTEREST MARGIN 3.90% 3.87%
==== ====
</TABLE>
24
<PAGE> 25
PROVISION FOR CREDIT LOSSES
The Company's provision for loan losses decreased to $12.3 for the nine months
ended September 30, 2000 from $17.7 million for the same period in 1999. The
provision was affected by several factors including loan charge-offs of $13.5
million for the period, of which a substantial amount was related to one
domestic credit relationship. The provision and charge-offs for the nine month
period resulted in the allowance for loan losses decreasing from $21.4 million
at December 31, 1999 to $20.3 million as of September 30, 2000, a 5% decrease.
The allowance for loan losses was deemed to be adequate based on various
methodologies utilized by the Company in estimating the adequacy of the
allowance for loan losses which are impacted by several factors including loan
growth, the level of criticized assets and changes in the loan portfolio
composition. In addition to the previously mentioned factors, the payoff of
certain criticized losses resulted in a shift from allocated reserves to
unallocated reserves.
NON-INTEREST INCOME
Non-interest income decreased to, $13.2 million for the nine months ended
September 30, 2000 from $14.2 million for the same period in 1999. The decrease
was largely in trade finance fees and commissions, which decreased by $2.2
million. The Company realized a gain on the sale of foreign debt securities of
$1.7 million during the nine month period. This represents the sale of thirteen
securities for an aggregate amount of $55,653,000 sold during the nine month
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 Nine Months Ended September 30,
-----------------------------------------
1999 to 2000
2000 Percent Change 1999
------- -------------- --------
<S> <C> <C> <C>
Trade finance fees and commissions $ 7,136 -23.9% $ 9,380
Structuring and syndication fees 2,718 -6.2% 2,899
Customer service fees 1,213 6.8% 1,136
Gain on sale of assets 1,799 221.3% 560
Other 288 22.0% 236
------- ----- --------
Total non-interest income $13,154 -7.4% $ 14,211
======= ===== ========
</TABLE>
OPERATING EXPENSES
Operating expenses increased to $35.2 million for the nine months ended
September 30, 2000 from $21.9 million for the same period in 1999, a 60.6
percent increase. Operating expenses were affected by a write down of an
available for sale security of $4.3 million. During the period, management
determined that the security had an other than temporary decline in fair market
value, therefore in accordance with SFAS115, management recorded a write down
which resulted in a reduction of the cost basis of the security and a charge to
operating expenses. In addition, during the quarter the Company also recorded
legal reserves relating to two judgments, which the Company is appealing.
Following the guidance of SFAS 5 and based on the conclusions reached by the
Company's legal counsel, management determined that it was probable that a $4.5
million loss could occur in the future. Lastly, other losses and charge-offs
increased to $2.4 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 client regarding the
balance owed, which was settled and resulted in a write-off of $1.0 million.
The following table sets forth details regarding the components of operating
expenses for the periods indicated.
25
<PAGE> 26
OPERATING EXPENSES
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
-----------------------------------------
1999 to 2000
2000 Percent Change 1999
------- -------------- --------
<S> <C> <C> <C>
Employee compensation and benefits $ 10,698 9.5% $ 9,769
Occupancy and equipment 3,670 17.8% 3,115
Legal Expenses 1,918 -10.6% 2,146
Legal Reserves 4,518 100.0% -
Other losses & charge-offs 2,498 114.2% 1,166
Write down of security 4,320 100.0% -
Other operating expenses 7,622 32.7% 5,744
-------- ----- --------
Total operating expenses $ 35,244 60.6% $ 21,940
======== ===== ========
</TABLE>
RESULTS OF OPERATIONS - THIRD QUARTER
Net interest income decreased to $16.0 million for the quarter ended September
30, 2000 from $16.4 million for the same period in 1999, a 2.4 percent decrease.
This decrease was due to a higher cost of funds during the period, primarily a
97 basis point increase in cost of funds offset by a 45 basis point increase in
the rate on interest earning assets. Interest income increased to $38.9 from
$34.2 million for the quarter ended September 30, 2000 and 1999, respectively, a
6.19% increase. This increase was due to growth in interest earning assets
coupled with an increase in the yield earned on these assets. The US bank prime
rate increased 125 basis points in the last twelve months. This prime rate
increase was a factor in driving the assets yields 45 basis points higher. Cost
of funds increased to 6.17% for the quarter ended September 30, 2000 from 5.20%
for the same quarter last year. The increase in cost of interest bearing
deposits of almost 100 basis points is attributable to higher rates paid on
certificates of deposit in the Florida market. All these factors resulted in a
reduction in the net interest margin of 41 basis points, to 3.82 percent for the
quarter ended September 30, 2000 from 4.23 percent for the quarter ended
September 30, 1999.
26
<PAGE> 27
<TABLE>
<CAPTION>
YIELDS EARNED AND RATE PAID
---------------------------------------------------------------------------------------------------------------------------
FOR THE QUARTER ENDED
SEPTEMBER 30, 2000 SEPTEMBER 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 $1,012,294 $25,332 9.79% $1,075,971 $24,698 8.98%
Acceptances Discounted 113,907 2,967 10.19% 105,365 2,386 8.86%
Overdraft 10,197 339 13.01% 5,564 362 25.46%
Mortgage loans 2,043 41 7.85% 2,178 44 7.91%
---------- -------- ---------- --------
TOTAL LOANS 1,138,441 28,679 9.86% 1,189,078 27,490 9.05%
Time Deposit with Banks 123,024 2,884 9.17% 197,848 4,527 8.95%
Investments 352,107 6,622 7.36% 126,702 1,970 6.08%
Federal funds sold 43,327 731 6.60% 19,615 255 5.09%
---------- -------- ----- ---------- -------- -----
Total Investments and Time Deposit
with Banks 518,458 10,237 7.73% 344,165 6,752 7.68%
Total Interest Earning assets 1,656,899 38,916 9.19% 1,533,243 34,242 8.74%
-------- ------- ---------- ------- -------
Total non interest earning assets 83,512 81,311
---------- ----------
TOTAL ASSETS $1,740,411 $1,614,554
========== ==========
INTEREST BEARING LIABILITIES
DEPOSITS:
NOW and savings accounts $ 21,153 134 2.48% $ 24,661 154 2.44%
Money Market 44,320 698 6.16% 42,743 529 4.84%
Presidential Money Market 71,106 1,040 5.72% 49,969 602 4.71%
Certificate of Deposits
(including IRA) 1,177,721 18,834 6.26% 1,134,810 15,306 5.28%
Time Deposits with Banks (IBF) and
Other 127,775 1,933 5.92% 79,309 952 4.70%
---------- -------- ----- ---------- -------- -----
TOTAL DEPOSITS 1,442,075 22,639 6.14% 1,331,492 17,543 5.16%
Trust preferred securities 12,650 308 9.74% 12,650 308 9.74%
Federal Funds Purchased 87 1 6.60% 0 0 0.00%
Other Borrowings 0 0 0.00% 2,391 33 5.40%
---------- -------- ----- ---------- -------- -----
Total interest bearing liabilities 1,454,812 22,948 6.17% 1,346,533 17,884 5.20%
---------- -------- ----- ---------- -------- -----
Non interest bearing liabilities
Demand Deposits 73,610 77,370
Other Liabilities 57,844 50,650
---------- ----------
Total non interest bearing liabilities 131,454 128,020
Stockholders' equity 154,145 140,001
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,740,411 $1,614,554
========== ==========
NET INTEREST INCOME / NET INTEREST SPREAD $15,968 3.02% $16,358 3.54%
======= ===== ======= =====
MARGIN
INTEREST INCOME / INTEREST EARNING ASSETS 9.32% 8.86%
INTEREST EXPENSE / INTEREST EARNING ASSETS 5.49% 4.63%
----- -----
NET INTEREST MARGIN 3.82% 4.23%
===== =====
</TABLE>
27
<PAGE> 28
NON-INTEREST INCOME
Non-interest income decreased by 23 percent, $4.8 million for the three months
ended September 30, 2000 compared to $3.7 million for the same period in 1999.
Decreases in trade finance fees and structuring and syndication activities were
affected by the slower than expected recovery of the economies in the Region
coupled with an increase in domestic business which is not as fee intensive.
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 September 30,
-----------------------------------------
1999 to 2000
2000 Percent Change 1999
------- -------------- --------
<S> <C> <C> <C>
Trade finance fees and commissions $ 2,152 -27.0% $ 2,948
Structuring and syndication fees 531 -51.8% 1,102
Customer service fees 363 0.0% 363
Gain on sale of assets 549 58.7% 346
Other 101 60.3% 63
------- ----- -------
Total non-interest income $ 3,696 -23.4% $ 4,822
======= ===== =======
</TABLE>
PROVISION FOR CREDIT LOSSES
The Company's provision for loan losses decreased to $11.5 for the three months
ended September 30, 2000 from $15.0 million for the same period in 1999. The
provision was impacted by several factors including loan charge-offs of $13.5
million for the period, of which a substantial amount was related to one
domestic credit relationship. The provision and charge-offs for the three month
period resulted in the allowance for loan losses decreasing from $21.4 million
at December 31, 1999 to $20.3 million as of September 30, 2000, a 5% decrease.
The allowance for loan losses was deemed to be adequate based on various
methodologies utilized by the Company in estimating the adequacy of the
allowance for loan losses which are impacted by several factors including loan
growth, the level of criticized assets and changes in the loan portfolio
composition
OPERATING EXPENSES
Operating expenses increased to $17.0 million for the quarter ended September
30, 2000 from $7.3 million for the same period in 1999. Included in operating
expenses was a write down of an available for sale security of $4.3 million.
During the period, management determined that the security had an other than
temporary decline in fair market value therefore, in accordance with SFAS115,
management recorded a write down which resulted in a reduction of the cost basis
of the security and a charge to operating expenses. The company also recorded
legal reserves relating to two judgments, which the Company is appealing.
Following the guidance of SFAS 5 and based on the conclusions reached by the
Company's legal counsel, management determined that it was probable that an
additional $3.9 million loss could occur in the future.
28
<PAGE> 29
OPERATING EXPENSES
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
-----------------------------------------
1999 to 2000
2000 Percent Change 1999
------- -------------- --------
<S> <C> <C> <C>
Employee compensation and benefits $ 3,630 11.4% $ 3,258
Occupancy and equipment 1,217 8.9% 1,118
Legal Reserves 3,918 100.0% --
Write down of security 4,320 100.0% --
Other operating expenses 4,566 55.6% 2,934
------- ------ -------
Total operating expenses $17,651 141.5% $ 7,310
======= ====== =======
</TABLE>
29
<PAGE> 30
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Edie Rolando Pinto Lemus V. Hamilton Bank, N.A., Case No.
00-3397-CIV-HIGHSMITH, in the U.S. District Court for the Southern District of
Florida, Miami Division. On September 12, 2000, Edie Rolando Pinto Lemus filed
an eight count complaint against Hamilton Bank alleging conspiracy, conversion,
unjust enrichment, money had and received, breach of fiduciary duty,
constructive trust, breach of contract and negligent retention and supervision.
Hamilton Bank is the only defendant in the action. In support of his claims, Mr.
Pinto alleges that two individuals in Guatemala, who identified themselves as
directors of Hamilton Bank, approached him to open a bank account with Hamilton
Bank in Miami. He claims that they made certain representations to induce him to
open this account, and that they offered to pick up checks due to him from
business transactions in Guatemala for deposit and immediate credit to his
account in U.S. dollars. Mr. Pinto alleges that Hamilton Bank's employees and/or
agents then proceeded to pick up a total of 56 checks, endorsed them without
authorization, but only deposited approximately $9.97 million in his account. He
alleges that the balance, approximately $9.87 million, was misappropriated. In
the complaint Mr. Pinto sought damages of $10 million. On November 6, 2000, the
plaintiff filed an amended complaint adding a count for civil theft. This count
includes a request for treble damages.
Hamilton Bank is in the process of preparing a motion to dismiss on
multiple grounds, both procedural and substantive. The individuals alleged in
the complaint to be directors of Hamilton Bank are not now and never have been
directors, officers or employees of Hamilton Bank. Furthermore, during the time
periods material to the complaint, the plaintiff was not a customer of or
otherwise have any account relationship with Hamilton Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of shareholders of the Company was held on October
23, 2000. At the Meeting all nominees for directors were elected with the
following votes:
<TABLE>
<CAPTION>
For Withhold
<S> <C> <C>
William Alexander 8,098,267 253,754
Juan Carlos Bernace 8,113,024 238,997
Ronald Frazier 8,111,024 240,997
Ronald Lacayo 8,113,024 238,997
George Lyall 8,098,367 253,654
Eduardo A. Masferrer 8,113,024 238,997
Benton L. Moyer 8,112,974 239,047
</TABLE>
Shareholders also approved at the Meeting the 2000 Executive Incentive
Compensation Plan in the form contained in the proxy statement for the Meeting
as follows:
For Against Abstain
6,386,545 1,964,345 1,131
30
<PAGE> 31
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Employment Agreement dated September 1, 2000 with Mr.
John F. Stumpff
27 Financial Data Schedule (for SEC use only)
(b) No Reports on Form 8-K were filed during the quarter ended September
30, 2000.
31
<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: November 27, 2000 Hamilton Bancorp Inc.
/s/ Eduardo A. Masferrer
--------------------------------------------
Eduardo A. Masferrer,
Chairman, President and Chief Executive
Officer
/s/ Eva Lynn Hernandez
--------------------------------------------
Eva Lynn Hernandez
Vice President - Finance, Controller
and Chief Accounting Officer
32
<PAGE> 33
EXHIBIT 1
HAMILTON BANCORP INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ---------------------------
2000 1999 2000 1999
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Basic
Weighted average number of common shares outstanding 10,081,147 10,076,147 10,081,147 10,066,107
Net income $ (5,978) $ (736) $ 8,781 $ 11,765
Basic earnings $ (0.59) $ (0.07) $ 0.87 $ 1.17
Diluted:
Weighted average number of common shares outstanding 10,081,147 10,076,147 10,081,147 10,066,107
Potential common shares outstanding - options 138,531 208,004 142,685 212,239
------------ ------------ ----------- -----------
Total common and potential common shares outstanding 10,219,678 10,284,151 10,223,832 10,278,346
Net income $ (5,978) $ (736) $ 8,781 $ 11,765
Diluted earnings per share $ (0.59) $ (0.07) $ 0.86 $ 1.14
</TABLE>
33
