<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 March 31, 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 [X] No [ ]
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 [ ]
<PAGE> 2
ITEM 1
PART I. FINANCIAL INFORMATION
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CASH AND DEMAND DEPOSITS WITH OTHER BANKS $ 35,529 $ 21,710
FEDERAL FUNDS SOLD 94,697 63,400
----------- -----------
Total cash and cash equivalents 130,226 85,110
INTEREST EARNING DEPOSITS WITH OTHER BANKS 151,398 187,685
SECURITIES AVAILABLE FOR SALE 295,772 274,277
LOANS-NET 1,096,514 1,091,976
DUE FROM CUSTOMERS ON BANKERS ACCEPTANCES 35,569 27,767
DUE FROM CUSTOMERS ON DEFERRED PAYMENT LETTERS OF CREDIT 3,497 5,835
PROPERTY AND EQUIPMENT-NET 5,066 5,209
ACCRUED INTEREST RECEIVABLE 20,231 19,111
GOODWILL-NET 1,614 1,658
OTHER ASSETS 19,065 22,672
----------- -----------
TOTAL $ 1,758,952 $ 1,721,300
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS $ 1,550,951 $ 1,535,606
TRUST PREFERRED SECURITIES 12,650 12,650
BANKERS ACCEPTANCES OUTSTANDING 35,569 27,767
DEFERRED PAYMENT LETTERS OF CREDIT OUTSTANDING 3,497 5,835
OTHER LIABILITIES 13,034 5,544
----------- -----------
Total liabilities 1,615,701 1,587,402
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 75,000,000 shares authorized, 10,081,147 shares
issued and outstanding at March 31, 2000 and December 31, 1999 101 101
Capital surplus 60,702 60,708
Retained earnings 89,378 82,175
Accumulated other comprehensive loss (6,930) (9,086)
----------- -----------
Total stockholders' equity 143,251 133,898
----------- -----------
TOTAL $ 1,758,952 $ 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)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
INTEREST INCOME:
Loans, including fees $ 29,405 $ 25,529
Deposits with other banks 3,841 3,241
Investment securities 3,052 2,756
Federal funds sold 703 466
------------ ------------
Total 37,001 31,992
INTEREST EXPENSE:
Deposits 20,166 18,168
Trust preferred securities 308 302
Federal funds purchased and other borrowing 1 105
------------ ------------
Total 20,475 18,575
------------ ------------
NET INTEREST INCOME 16,526 13,417
PROVISION FOR CREDIT LOSSES 750 900
------------ ------------
NET INTEREST INCOME AFTER PROVISION FOR CREDIT
LOSSES 15,776 12,517
------------ ------------
NON-INTEREST INCOME:
Trade finance fees and commissions 2,765 2,990
Structuring and syndication fees 1,488 577
Customer service fees 400 415
Gain (loss) on sale of assets (92) 188
Other 102 117
------------ ------------
Total 4,663 4,287
------------ ------------
OPERATING EXPENSES:
Employee compensation and benefits 3,284 3,344
Occupancy and equipment 1,298 960
Other 4,431 2,864
------------ ------------
Total 9,013 7,168
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 11,426 9,636
PROVISION FOR INCOME TAXES 4,223 3,567
------------ ------------
NET INCOME $ 7,203 $ 6,069
============ ============
NET INCOME PER COMMON SHARE:
BASIC $ 0.71 $ 0.60
============ ============
DILUTED $ 0.70 $ 0.59
============ ============
AVERAGE SHARES OUTSTANDING:
BASIC 10,081,147 10,056,111
============ ============
DILUTED 10,221,121 10,283,235
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
---------- -----------
(Unaudited)
<S> <C> <C>
NET INCOME $ 7,203 $ 6,069
OTHER COMPREHENSIVE INCOME, Net of tax:
Net change in unrealized loss on securities available for sale during period 2,156 344
Less: Reclassification adjustment for write off of a foreign bank stock (187)
------- -------
Total 2,156 157
------- -------
COMPREHENSIVE INCOME $ 9,359 $ 6,226
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
3
<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 excersized (6) (6)
Net change in unrealized loss on
securities available for sale, net of taxes 2,156 2,156
Net income for the three months ended
March 31, 2000 7,203 7,203
---------- ---- ------- ------- ------- --------
Balance as of March 31, 2000
(Unaudited) 10,081,147 $101 $60,702 $89,378 $(6,930) $143,251
========== ==== ======= ======= ======= ========
</TABLE>
4
<PAGE> 6
HAMILTON BANCORP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For Three Months Ended March
----------------------------
2000 1999
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,203 $ 6,069
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 429 369
Provision for credit losses 750 900
Deferred tax provision 163 28
Write off of available for sale security 187
Net loss gain (loss) on sale of assets 92 (188)
Proceeds from the sale of bankers acceptances and loan participations 393 5,715
Decrease (increase) in accrued interest receivable and other assets 4,044 (11,237)
Increase in other liabilities 7,483 2,638
--------- ---------
Net cash provided by operating activities 20,557 4,481
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increases in interest-earning deposits with other banks 36,286 83,756
Purchase of securities available for sale (105,105) (293,385)
Purchase of securities held to maturity (6,261)
Proceeds from sales and maturities of securities available for sale 86,949 229,612
Proceeds from paydowns of securities held to maturity 1,074
Proceeds from sale of loans 11,148
(Increase) decrease in loans-net (8,677) 40,063
Purchases of property and equipment-net (239) (119)
--------- ---------
Net cash provided by investing activities 9,214 65,888
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 15,345 (91,337)
Proceeds from trust preferred securities offering 1,650
Payment of other borrowing (6,116)
Net proceeds from exercise of common stock options 205
--------- ---------
Net cash provided by (used in) financing activities 15,345 (95,598)
--------- ---------
NET INCRESE (DECREASE) IN CASH AND CASH EQUIVALENTS 45,116 (25,229)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 85,110 111,790
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 130,226 $ 86,561
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 10,686 $ 18,821
========= =========
Income taxes paid during the period $ 9 $ 45
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 7
HAMILTON BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1: BASIS OF PRESENTATION
The consolidated statements of condition for Hamilton Bancorp Inc. and
Subsidiary (the "Company") as of March 31, 2000 and December 31, 1999, the
related consolidated statements of income, stockholders' equity and the cash
flows for the three months ended March 31, 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 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 $35,338,000 and $42,651,000 for March 31, 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 the 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
quarter, these adjustments were reduced by the following events: (i) a reduction
of the allocation transfer risk reserve of $3,172,000 and (ii) realized gains in
the sales of assets previously written down of $4,141,000.
The capital ratios presented for the Company in the Capital Resources section
are calculated using the following components of Tier I and Total Capital:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
<S> <C> <C>
Stockholders' equity per generally accepted accounting principles $ 143,251 $ 133,898
Trust preferred securities 12,650 12,650
Less intangible assets (1,615) (1,615)
Other accumulated comprehensive loss 6,928 9,086
-------- --------
Tier I Capital 161,214 153,976
Tier II Capital 14,868 14,776
-------- --------
Total Capital $ 176,082 $ 168,752
======== ========
</TABLE>
6
<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 - MARCH 31, 2000 VS. DECEMBER 31, 1999.
Total consolidated assets increased $37.7 million, or 2.2 percent, during the
first three months of 2000, which included an increase of $21.0 million in
interest earning assets and $16.6 million in non-interest earning assets. The
increase in consolidated assets reflects increases of $45.1 million in cash and
cash equivalents and an increase in securities available for sale of $21.5
million. During the quarter, the Company's asset composition reflected greater
liquidity due largely to a decrease in interest earning deposits with other
banks.
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 $130.2 million at
March 31, 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 $151.4 million at March
31, 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 three months ended March 31, 2000. The
short-term nature of these deposits allows the Company the flexibility to later
redeploy assets into a higher yielding domestic loan component.
Investment securities increased to $295.8 million at March 31, 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 classified as available for sale. 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.
7
<PAGE> 9
LOANS
The Company's gross loan portfolio increased slightly by $3.6 million, during
the first three months of 2000 in relation to the year ended December 31, 1999.
Commercial-foreign loans increased by $37.7 million or 11.1 percent and domestic
acceptances discounted increased by $9.5 million or 16.2 percent. This was
offset by decreases in loans to banks and other financial institutions - foreign
of $19.3 million, loans to foreign government and official institutions of $12.8
and foreign acceptances discounted of $9.6 million. Details on the loans by type
are shown in the table below. At March 31, 2000 approximately 41.4 percent of
the Company's portfolio consisted of loans to domestic borrowers and 58.6
percent of the Company's portfolio consisted of loans to foreign borrowers. The
Company's loan portfolio is relatively short-term, as approximately 76.7 and
81.6 percent of loans at March 31, 2000 were short-term loans with average
maturities of less than 180 and less than 365 days, respectively. See "Interest
Rate Sensitivity Report".
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>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Domestic:
Commercial (1) $ 392,884 $ 394,841
Acceptances discounted 68,587 59,040
Residential mortgages 2,113 2,140
---------- ----------
Subtotal Domestic 463,584 456,021
---------- ----------
Foreign:
Banks and other financial institutions 204,845 224,155
Commercial and industrial (1) 376,121 338,411
Acceptances discounted 49,646 59,256
Government and official institutions 25,569 38,358
---------- ----------
Subtotal Foreign 656,181 660,180
---------- ----------
Total Loans $1,119,765 $1,116,201
========== ==========
</TABLE>
(1) Includes pre-export financing, warehouse receipts and refinancing of letter
of credits.
8
<PAGE> 10
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. 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 March 31, 2000 approximately 28.4 percent in principal amount of the
Company's loans were outstanding to borrowers in four countries other than the
United States: Panama (12.3 percent), Guatemala (6.2 percent), El Salvador (5.4
percent) and Jamaica (4.5 percent).
LOANS BY COUNTRY
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
--------------------------------- --------------------------------
Percent of Percent of
Amount Total Loans Amount Total Loans
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Country
United States $ 463,584 41.4% $ 456,021 40.9%
Argentina 24,053 2.1% 35,494 3.2%
Brazil 40,384 3.6% 49,214 4.4%
British West Indies (1) -- -- 22,082 2.0%
Colombia 26,862 2.4% 28,437 2.5%
Dominican Republic 35,855 3.2% 41,604 3.7%
Ecuador 38,298 3.4% 43,622 3.9%
El Salvador 60,180 5.4% 45,847 4.1%
Guatemala 69,578 6.2% 66,531 6.0%
Honduras 38,614 3.4% 42,352 3.8%
Jamaica 50,546 4.5% 28,628 2.6%
Panama 137,269 12.3% 127,419 11.4%
Peru 24,359 2.2% 29,648 2.7%
Venezuela 17,330 1.5% 17,842 1.6%
Other (2) 92,853 8.3% 81,460 7.3%
---------- ---------- ---------- ----------
Total $1,119,765 100.0% $1,116,201 100.0%
========== ========== ========== ==========
</TABLE>
(1) These countries had loans in periods presented which did not exceed
1 percent of total assets.
(2) Other consists of loans to borrowers in countries in which loans did not
exceed 1 percent of total assets.
9
<PAGE> 11
At March 31, 2000 approximately 29.0 percent in cross-border outstandings were
outstanding to borrowers in five countries other than the United States: Brazil
(9.3 percent), Panama (7.0 percent), Guatemala (4.4 percent), Argentina (4.2
percent), and Ecuador (4.1 percent).
TOTAL CROSS-BORDER OUTSTANDINGS BY COUNTRY
(Dollars in millions)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
------------------------------ ------------------------------
% of Total % of Total
Amount Assets Amount Assets
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Argentina $ 73 4.2% $ 113 6.6%
Bahamas 21 1.2% 21 1.2%
Bolivia 13 0.7% 18 1.1%
Brazil 164 9.3% 173 10.1%
BritishWest Indies (1) 17 1.0% -- --
Colombia 47 2.7% 48 2.8%
Costa Rica (1) 13 0.7% -- --
Dominican Republic 40 2.3% 55 3.2%
Ecuador 72 4.1% 78 4.6%
El Salvador 52 3.0% 44 2.6%
Guatemala 77 4.4% 68 4.0%
Honduras 42 2.4% 43 2.5%
Jamaica 58 3.3% 35 2.0%
Mexico 13 0.7% 20 1.2%
Panama 124 7.0% 116 6.8%
Peru 35 2.0% 42 2.5%
Suriname 31 1.8% 32 1.9%
United Kingdom 15 0.9% 15 0.9%
Venezuela 17 1.0% 17 1.0%
Other (2) 40 2.3% 75 4.4%
--------- --------- --------- ---------
Total $ 964 54.9% $ 1,013 59.3%
========= ========= ========= =========
</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.
10
<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 35.6 percent to $143.6 million for the three months ended March 31,
2000 when compared to the same period in 1999. This increase is due to greater
financing of domestic import activities, which increased by 49.2 percent, and to
a lesser extent, the export financing, which increased by 17.4 percent.
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------------- 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) $ 53,187 $ 17,729 $ 45,313 $ 15,104 $227,904 $ 18,992
Import Letters of Credit (1) 90,473 30,158 60,654 20,218 296,943 24,745
-------- -------- -------- -------- -------- --------
Total $143,660 $ 47,887 $105,967 $ 35,322 $524,847 $ 43,737
======== ======== ======== ======== ======== ========
</TABLE>
(1) Represents certain contingent liabilities not reflected on the Company's
balance sheet.
11
<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 3.7 percent from December 31, 1999 to March 31, 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>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Aruba (2) $ -- $ 3,720
Costa Rica 2,452 9,893
Dominican Republic 6,367 4,707
El Salvador (2) -- 2,734
Guatemala 6,301 9,475
Guyana 2,890 4,165
Haiti 2,021 5,705
Honduras 3,720 4,174
Jamaica (2) 9,383 --
Panama 8,904 14,242
Peru 2,111 3,573
Suriname 6,506 5,677
United States 88,398 74,643
Venezuela 1,622 2,593
Other (3) 5,191 6,143
-------- --------
Total $145,866 $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.
12
<PAGE> 14
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 March 31, 2000 the
allowance for credit losses was approximately $20.6 million.
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.
CREDIT LOSS EXPERIENCE
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 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 (36) (3,299)
Acceptances --
Installment (5)
----------- -----------
Total Domestic (36) (3,304)
----------- -----------
Foreign:
Banks and other financial institutions (200) (2,330)
Commercial and industrial (1,394) (6,216)
----------- -----------
Total Foreign (1,594) (8,546)
----------- -----------
Total charge-offs (1,630) (11,850)
----------- -----------
Recoveries:
Domestic:
Commercial 3 4
Foreign:
Banks and other financial institutions 41 163
----------- -----------
Total recoveries 44 167
----------- -----------
Net (charge-offs) recoveries (1,586) (11,683)
Provision for credit losses 750 20,300
----------- -----------
Balance at end of the period $ 20,575 $ 21,411
=========== ===========
Average loans $ 1,242,750 $ 1,194,667
Total loans $ 1,119,765 $ 1,116,201
Net charge-offs to average loans 0.13% 0.98%
Allowance to total loans 1.84% 1.92%
</TABLE>
13
<PAGE> 15
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.
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
(in thousands)
<TABLE>
<CAPTION>
As of As of
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Allocation of the allowance by category of loans:
Domestic:
Commercial $ 2,986 $ 3,199
Acceptances 285 269
Residential 9 10
--------- ---------
Total domestic 3,280 3,478
Foreign:
Government and official institutions 3,752 1,496
Banks and other financial institutions 3,511 5,152
Commercial and industrial 9,825 11,015
Acceptances discounted 207 270
--------- ---------
Total foreign 17,295 17,933
--------- ---------
Total $ 20,575 $ 21,411
========= =========
Percent of loans in each category to total loans:
Domestic:
Commercial 35.1% 35.4%
Acceptances 6.1% 5.3%
Residential 0.2% 0.2%
--------- ---------
Total domestic 41.4% 40.9%
Foreign:
Banks and other financial institutions 18.3% 20.1%
Commercial and industrial 33.6% 30.3%
Acceptances discounted 4.4% 5.3%
Government and official Institutions 2.3% 3.4%
--------- ---------
Total foreign 58.6% 59.1%
--------- ---------
Total 100.0% 100.0%
========= =========
</TABLE>
14
<PAGE> 16
ANALYSIS OF ALLOWANCE FOR CREDIT LOSSES ALLOCATED TO FOREIGN LOANS
(in thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Balance, beginning of year $ 17,933 $ 11,379
Provision for credit losses 956 14,937
Net charge-offs (1,594) (8,383)
-------- --------
Balance, end of period $ 17,295 $ 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>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Domestic:
Non accrual $ 681 $ 6,995
Past due over 90 days and accruing 2,349 --
------- -------
Total domestic nonperforming loans 3,030 6,995
------- -------
Foreign
Non accrual 15,795 9,588
Past due over 90 days and accruing 69 1,992
------- -------
Total foreign nonperforming loans 15,864 11,580
------- -------
Total nonperforming loans $18,894 $18,575
======= =======
Total nonperforming loans to total loans 1.69% 1.66%
Total nonperforming assets to total assets 1.25% 1.08%
</TABLE>
At March 31, 2000 the Company had $3.1 million in nonperforming investment
securities. At December 31, 1999 the Company had no nonperforming investment
securities
15
<PAGE> 17
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 $35.6 million and $3.5 million, respectively, at March 31, 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 $1.55 billion at March 31, 2000 compared to $1.53 billion at
December 31, 1999. The increase in deposits during the three month period was
largely in certificates of deposits over $100,000 which increased by $61.2
million and in non interest bearing demand deposit which increased by $15.3
million. These increases were offset by a decrease in certificates of deposit
under $100,000 of $56.0 million.
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 March 31, 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 $ 158,703 $ 26,641 $ 185,344
Over 3 through 6 months 119,853 3,101 122,954
Over 6 through 12 months 106,697 4 106,701
Over 12 months 85,374 -- 85,374
------------ ------------ ------------
Total $ 470,627 $ 29,746 $ 500,373
============ ============ ============
</TABLE>
STOCKHOLDERS' EQUITY
The Company's stockholders' equity at March 31, 2000 was $143.3 million compared
to $133.9 million at December 31, 1999. During this period stockholders' equity
increased by $9.4 million primarily due to the retention of net income and the
recovery in market value of the securities available for sale.
16
<PAGE> 18
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 March 31, 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 $ 552,250 $151,093 $ 155,507 $ 54,778 $176,318 $ 29,819 $1,119,765
Federal funds sold 94,697 94,697
Investment securities 43,797 93,975 40,651 12,258 19,578 80,248 290,507
Interest earning deposits with
other banks 27,013 43,227 39,825 41,333 151,398
--------- -------- --------- ---------- -------- -------- ----------
Total 717,757 288,295 235,983 108,369 195,896 110,067 1,656,367
--------- -------- --------- ---------- -------- -------- ----------
Funding Sources:
Savings and transaction deposits 29,776 67,942 40,443 138,161
Certificates of deposits of $100 or more 33,510 125,193 119,853 106,697 85,374 470,627
Certificates of deposits under $100 78,432 132,175 174,019 264,231 111,942 38 760,837
Other time deposits 23,179 3,462 3,101 595 30,337
Funds overnight 60,010 60,010
Trust preferred securities 12,650 12,650
--------- -------- --------- ---------- -------- -------- ----------
Total $ 224,907 $328,772 $ 337,416 $371,523 $197,316 $ 12,688 $1,472,622
========= ======== ========= ======== ======== ======== ==========
Interest sensitivity gap $ 492,850 $(40,477) $(101,433) $ (263,154) $ (1,420) $ 97,379 $ 183,745
========= ======== ========= ======== ======== ======== ==========
Cumulative gap $ 492,850 $452,373 $ 350,940 $ 87,786 $ 86,366 $183,745
========= ======== ========= ======== ======== ========
Cumulative gap as a percentage
of total earning assets 29.75% 27.31% 21.19% 5.30% 5.21% 11.09%
========= ======== ========= ======== ======== ========
</TABLE>
17
<PAGE> 19
LIQUIDITY
Cash and cash equivalents increased by $45.1 million from December 31, 1999 to
March 31, 2000. During the first quarter of 2000, net cash provided by operating
activities was $20.6 million, net cash provided investing activities was $9.2
million and net cash provided by financing activities was $15.3 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 sales of bankers' acceptances as well as loan participations. The
level and maturity of deposits necessary to support the Company's lending and
investment activities is determined through monitoring loan demand and through
its asset/liability management process. Considerations in managing the
Company's liquidity position include, 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 March 31, 2000 interest-earning assets maturing within six months
were $1.242 billion, representing 75.0 percent of total earning assets and
earning assets maturing within one year were $1.351 billion or 81.5 percent of
total earning assets. The interest bearing liabilities maturing within six
months were $891.1 million or 61.0 percent of total interest bearing liabilities
and maturing within one year were $1.263 billion or 85.7 percent of the total at
March 31, 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 March 31, 2000 were $434 million, 24.7 percent of
total assets, and consisted of cash and cash equivalents, due from banks-time
and available for sale securities maturing in one year or less that are
unpledged. At March 31, 2000 the Company had been advised of $57 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 Office of the Comptroller of the
Currency ("OCC") has directed the Bank, among other things, to take $32 million
in transfer risk reserves related to the Bank's exposure in Ecuador and "mark to
market" certain assets based upon the OCC's interpretation of regulatory
accounting rules. 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 within the
OCC. In this connection, the OCC has initiated formal administrative action
under Section 8 of the Federal Deposit Insurance Act which the Bank has not
agree 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 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. As a result of the formal
administrative action, however, the Bank may not accept new, or renew, "brokered
deposits" without the prior approval of the Federal Deposit Insurance
Corporation or appoint new directors or senior officers without the prior
consent of the OCC. The Bank does not anticipate that either of such
restrictions will have any material adverse effect on its business or
operations. In fact, the Bank subsequently hired three senior executives with
the consent of the OCC. The Company is satisfied that the reserves it recorded
in the third quarter of 1999 relating to its Ecuador and other Latin American
exposures are adequate and in accordance with generally accepted accounting
principles ("GAAP").
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.
18
<PAGE> 20
Company Capital Ratios
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
------------------ ------------------
Amount Ratio Amount Ratio
------ ----- ------ -----
<S> <C> <C> <C> <C>
Tier 1 risk-weighted
Capital:
Actual $161,214 13.6% $153,976 13.1%
Minimum 47,349 4.0% 47,019 4.0%
Total risk-weighted
Capital:
Actual 176,082 14.9% 168,752 14.4%
Minimum 94,698 8.0% 94,037 8.0%
Leverage:
Actual 161,214 9.4% 153,976 8.9%
Minimum 51,560 3.0% 51,659 3.0%
</TABLE>
Bank Capital Ratios
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
------------------ ------------------
Amount Ratio Amount Ratio
------ ----- ------ -----
<S> <C> <C> <C> <C>
Tier 1 risk-weighted capital:
Actual $117,165 10.3% $103,755 9.0%
Minimum to be well capitalized 68,586 6.0% 69,182 6.0%
Minimum to be adequately capitalized 45,724 4.0% 46,121 4.0%
Total risk-weighted capital:
Actual 131,945 11.4% 118,707 10.3%
Minimum to be well capitalized 114,310 10.0% 115,303 10.0%
Minimum to be adequately capitalized 91,448 8.0% 92,243 8.0%
Leverage:
Actual 117,165 7.0% 103,755 7.1%
Minimum to be well capitalized 83,887 5.0% 84,187 5.0%
Minimum to be adequately capitalized 67,110 4.0% 67,350 4.0%
</TABLE>
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.
19
<PAGE> 21
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 March 31, 2000 shows that interest
bearing liabilities maturing or repricing within one year exceed interest
earning assets by $263.2 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 Chief Financial Officer and the Bank's Treasurer are
responsible for measuring and managing market risk.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income is the difference between interest and fees earned on loans
and investments and interest paid on deposits and other sources of funds, and it
constitutes the Company's principal source of income. Net interest income
increased to $16.5 million for the three months ended March 31, 2000 from $13.4
million for the same period in 1999, an 23.1 percent increase. The increase was
due largely to an increase in net interest margin as well as an increase in
average earning assets. Average earning assets increased to $1.630 billion for
the three months ended March 31, 2000 from $1.552 billion for the same period in
1999, a 5.0 percent increase. Average loans and acceptances discounted increased
to $1.243 billion for the three months ended March 31, 2000 from $1.162 billion
for the same period in 1999, a 7.0 percent increase. Average interest earning
deposits with other banks increased to $162.1 million for the three months ended
March 31, 2000 from $108.7 million for the same period in 1999, a 49 percent
increase. The increase in loans was largely attributable to trade finance
activities within the Region. Net interest margin increased to 4.07 percent for
the three months ended March 31, 2000 from 3.51 percent for the same period in
1999, a 56 basis point increase. The primary reasons for this increase were (i)
the redeployment of lower yielding U.S. government agency securities into the
higher yielding loan category and (ii) the base for pricing commercial loans has
increased within the last three months as a result of increases in the prime
rate.
Interest income increased to $37.0 million for the three months ended March 31,
2000 from $31.9 million for the same period in 1999, a 16.0 percent increase,
reflecting the increase in commercial loans and the increase in prevailing
interest rates. Interest expense increased to $20.5 million for the three months
ended March 31, 2000 from $18.6 million for the same period in 1999, a 10.2
percent increase, reflecting the additional deposits to fund asset growth.
Average interest-bearing deposits increased to $1.425 billion for the three
months ended March 31, 2000 from $1.367 billion for the same period in 1999, a
4.2 percent increase. The growth in deposits was primarily a result of the
Company seeking additional deposits to fund asset growth.
20
<PAGE> 22
YIELDS EARNED AND RATE PAID
<TABLE>
<CAPTION>
For the Quarter Ended
March 31, 2000 March 31, 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 $1,120,300 $26,255 9.37% $1,027,975 $22,120 8.61%
Acceptances discounted 114,564 2,722 9.50% 117,044 2,642 9.03%
Overdraft 5,759 386 26.81% 13,667 696 20.37%
Mortgage loans 2,127 42 7.90% 3,514 71 8.08%
Total Loans 1,242,750 29,405 9.46% 1,162,200 25,529 8.79%
Time deposits with banks 162,107 3,841 9.48% 108,748 3,241 11.92%
Investments 175,281 3,052 6.96% 242,179 2,756 4.55%
Federal funds sold 49,888 703 5.64% 38,486 466 4.84%
-------------------- ----------------------
Total investments and time deposits with banks 387,276 7,596 7.85% 389,413 6,463 6.64%
Total interest earning assets 1,630,026 37,001 9.08% 1,551,613 31,992 8.25%
-------
Total non interest earning assets 88,655 121,650
---------- ----------
Total Assets $1,718,681 $1,673,263
========== ==========
Interest Bearing Liabilities
Deposits:
NOW and savings accounts $22,168 132 2.38% $21,654 109 2.01%
Money Market 44,054 630 5.72% 45,849 530 4.62%
Presidential Money Market 65,579 906 5.53% 25,673 304 4.74%
Certificate of Deposits (including IRA) 1,216,335 17,495 5.75% 1,160,076 15,889 5.48%
Time Deposits with Banks (IBF) 68,463 862 5.04% 109,383 1,303 4.76%
Other 8,786 141 6.42% 3,923 33 3.36%
-------------------- ----------------------
Total Deposits 1,425,385 20,166 5.66% 1,366,558 18,168 5.32%
Trust Preferred Securities 12,650 308 9.74% 12,393 302 0.00%
Other Borrowings 5,498 103 7.49%
Federal Funds Purchased 55 1 7.27% 111 2 7.21%
-------------------- ----------------------
Total interest bearing liabilities 1,438,090 20,475 5.70% 1,384,560 18,575 5.37%
-------------------- ----------------------
Non interest bearing liabilities
Demand Deposits 81,171 75,510
Other Liabilities 54,930 86,875
---------- ----------
Total non interest bearing liabilities 136,101 162,385
Stockholders equity 144,490 126,321
---------- ----------
Total liabilities and stockholder's equity $1,718,681 $1,673,266
========== ==========
Net Interest income/net interest spread $16,526 3.38% $13,417 2.88%
======= ==== ======= ====
Margin
Interest income/interest earning assets 9.10% 8.37%
Interest expense/interest earning assets 5.04% 4.86%
---- ----
Net interest margin 4.07% 3.51%
==== ====
</TABLE>
21
<PAGE> 23
PROVISION FOR CREDIT LOSSES
The Company's provision for credit losses decreased to $750 thousand for the
three months ended March 31, 2000 from $900 thousand for the same period in
1999. Net loan charge-offs during the first three months of 2000 amounted to
$1,586 thousand compared to $104 thousand for the same period in 1999. The
allowance for credit losses increased from $13.6 million at March 31, 1999 to
$20.6 million at March 31, 2000. The ratio of the allowance for credit losses to
total loans was 1.84 percent at March 31, 2000 increasing from approximately
1.21 percent at March 31, 1999.
NON-INTEREST INCOME
Non-interest income increased to $4.7 million for the three months ended March
31, 2000 from $4.3 million for the same period in 1999, a 8.8 percent increase.
The increase was largely the result of higher structuring and syndication fees
which increased by $911 thousand, partially offset by a decrease in trade
finance fees and commissions of $225 thousand.
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 March 31,
---------------------------------------------
1999 to 2000
1999 Percent Change 2000
------- -------------- --------
<S> <C> <C> <C>
Trade finance fees and commissions $ 2,990 -7.5% $ 2,765
Structuring and syndication fees 577 157.9% 1,488
Customer service fees 415 -3.6% 400
Gain (loss) on sale of loans 188 -148.9% (92)
Other 117 -12.8% 102
------- ------ -------
Total non-interest income $ 4,287 8.8% $ 4,663
======= ====== =======
</TABLE>
OPERATING EXPENSES
Operating expenses increased to $9.0 million for the three months ended March
31, 2000 from $7.2 million for the same period in 1999, a 25.0 percent increase.
The majority of this increase was in other losses and charge-offs which
increased to $1.7 million from $320 thousand largely as a result of a write off
of an other miscellaneous receivable. The Company's efficiency ratio increased
to 42.5 percent for the three month period ended March 31, 2000 from 40.5
percent for the same period in 1999.
22
<PAGE> 24
The following table sets forth details regarding the components of operating
expenses for the periods indicated.
OPERATING EXPENSES
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-------------------------------------------
1999 to 2000
1999 Percent Change 2000
------ -------------- ------
<S> <C> <C> <C>
Employee compensation and benefits $3,344 -1.8% $3,284
Occupancy and equipment 960 35.2% 1,298
Legal Expenses 640 -23.3% 491
Other losses & charge-offs 320 427.8% 1,689
Other operating expenses 1,904 18.2% 2,251
------ ---- ------
Total operating expenses $7,168 25.7% $9,013
====== ==== ======
</TABLE>
23
<PAGE> 25
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Employment Agreement dated April 26, 2000 with Mr. Felix M.
Garcia
10.2 Employment Agreement dated April 26, 2000 with Mr. Fernando J.
Martinez
11 Calculation of Earnings Per Share
27 Financial Data Schedule
(b) No Reports on Form 8-K were filed during the quarter ended March 31,
2000.
24
<PAGE> 26
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: May 15, 2000 Hamilton Bancorp Inc.
/s/ Eduardo A. Masferrer
-----------------------------------------
Eduardo A. Masferrer,
Chairman, President and Chief Executive
Officer
/s/ John M. R. Jacobs
---------------------------
John M. R. Jacobs,
Senior Vice President - Finance and
Principal Financial and Chief Accounting
Officer
25
<PAGE> 1
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made and executed effective
this 26th day of April, 2000, by and between HAMILTON BANK N.A., a banking
association organized under the laws of the United States, with offices at 3750
NW 87th Avenue, Miami, FL 33178, and its holding company HAMILTON BANCORP INC.
(collectively the "Bank"), and FELIX M. GARCIA residing at 12531 SW 94th Court,
Miami, FL 33176 (the "Executive").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein contained
the parties hereto agree as follows:
1. EMPLOYMENT.
(a) DUTIES. The Bank hereby employs the Executive and the Executive
hereby accepts such employment from the commencement date, as defined in Section
2 below, until the termination of this Agreement as provided in Section 5. The
Executive shall be employed as Executive Vice President and Chief Operating
Officer and shall perform such services consistent with such position for the
Bank as he shall be assigned from time to time by the Chief Executive Officer or
the Board of Directors. During the term of this Agreement, Executive faithfully
and industriously shall devote at all times his best and dedicated efforts,
cooperation and assistance in the performance of his services.
(b) SERVICE ON BOARD OF DIRECTORS. Executive agrees to serve, if
requested, on the Board of Directors, or any committees, of the Bank during the
term of this Agreement.
2. TERM.
The term of this Agreement, and Executive's employment under the terms of
this Agreement, shall continue, unless otherwise terminated by either party in
accordance with the provisions contained in Section 5 of this Agreement, until
the third anniversary of the date this Agreement; PROVIDED, HOWEVER, commencing
on the second anniversary of the date of this Agreement, and on each anniversary
thereafter, the term of this Agreement shall be automatically extended for an
additional one-year period unless at least sixty (60) days prior to any such
anniversary date either party gives notice to the other that it elects not to
extend the term of this Agreement by an additional year. Notwithstanding, the
minimum term of this agreement if not otherwise extended by the terms of this
provision, shall be for a period of three years.
<PAGE> 2
3. COMPENSATION; BENEFITS.
The Bank shall compensate the Executive as follows:
(a) BASE SALARY. The Bank shall pay Executive a minimum starting salary
(the "Base Salary") of Two Hundred Ten Thousand and 00/100 cents ($210,000.00)
upon commencement of his employment with Bank. Such Base Salary shall be paid in
equal installments at such intervals as the Bank regularly pays salaries and
wages. The Base Salary shall be reviewed at least annually and shall be subject
to merit increases in the discretion of the Board of the Bank.
(b) INCENTIVE COMPENSATION. During the term of this Agreement,
Executive shall be eligible to receive bonuses ("Incentive Compensation"), as
the Board of Directors of the Bank may reasonably determine in its sole
discretion and in accordance with the Bank's prior policy and commitment of
providing its key officers with yearly bonuses commensurate with the Bank's
performance.
(c) PAYMENT FOR INCENTIVE BENEFITS FOREGONE. In consideration of
certain benefits foregone by Executive from his former employment, Executive
shall be paid the sum of One Hundred Thousand ($100,000.00), payable on the
commencement date or as soon thereafter as the Bank regularly pays salaries and
wages (the "Incentive Benefits Foregone"). The Incentive Benefits Foregone shall
be deemed earned by Executive upon the execution of this Agreement by the
parties.
(d) STOCK OPTIONS. Upon execution of this Agreement, Executive shall be
granted and issued 20,000 stock option grants in the Bank in accordance with the
terms and conditions of the Bank's Stock Option Plan. Additionally, and as a
further incentive to Executive to accept this Employment Agreement, Bank has
offered Executive an additionally 20,000 stock option grants in the Bank to be
issued in May 2000, subject to approval by the Bank's Compensation Committee
(which does not meet until April 2000). Executive shall be issued an option
agreement upon terms and conditions that are consistent with this Agreement.
(e) BENEFITS.
(i) The Executive will be entitled to participate in any
medical, dental, disability and life insurance plan or other benefit plan as may
be maintained from time to time by the Bank for its senior management, in
accordance with the terms of such plans.
(ii) The Bank will provide Executive with an annual vacation
in accordance with the Bank's policy, as the same may be changed from time to
time.
(iii) The Bank will reimburse Executive for reasonable
expenses actually and necessarily incurred by Executive in the discharge of his
duties, subject to any restrictions of policies imposed or adopted by the Bank
with respect to business expenses.
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GARCIA EMPLOYMENT AGREEMENT
<PAGE> 3
4. CERTAIN RESTRICTIONS ON EXECUTIVE.
(a) ACKNOWLEDGMENT OF BANK'S INTEREST.
Executive acknowledges (i) that the Bank's records, customer and depositor
lists, business prospects and other information are confidential trade secrets
and constitute valuable and unique assets of the Bank's business, and (ii) that
during the course of his employment with the Bank, the Executive may have access
to the Bank's Confidential Information.
(b) CONFIDENTIALITY. The Executive covenants and agrees that he will
not at any time while he is employed by the Bank in any capacity (whether
pursuant to this Agreement or otherwise), or at any time subsequent to his
employment by the Bank, (i) intentionally disclose any Confidential Information,
Directly or Indirectly, to any person, firm, corporation, partnership,
association or other entity, or (ii) otherwise directly or indirectly use any
Confidential Information, except disclosures made to other employees or to
officers, directors for or agents of the Bank, which are made for valid business
purposes, in connection with the performance by the Executive of his duties and
responsibilities hereunder. The Executive covenants and agrees that upon
termination of Executive's employment with the Bank, the Executive shall
promptly return and surrender to the Bank, any and all customer lists and other
Confidential Information of the Bank while he may have in his possession. As
used in this Agreement, the term "Confidential Information" shall mean
information which is not generally known to the public at large concerning the
business, affairs of properties of the Bank and their respective subsidiaries,
associates and affiliates, including, but not limited to, the names of the
Bank's customers and depositors, methods of doing business, financial
information and reports, regulatory reports, strategies or any other information
of the Bank and their respective subsidiaries and affiliates relating to their
manner of operation, their plans or other data of any kind, nature or
description.
(c) NON-SOLICITATION COVENANT. During the term of this Agreement,
Executive shall not (A) engage in, acquire an interest in any or become
affiliated in Miami-Dade County as an agent, employee, partner, director,
officer, stockholder, or proprietor with or of any bank, or savings and loan
association, except for the ownership of shares, not in excess of 5% of all
outstanding shares, in companies the shares of which are publicly traded; (B)
solicit (except in connection with the business of the Bank) or divert any
person who is, or has been during the preceding two (2) years, a customer or
depositor of the Bank; (C) influence or attempt to influence any employee of the
Bank to terminate his employment with the Bank; nor (D) influence or attempt to
influence, any supplier, agent or independent contractor that has a business
relationship with the Bank, or any customer of the Bank, to cease or adversely
alter its business relations with the Bank.
(d) INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach or violation by the Executive of any or all of the
covenants and agreements contained in this Section 4 may cause irreparable harm
and damage to the Bank in a monetary amount which may be virtually impossible to
ascertain. As a result,
Page 3 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 4
the Executive recognizes and hereby acknowledges and agrees that the Bank Shall
be entitled to an injunction from any court of competent jurisdiction enjoining
and restraining any breach or violation of any or all of the covenants and
agreements contained in this Section 4 by the Executive either directly or
indirectly, and that such right to injunction shall be cumulative and in
addition to whatever other rights or remedies the Bank may possess hereunder, at
law or in equity. Nothing in this Section 4 shall be construed to prevent the
Bank from seeking and recovering from the Executive damages sustained by it as a
result of any breach or violation by the Executive of any of the covenants or
agreements contained in this Section 4.
(e) REASONABLENESS OF RESTRICTIONS. In the event that any provision of
Paragraph 4 (c) above relating to the time period and/or the areas of
restriction is found by a court of competent jurisdiction to exceed the maximum
time period or area which such court finds reasonable and enforceable, the time
period and/or areas of restriction which the court finds reasonable and
enforceable shall become and thereafter be the maximum time period and/or area
applicable to the provisions of Paragraph 4 (c).
(f) DEFINITION OF BANK. Solely for purposes of this Section 4, the term
"Bank" shall include also any existing or future subsidiaries of the Bank, as
the case may be, that are operating in the time period described herein and any
other entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Bank during the
periods described herein.
5. TERMINATION.
(a) TERMINATION BY BANK FOR "CAUSE". Executive's employment pursuant to
this Employment Agreement can be terminated at any time by the Bank (i) if after
written notice to Executive specifying the nature of any material act or
omission which constitutes willful misfeasance or malfeasance by Executive in
connection with the performance of his employment duties, Executive fails to
cure the breach within fifteen (15) days of such notice; or (ii) if Executive
commits a felony or any material act of fraud, dishonesty, gross negligence or
any material act that is detrimental or harmful to the reputation, character or
standing of the Bank. Termination of Executive's employment under the provisions
of Paragraph 5(a) shall be deemed a termination for "Cause".
(b) TERMINATION BY EXECUTIVE FOR "GOOD REASON." The Bank shall be
deemed in breach of this Agreement upon the occurrence of any of the following:
(i) the breach by the Bank of any of the material provisions of this Agreement;
(ii) the assignment to Executive of any duties materially inconsistent with the
Executive's position as contemplated by Paragraph 1(a) of this Agreement; (iii)
any act by Bank which requires Executive to be permanently based at any office
or location outside of Miami-Dade County, except for travel reasonably required
in the performance of the Executive's responsibilities; or (iv) any purported
termination by the Bank of Executive's employment other than for Cause pursuant
to the provisions of paragraph 5(a) or by reason of the Executive's death or
disability pursuant to the provisions of
Page 4 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 5
Paragraph 5(c), or as a result of a Change in Control as provided in Paragraph
5(d). In the event that a breach by the Bank of this Agreement is not cured
within fifteen (15) days following a written notice specifying the nature of
such breach, Executive shall be entitled to terminate Executive's employment
under this Agreement and shall be entitled to be paid the Severance Payment
defined in Section 5(e). Termination by Executive of his employment under the
provisions of this Paragraph 5(b) shall be deemed a termination for "Good
Reason".
(c) DEATH OR DISABILITY. The death or extended disability of Executive
will terminate this Employment Agreement. Extended disability shall mean the
inability of Executive to perform his obligations hereunder for a period of 180
days in any 12-month period. The Bank shall have sole discretion based upon
competent medical evidence to determine whether Executive is disabled.
(d) CHANGE IN CONTROL OF THE BANK.
(i) In the event of a Change in Control of the Bank (as
defined in Paragraph 5(d)(iv) below) and in the event that within ninety (90)
days following the consummation of the Change in Control (A) Executive
voluntarily terminates his employment with the Bank (or its successors) or (B)
the Bank (or its successors) notifies Executive that it elects to terminate
Executive's employment with the Bank (or its successors) for any or no reason,
then Executive shall promptly be paid a lump sum payment (the "Change of Control
Payment") equal to:
(1) Two times his then Base Salary; plus
(2) An amount equal to two times the Incentive
Compensation earned by Executive in respect of the fiscal year immediately
preceding the Change in Control, or in the event Incentive Compensation has not
been paid yet for such year as of the date of the Change in Control, then an
amount equal to two times Executive's Incentive Compensation for the penultimate
year prior to the Change in Control or equal to two times the Incentive Benefits
Foregone, whichever is greater if no Incentive Compensation has been paid prior
to the Change in Control, PROVIDED, HOWEVER, that the total amount of the Change
of Control Payment shall not exceed an amount equal to three times the average
of the Executive's annualized compensation paid by the Bank and its affiliates
which was includible in the Executive's gross income during the most recent five
taxable years (or such lesser number of years equal to the number of years
Executive was employed by the Bank) ending before the date of the Change of
Control (i.e. amounts includible in compensation, including base salary and cash
annual incentive prior to any deferred arrangements, and defined as the
individual's "base amount" under Section 280G of the Internal Revenue Code of
1986, as amended).
Upon such termination, however, Executive shall not be paid any Severance
Payment (as defined below) which would otherwise be payable to Executive under
this Agreement -- the Change in Control Payment replacing any such Severance
Payment.
Page 5 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 6
(ii) In the event neither Executive nor the Bank (or its successors)
elects to terminate Executive's employment as provided in (i) above within
ninety (90) days following a Change in Control, the Bank (or its successor)
shall either (A) promptly pay the Change of Control Payment to Executive or (B)
offer Executive a new two (2) year employment agreement containing terms no less
favorable than the terms of this Agreement existing on the date of the Change in
Control.
(iii) In the event of a Change in Control and in the event Executive
shall elect to terminate his employment as provided in section (i) above for any
or no reason, such termination shall not be deemed a breach of this Agreement.
(iv) For purposes of this Agreement the term "Change in Control"
shall mean:
(A) A reorganization, merger, consolidation or other
form of corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Bank immediately prior
to such reorganization, merger or consolidation or other transaction do not,
immediately thereafter, directly or indirectly, own more than 50% of the
combined voting power entitled to vote generally in the election of director of
the reorganized, merged or consolidated entity's then outstanding voting
securities;
(B) A liquidation or dissolution of the Bank;
(C) The sale of all or substantially all of the
assets of the Bank (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(D) The acquisition by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act, (excluding any employee benefit plan of the Bank or its subsidiaries which
acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act)) of more than fifty percent (50%) of either
the then outstanding shares of common stock or the combined voting power of the
Bank's then outstanding voting securities entitled to vote generally in the
election of directors.
(v) In the Event of a Change of Control and provided that Executive
does not terminate his employment within 90 days following consummation of such
Change of Control, of all of Executive's outstanding stock options in the Bank
shall be accelerated and immediately vest upon the anniversary of the third
month following the consummation of such Change.
(e) SEVERANCE PAYMENT. In the event that Executive is terminated at any
time and for any reason other than for Cause, Death or Disability as defined in
Sections 5(a) and (c), or as provided in Section 5(d)(i), or in the event
that Executive terminates his
Page 6 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 7
employment for Good Reason under Section 5(b) other than as provided in Section
5(d)(i), Executive shall be paid a lump sum payment (the "Severance Payment")
equal to:
(A) Two times his then Base Salary; plus
(B) An amount equal to two times the Incentive
Compensation earned by Executive in respect of the fiscal year immediately
preceding the year of termination, or in the event Incentive Compensation has
not been paid yet for such year as of the date of termination, then an amount
equal to two times Executive's Incentive Compensation for the penultimate year
prior to the year of termination or equal to two times the Incentive Benefits
Foregone, whichever is greater if no Incentive Compensation has been paid prior
to the date of termination.
(C) The Severance Payment shall be paid on the
earlier of the termination of Executive's employment by the Bank (or its
successor) or thereafter at the earliest interval as the Bank regularly pays
salaries and wages.
(f) DAMAGES. Nothing contained herein shall be construed o prevent the
Bank or the Executive from seeking and recovering form the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement.
6. EXCISE TAX.
(a) LIMITATION OR ADDITIONAL PAYMENT. In the event that any portion of
the payments and benefits provided to Executive under this Agreement (without
regard to any amount payable under this Section 6) and any other payments and
benefits under any other agreement with or plan of the Bank (in the aggregate,
"Total Payments") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code (the "Excise Tax"), then Executive shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, Executive retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.
(b) DETERMINATION BY ACCOUNTING FIRM. Subject to the provisions of
Section 6(c) below, all determinations required to be made under this Section 6,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Bank's independent auditors or such other
certified public accounting firm reasonably acceptable to Executive as may be
designated by the Bank's (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Bank and Executive. All fees and expenses of
the Accounting Firm shall be paid solely by the Bank. Any Gross-Up Payment, as
determined pursuant to this Section 6, shall be paid by the Bank to Executive no
later than the due date for the payment of any Excise Tax. Any
Page 7 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 8
determination by the Accounting Firm shall be binding upon the Bank and
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Bank should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Bank exhausts
its remedies pursuant to Section 6(c) and Executive is thereafter required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by The Bank to Executive or for Executive's benefit.
(c) THE BANK RIGHT TO CONTEST EXCISE TAX. Executive agrees to notify
the Bank in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Bank of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten (10)
business days after Executive is informed in writing of such claim and shall
apprise the Bank of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the expiration
of the 30-day period following the date on which Executive is given such notice
to the Bank (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Bank notifies Executive in writing
prior to the expiration of such period that it desires to contest such claim,
Executive agrees to:
(i) give the Bank any information reasonably requested by the
Bank relating to such claim,
(ii) take such action in connection with contesting such
claim as the Bank shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Bank;
(iii) cooperate with the Bank in good faith in order to
effectively contest such claim, and
(iv) permit the bank to participate in any proceedings
relating to such claim; provided, however, that The Bank agrees to bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Bank shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearing and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination
Page 8 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 9
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Bank shall determine; provided, however,
that if the Bank directs Executive to pay such claim and sue for a refund, the
bank shall advance the amount of such payment to Executive, on an interest-free
basis and shall indemnify and hold Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for Executive taxable
year with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Bank control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) REPAYMENT TO THE BANK. If, after the receipt by Executive of an
amount advanced by the Bank pursuant to Section 6(c), Executive becomes entitled
to receive any refund with respect to such claim, Executive agrees to promptly
pay to the Bank the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Bank pursuant to Section 6(c), a
determination is made that Executive is not entitled to any refund with respect
to such claim and the Bank does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
7. CUMULATIVE RIGHTS. The rights of the Bank and duties and obligations of
the Executive hereunder are in addition to, and not in substitution for, any
rights available to the Bank against the Executive at law or in equity, or under
any other written agreements, contracts or other documents which the Executive
may hereafter agree to, all of which are cumulative and may be exercised by the
Bank in whole or in part form time to time.
8. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, both oral and written, between the parties hereto with respect
to the subject matter hereof. This Agreement may not be modified in any way
unless in writing signed by both the Bank and the Executive.
10. NOTICES. Any notices given pursuant to this Agreement shall be in
writing and shall be given by hand or deposited in the United States mail, by
Page 9 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 10
registered or certified mail, return receipts requested, postage prepaid,
addressed as follows:
If to the Bank: HAMILTON BANK N.A.
3750 NW 87th Avenue
Miami, FL 33178
Attn: Chief Executive Officer
If to the Executive: FELIX GARCIA
12531 SW 94th Court
Miami, FL 33176
or to such other address as either party hereto may from time to time give
notice of to the other in accordance with this Section.
11. BENEFIT AND BINDING EFFECT. This Agreement may not be assigned by the
Bank except in connection with a reorganization or a Change in Control of the
Bank and shall be binding upon the Bank by Executive and shall be binding upon
Executive and his legal representatives, successors and heirs.
12. SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part hereof,
all of which are inserted conditionally on their being valid in law, and in the
event that any one or more of the words, phrases, sentences, clauses or sections
contained in this Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid words, phrases, sentences, clauses, or sections had
not been inserted.
13. WAIVERS. The waiver by either party hereto of a breach of any provision
of this Agreement shall not operate nor be construed as a waiver of any
subsequent breach.
14. INTERPRETATION. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning of
interpretation of this Agreement. Whenever used in this Agreement, words in the
singular include the plural, words in the plural include the singular, and
pronouns of any gender include the other gender, all as may be appropriate.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Page 10 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 11
HAMILTON BANCORP INC. HAMILTON BANK, N.A.
By: /s/ Juan Carlos Bernace By: /s/ Eduardo A. Masferrer
--------------------------- ----------------------------
Name: Juan Carlos Bernace Name: Eduardo A. Masferrer
Title: Executive Vice President Title: Chairman
By: /s/ Eduardo A. Masferrer By: /s/ Juan Carlos Bernace
--------------------------- ----------------------------
Name: Eduardo A. Masferrer Name: Juan Carlos Bernace
Title: President Title: President
- ------------------------------- EXECUTIVE
Witness:
/s/ Felix Garcia
-------------------------------
FELIX GARCIA
- -------------------------------
Witness:
Page 11 of 11
GARCIA EMPLOYMENT AGREEMENT
<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made and executed effective this
26th day of April, 2000, by and between HAMILTON BANK N.A., a banking
association organized under the laws of the United States, with offices at 3750
NW 87th Avenue, Miami, FL 33178, and its holding company HAMILTON BANCORP INC.
(collectively the "Bank"), and FERNANDO J. MARTINEZ residing at 7210 SW 86
Avenue, Miami, FL 33143 (the "Executive").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein contained
the parties hereto agree as follows:
1. EMPLOYMENT.
(a) DUTIES. The Bank hereby employs the Executive and the Executive
hereby accepts such employment from the commencement date, as defined in Section
2 below, until the termination of this Agreement as provided in Section 5. The
Executive shall be employed as Executive Vice President of the Real Estate
Division of the Bank and shall perform such services consistent with such
position for the Bank as he shall be assigned from time to time by the Chief
Executive Officer or the Board of Directors. During the term of this Agreement,
Executive faithfully and industriously shall devote at all times his best and
dedicated efforts, cooperation and assistance in the performance of his
services.
(b) SERVICE ON BOARD OF DIRECTORS. Executive agrees to serve, if
requested, on the Board of Directors, or any committees, of the Bank during the
term of this Agreement.
2. TERM.
The term of this Agreement, and Executive's employment under the terms of
this Agreement, shall continue, unless otherwise terminated by either party in
accordance with the provisions contained in Section 5 of this Agreement, until
the third anniversary of the date this Agreement; PROVIDED, HOWEVER, commencing
on the second anniversary of the date of this Agreement, and on each anniversary
thereafter, the term of this Agreement shall be automatically extended for an
additional one-year period unless at least sixty (60) days prior to any such
anniversary date either party gives notice to the other that it elects not to
extend the term of this Agreement by an additional year. Notwithstanding, the
minimum term of this agreement if not otherwise extended by the terms of this
provision, shall be for a period of three years.
<PAGE> 2
3. COMPENSATION; BENEFITS.
The Bank shall compensate the Executive as follows:
(a) BASE SALARY. The Bank shall pay Executive a minimum starting salary
(the "Base Salary") of One Hundred Eighty Thousand and 00/100 cents
($180,000.00) upon commencement of his employment with Bank. Such Base Salary
shall be paid in equal installments at such intervals as the Bank regularly pays
salaries and wages. The Base Salary shall be reviewed at least annually and
shall be subject to merit increases in the discretion of the Board of the Bank.
(b) INCENTIVE COMPENSATION. During the term of this Agreement,
Executive shall be eligible to receive bonuses ("Incentive Compensation"), as
the Board of Directors of the Bank may reasonably determine in its sole
discretion and in accordance with the Bank's prior policy and commitment of
providing its key officers with yearly bonuses commensurate with the Bank's
performance.
(c) PAYMENT FOR INCENTIVE BENEFITS FOREGONE. In consideration of
certain benefits foregone by Executive from his former employment, Executive
shall be paid the sum of Eighty Thousand ($80,000.00), payable on the
commencement date or as soon thereafter as the Bank regularly pays salaries and
wages (the "Incentive Benefits Foregone"). The Incentive Benefits Foregone shall
be deemed earned by Executive upon the execution of this Agreement by the
parties.
(d) STOCK OPTIONS. Upon execution of this Agreement, Executive shall be
granted and issued 15,000 stock option grants in the Bank in accordance with the
terms and conditions of the Bank's Stock Option Plan. Additionally, and as a
further incentive to Executive to accept this Employment Agreement, Bank has
offered Executive an additionally 15,000 stock option grants in the Bank to be
issued in May 2000, subject to approval by the Bank's Compensation Committee
(which does not meet until April 2000). Executive shall be issued an option
agreement upon terms and conditions that are consistent with this Agreement.
(e) BENEFITS.
(i) The Executive will be entitled to participate in any
medical, dental, disability and life insurance plan or other benefit plan as may
be maintained from time to time by the Bank for its senior management, in
accordance with the terms of such plans.
(ii) The Bank will provide Executive with an annual vacation
in accordance with the Bank's policy, as the same may be changed from time to
time.
(iii) The Bank will reimburse Executive for reasonable
expenses actually and necessarily incurred by Executive in the discharge of his
duties, subject to any restrictions of policies imposed or adopted by the Bank
with respect to business expenses.
Page 2 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 3
4. CERTAIN RESTRICTIONS ON EXECUTIVE.
(a) ACKNOWLEDGMENT OF BANK'S INTEREST.
Executive acknowledges (i) that the Bank's records, customer and depositor
lists, business prospects and other information are confidential trade secrets
and constitute valuable and unique assets of the Bank's business, and (ii) that
during the course of his employment with the Bank, the Executive may have access
to the Bank's Confidential Information.
(b) CONFIDENTIALITY. The Executive covenants and agrees that he will
not at any time while he is employed by the Bank in any capacity (whether
pursuant to this Agreement or otherwise), or at any time subsequent to his
employment by the Bank, (i) intentionally disclose any Confidential Information,
Directly or Indirectly, to any person, firm, corporation, partnership,
association or other entity, or (ii) otherwise directly or indirectly use any
Confidential Information, except disclosures made to other employees or to
officers, directors for or agents of the Bank, which are made for valid business
purposes, in connection with the performance by the Executive of his duties and
responsibilities hereunder. The Executive covenants and agrees that upon
termination of Executive's employment with the Bank, the Executive shall
promptly return and surrender to the Bank, any and all customer lists and other
Confidential Information of the Bank while he may have in his possession. As
used in this Agreement, the term "Confidential Information" shall mean
information which is not generally known to the public at large concerning the
business, affairs of properties of the Bank and their respective subsidiaries,
associates and affiliates, including, but not limited to, the names of the
Bank's customers and depositors, methods of doing business, financial
information and reports, regulatory reports, strategies or any other information
of the Bank and their respective subsidiaries and affiliates relating to their
manner of operation, their plans or other data of any kind, nature or
description.
(c) NON-SOLICITATION COVENANT. During the term of this Agreement,
Executive shall not (A) engage in, acquire an interest in any or become
affiliated in Miami-Dade County as an agent, employee, partner, director,
officer, stockholder, or proprietor with or of any bank, or savings and loan
association, except for the ownership of shares, not in excess of 5% of all
outstanding shares, in companies the shares of which are publicly traded; (B)
solicit (except in connection with the business of the Bank) or divert any
person who is, or has been during the preceding two (2) years, a customer or
depositor of the Bank; (C) influence or attempt to influence any employee of the
Bank to terminate his employment with the Bank; nor (D) influence or attempt to
influence, any supplier, agent or independent contractor that has a business
relationship with the Bank, or any customer of the Bank, to cease or adversely
alter its business relations with the Bank.
(d) INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach or violation by the Executive of any or all of the
covenants and agreements contained in this Section 4 may cause irreparable harm
and damage to the Bank in a monetary amount which may be virtually impossible to
ascertain. As a result,
Page 3 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 4
the Executive recognizes and hereby acknowledges and agrees that the Bank Shall
be entitled to an injunction from any court of competent jurisdiction enjoining
and restraining any breach or violation of any or all of the covenants and
agreements contained in this Section 4 by the Executive either directly or
indirectly, and that such right to injunction shall be cumulative and in
addition to whatever other rights or remedies the Bank may possess hereunder, at
law or in equity. Nothing in this Section 4 shall be construed to prevent the
Bank from seeking and recovering from the Executive damages sustained by it as a
result of any breach or violation by the Executive of any of the covenants or
agreements contained in this Section 4.
(e) REASONABLENESS OF RESTRICTIONS. In the event that any provision of
Paragraph 4 (c) above relating to the time period and/or the areas of
restriction is found by a court of competent jurisdiction to exceed the maximum
time period or area which such court finds reasonable and enforceable, the time
period and/or areas of restriction which the court finds reasonable and
enforceable shall become and thereafter be the maximum time period and/or area
applicable to the provisions of Paragraph 4 (c).
(f) DEFINITION OF BANK. Solely for purposes of this Section 4, the term
"Bank" shall include also any existing or future subsidiaries of the Bank, as
the case may be, that are operating in the time period described herein and any
other entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Bank during the
periods described herein.
5. TERMINATION.
(a) TERMINATION BY BANK FOR "CAUSE". Executive's employment pursuant to
this Employment Agreement can be terminated at any time by the Bank (i) if after
written notice to Executive specifying the nature of any material act or
omission which constitutes willful misfeasance or malfeasance by Executive in
connection with the performance of his employment duties, Executive fails to
cure the breach within fifteen (15) days of such notice; or (ii) if Executive
commits a felony or any material act of fraud, dishonesty, gross negligence or
any material act that is detrimental or harmful to the reputation, character or
standing of the Bank. Termination of Executive's employment under the provisions
of Paragraph 5(a) shall be deemed a termination for "Cause".
(b) TERMINATION BY EXECUTIVE FOR "GOOD REASON." The Bank shall be
deemed in breach of this Agreement upon the occurrence of any of the following:
(i) the breach by the Bank of any of the material provisions of this Agreement;
(ii) the assignment to Executive of any duties materially inconsistent with the
Executive's position as contemplated by Paragraph 1(a) of this Agreement; (iii)
any act by Bank which requires Executive to be permanently based at any office
or location outside of Miami-Dade County, except for travel reasonably required
in the performance of the Executive's responsibilities; or (iv) any purported
termination by the Bank of Executive's employment other than for Cause pursuant
to the provisions of paragraph 5(a) or by reason of the Executive's death or
disability pursuant to the provisions of
Page 4 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 5
Paragraph 5(c), or as a result of a Change in Control as provided in Paragraph
5(d). In the event that a breach by the Bank of this Agreement is not cured
within fifteen (15) days following a written notice specifying the nature of
such breach, Executive shall be entitled to terminate Executive's employment
under this Agreement and shall be entitled to be paid the Severance Payment
defined in Section 5(e). Termination by Executive of his employment under the
provisions of this Paragraph 5(b) shall be deemed a termination for "Good
Reason".
(c) DEATH OR DISABILITY. The death or extended disability of Executive
will terminate this Employment Agreement. Extended disability shall mean the
inability of Executive to perform his obligations hereunder for a period of 180
days in any 12-month period. The Bank shall have sole discretion based upon
competent medical evidence to determine whether Executive is disabled.
(d) CHANGE IN CONTROL OF THE BANK.
(i) In the event of a Change in Control of the Bank (as
defined in Paragraph 5(d)(iv) below) and in the event that within ninety (90)
days following the consummation of the Change in Control (A) Executive
voluntarily terminates his employment with the Bank (or its successors) or (B)
the Bank (or its successors) notifies Executive that it elects to terminate
Executive's employment with the Bank (or its successors) for any or no reason,
then Executive shall promptly be paid a lump sum payment (the "Change of Control
Payment") equal to:
(1) Two times his then Base Salary; plus
(2) An amount equal to two times the Incentive
Compensation earned by Executive in respect of the fiscal year immediately
preceding the Change in Control, or in the event Incentive Compensation has not
been paid yet for such year as of the date of the Change in Control, then an
amount equal to two times Executive's Incentive Compensation for the penultimate
year prior to the Change in Control or equal to two times the Incentive Benefits
Foregone, whichever is greater if no Incentive Compensation has been paid prior
to the Change in Control, PROVIDED, HOWEVER, that the total amount of the Change
of Control Payment shall not exceed an amount equal to three times the average
of the Executive's annualized compensation paid by the Bank and its affiliates
which was includible in the Executive's gross income during the most recent five
taxable years (or such lesser number of years equal to the number of years
Executive was employed by the Bank) ending before the date of the Change of
Control (i.e. amounts includible in compensation, including base salary and cash
annual incentive prior to any deferred arrangements, and defined as the
individual's "base amount" under Section 280G of the Internal Revenue Code of
1986, as amended).
Upon such termination, however, Executive shall not be paid any Severance
Payment (as defined below) which would otherwise be payable to Executive under
this Agreement -- the Change in Control Payment replacing any such Severance
Payment.
Page 5 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 6
(ii) In the event neither Executive nor the Bank (or its
successors) elects to terminate Executive's employment as provided in (i) above
within ninety (90) days following a Change in Control, the Bank (or its
successor) shall either (A) promptly pay the Change of Control Payment to
Executive or (B) offer Executive a new two (2) year employment agreement
containing terms no less favorable than the terms of this Agreement existing on
the date of the Change in Control.
(iii) In the event of a Change in Control and in the event
Executive shall elect to terminate his employment as provided in section (i)
above for any or no reason, such termination shall not be deemed a breach of
this Agreement.
(iv) For purposes of this Agreement the term "Change in
Control" shall mean:
(A) A reorganization, merger, consolidation or other
form of corporate transaction or series of transactions, in each case, with
respect to which persons who were the shareholders of the Bank immediately prior
to such reorganization, merger or consolidation or other transaction do not,
immediately thereafter, directly or indirectly, own more than 50% of the
combined voting power entitled to vote generally in the election of director of
the reorganized, merged or consolidated entity's then outstanding voting
securities;
(B) A liquidation or dissolution of the Bank;
(C) The sale of all or substantially all of the
assets of the Bank (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale is subsequently
abandoned); or
(D) The acquisition by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act, (excluding any employee benefit plan of the Bank or its
subsidiaries which acquires beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act)) of more than fifty percent
(50%) of either the then outstanding shares of common stock or the combined
voting power of the Bank's then outstanding voting securities entitled to vote
generally in the election of directors.
(v) In the Event of a Change of Control and provided that
Executive does not terminate his employment within 90 days following
consummation of such Change of Control, of all of Executive's outstanding stock
options in the Bank shall be accelerated and immediately vest upon the
anniversary of the third month following the consummation of such Change.
(e) SEVERANCE PAYMENT. In the event that Executive is terminated at any
time and for any reason other than for Cause, Death or Disability as defined in
Sections 5(a) and (c), or as provided in Section 5(d)(i), or in the event
that Executive terminates his
Page 6 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 7
employment for Good Reason under Section 5(b) other than as provided in Section
5(d)(i), Executive shall be paid a lump sum payment (the "Severance Payment")
equal to:
(A) Two times his then Base Salary; plus
(B) An amount equal to two times the Incentive
Compensation earned by Executive in respect of the fiscal year immediately
preceding the year of termination, or in the event Incentive Compensation has
not been paid yet for such year as of the date of termination, then an amount
equal to two times Executive's Incentive Compensation for the penultimate year
prior to the year of termination or equal to two times the Incentive Benefits
Foregone, whichever is greater if no Incentive Compensation has been paid prior
to the date of termination.
(C) The Severance Payment shall be paid on the
earlier of the termination of Executive's employment by the Bank (or its
successor) or thereafter at the earliest interval as the Bank regularly pays
salaries and wages.
(f) DAMAGES. Nothing contained herein shall be construed to prevent the
Bank or the Executive from seeking and recovering form the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement.
6. EXCISE TAX.
(a) LIMITATION OR ADDITIONAL PAYMENT. In the event that any portion of
the payments and benefits provided to Executive under this Agreement (without
regard to any amount payable under this Section 6) and any other payments and
benefits under any other agreement with or plan of the Bank (in the aggregate,
"Total Payments") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code (the "Excise Tax"), then Executive shall be entitled
to receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, Executive retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.
(b) DETERMINATION BY ACCOUNTING FIRM. Subject to the provisions of
Section 6(c) below, all determinations required to be made under this Section 6,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Bank's independent auditors or such other
certified public accounting firm reasonably acceptable to Executive as may be
designated by the Bank's (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Bank and Executive. All fees and expenses of
the Accounting Firm shall be paid solely by the Bank. Any Gross-Up Payment, as
determined pursuant to this Section 6, shall be paid by the Bank to Executive no
later than the due date for the payment of any Excise Tax. Any
Page 7 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 8
determination by the Accounting Firm shall be binding upon the Bank and
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Bank should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Bank exhausts
its remedies pursuant to Section 6(c) and Executive is thereafter required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by The Bank to Executive or for Executive's benefit.
(c) THE BANK RIGHT TO CONTEST EXCISE TAX. Executive agrees to notify
the Bank in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Bank of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten (10)
business days after Executive is informed in writing of such claim and shall
apprise the Bank of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the expiration
of the 30-day period following the date on which Executive is given such notice
to the Bank (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Bank notifies Executive in writing
prior to the expiration of such period that it desires to contest such claim,
Executive agrees to:
(i) give the Bank any information reasonably requested by the
Bank relating to such claim,
(ii) take such action in connection with contesting such
claim as the Bank shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Bank;
(iii) cooperate with the Bank in good faith in order to
effectively contest such claim, and
(iv) permit the bank to participate in any proceedings
relating to such claim; provided, however, that The Bank agrees to bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Bank shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals, proceedings, hearing and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination
Page 8 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 9
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Bank shall determine; provided, however,
that if the Bank directs Executive to pay such claim and sue for a refund, the
bank shall advance the amount of such payment to Executive, on an interest-free
basis and shall indemnify and hold Executive harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for Executive taxable
year with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Bank control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) REPAYMENT TO THE BANK. If, after the receipt by Executive of an
amount advanced by the Bank pursuant to Section 6(c), Executive becomes entitled
to receive any refund with respect to such claim, Executive agrees to promptly
pay to the Bank the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Bank pursuant to Section 6(c), a
determination is made that Executive is not entitled to any refund with respect
to such claim and the Bank does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
7. CUMULATIVE RIGHTS. The rights of the Bank and duties and obligations of
the Executive hereunder are in addition to, and not in substitution for, any
rights available to the Bank against the Executive at law or in equity, or under
any other written agreements, contracts or other documents which the Executive
may hereafter agree to, all of which are cumulative and may be exercised by the
Bank in whole or in part form time to time.
8. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, both oral and written, between the parties hereto with respect
to the subject matter hereof. This Agreement may not be modified in any way
unless in writing signed by both the Bank and the Executive.
10. NOTICES. Any notices given pursuant to this Agreement shall be in
writing and shall be given by hand or deposited in the United States mail, by
Page 9 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 10
registered or certified mail, return receipts requested, postage prepaid,
addressed as follows:
If to the Bank: HAMILTON BANK N.A.
3750 NW 87th Avenue
Miami, FL 33178
Attn: Chief Executive Officer
If to the Executive: FERNANDO J. MARTINEZ
7210 SW 86th Avenue
Miami, FL 33143
or to such other address as either party hereto may from time to time give
notice of to the other in accordance with this Section.
11. BENEFIT AND BINDING EFFECT. This Agreement may not be assigned by the
Bank except in connection with a reorganization or a Change in Control of the
Bank and shall be binding upon the Bank by Executive and shall be binding upon
Executive and his legal representatives, successors and heirs.
12. SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part hereof,
all of which are inserted conditionally on their being valid in law, and in the
event that any one or more of the words, phrases, sentences, clauses or sections
contained in this Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid words, phrases, sentences, clauses, or sections had
not been inserted.
13. WAIVERS. The waiver by either party hereto of a breach of any provision
of this Agreement shall not operate nor be construed as a waiver of any
subsequent breach.
14. INTERPRETATION. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning of
interpretation of this Agreement. Whenever used in this Agreement, words in the
singular include the plural, words in the plural include the singular, and
pronouns of any gender include the other gender, all as may be appropriate.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Page 10 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 11
HAMILTON BANCORP INC. HAMILTON BANK, N.A.
By: /s/ Juan Carlos Bernace By: /s/ Eduardo A. Masferrer
--------------------------- ----------------------------
Name: Juan Carlos Bernace Name: Eduardo A. Masferrer
Title: Executive Vice President Title: Chairman
By: /s/ Eduardo A. Masferrer By: /s/ Juan Carlos Bernace
--------------------------- ----------------------------
Name: Eduardo A. Masferrer Name: Juan Carlos Bernace
Title: President Title: President
- ------------------------------- EXECUTIVE
Witness:
/s/ Fernando J. Martinez
-------------------------------
FERNANDO J. MARTINEZ
- -------------------------------
Witness:
Page 11 of 11
MARTINEZ EMPLOYMENT AGREEMENT
<PAGE> 1
EXHIBIT 11
HAMILTON BANCORP INC. AND SUBSIDIARY
CALCULATION OF EARNINGS PER SHARE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Basic
Weighted average number of common shares outstanding 10,081,147 10,056,111
Net income $7,203 $6,069
Basic earnings $ 0.71 $ 0.60
Diluted:
Weighted average number of common shares outstanding 10,081,147 10,056,111
Potential common shares outstanding - options 139,974 227,124
---------- ----------
Total common and potential common shares outstanding 10,221,121 10,283,235
Net income $7,203 $6,069
Diluted earnings per share $ 0.70 $ 0.59
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 35,529
<INT-BEARING-DEPOSITS> 151,398
<FED-FUNDS-SOLD> 94,697
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 295,772
<LOANS> 1,120,085
<ALLOWANCE> 20,575
<TOTAL-ASSETS> 1,758,952
<DEPOSITS> 1,550,951
<SHORT-TERM> 0
<LIABILITIES-OTHER> 52,099
<LONG-TERM> 12,650
0
0
<COMMON> 101
<OTHER-SE> 143,151
<TOTAL-LIABILITIES-AND-EQUITY> 1,758,952
<INTEREST-LOAN> 29,405
<INTEREST-INVEST> 3,052
<INTEREST-OTHER> 4,544
<INTEREST-TOTAL> 37,001
<INTEREST-DEPOSIT> 20,166
<INTEREST-EXPENSE> 20,475
<INTEREST-INCOME-NET> 16,526
<LOAN-LOSSES> 750
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 9,013
<INCOME-PRETAX> 11,426
<INCOME-PRE-EXTRAORDINARY> 11,426
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,203
<EPS-BASIC> 0.71
<EPS-DILUTED> 0.70
<YIELD-ACTUAL> 3.35
<LOANS-NON> 16,476
<LOANS-PAST> 6,906
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 21,411
<CHARGE-OFFS> 1,629
<RECOVERIES> 43
<ALLOWANCE-CLOSE> 20,575
<ALLOWANCE-DOMESTIC> 3,280
<ALLOWANCE-FOREIGN> 17,295
<ALLOWANCE-UNALLOCATED> 20,575
</TABLE>
