SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 1999
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 0-22608
FFLC BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 59-3204891
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
800 North Boulevard West, Post Office Box 490420, Leesburg, Florida 34749-0420
- ------------------------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (352) 787-3311
--------------
- -------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
3,676,166 shares outstanding
Common stock, par value $.01 per share at April 22, 1999
- -------------------------------------- ----------------------------
CONFORMED COPY
<PAGE>
FFLC BANCORP, INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Condensed Consolidated Balance Sheets -
at March 31, 1999 (unaudited) and at December 31, 1998................2
Condensed Consolidated Statements of Income -
Three Months ended March 31, 1999 and 1998 (unaudited)................3
Condensed Consolidated Statement of Stockholders' Equity -
Three Months ended March 31, 1999 (unaudited).........................4
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 1999 and 1998 (unaudited)..............5-6
Notes to Condensed Consolidated Financial Statements (unaudited)......7-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................9-15
Part II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................16
Item 2. Changes in Securities...........................................16
Item 3. Default upon Senior Securities..................................16
Item 5. Other Information...............................................16
Item 6. Exhibits and Reports on Form 8-K................................16
SIGNATURES..................................................................17
1
<PAGE>
FFLC BANCORP, INC.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
At At
March 31, December 31,
1999 1998
---- ----
Assets (unaudited)
<S> <C> <C>
Cash and due from banks $ 12,672 9,515
Interest-bearing deposits 12,684 13,413
------- --------
Cash and cash equivalents 25,356 22,928
------- --------
Securities available for sale 23,325 22,165
Securities held to maturity (market value of $16,327 in 1999
and $18,425 in 1998) 16,130 18,227
Loans receivable, net of allowance for loan losses of $2,399 in 1999
and $2,283 in 1997 416,075 389,059
Accrued interest receivable:
Securities 378 352
Loans receivable 2,095 1,890
Premises and equipment, net 7,025 5,597
Foreclosed real estate 206 366
Real estate held for development - 122
Restricted securities - Federal Home Loan Bank stock, at cost 3,159 2,800
Other assets 520 314
--------- ---------
Total $ 494,269 463,820
======= =======
Liabilities and Stockholders' Equity
Liabilities:
NOW and money market accounts 72,633 68,816
Savings accounts 22,435 23,038
Certificates 276,737 259,176
------- -------
Total deposits 371,805 351,030
------- -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
At At
March 31, December 31,
1999 1998
---- ----
Assets (unaudited)
<S> <C> <C>
Advances from Federal Home Loan Bank 63,000 56,000
Other borrowed funds 1,408 789
Deferred income taxes 421 284
Accrued expenses and other liabilities 2,959 2,494
-------- --------
Total liabilities 439,593 410,597
------- -------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none outstanding - -
Common stock, $.01 par value, 9,000,000 shares authorized,
4,403,856 in 1999 and 4,372,041 in 1998 shares issued 44 44
Additional paid-in-capital 29,612 29,286
Retained income 41,049 39,714
Accumulated other comprehensive income - unrealized loss on securities
available for sale, net of tax of $48 in 1999 and $39 in 1998 (80) (65)
Treasury stock, at cost (732,400 shares in 1999 and
716,421 shares in 1998) (15,397) (15,125)
Stock held by Incentive Plan Trusts (552) (631)
-------- --------
Total stockholders' equity 54,676 53,223
------- -------
Total $ 494,269 463,820
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
FFLC BANCORP, INC.
Condensed Consolidated Statements of Income
($ in thousands, except share amounts)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-----------------------------
1999 1998
----------- ------------
(unaudited)
Interest income:
<S> <C> <C>
Loans receivable $ 8,086 6,620
Securities available for sale 345 366
Securities held to maturity 220 542
Other interest-earning assets 200 225
----------- ------------
Total interest income 8,851 7,753
----------- ------------
Interest expense:
Deposits 3,940 3,694
Borrowed funds 808 450
----------- ------------
Total interest expense 4,748 4,144
----------- ------------
Net interest income 4,103 3,609
Provision for loan losses 200 148
----------- ------------
Net interest income after provision for loan losses 3,903 3,461
----------- ------------
Noninterest income:
Deposit account fees 146 129
Other service charges and fees 244 87
Gain on sale of real estate held for development 886 -
Other 13 12
----------- ------------
Total noninterest income 1,289 228
----------- ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
-----------------------------
1999 1998
----------- ------------
(unaudited)
<S> <C> <C>
Interest income:
Noninterest expense:
Salaries and employee benefits 1,444 1,261
Occupancy expense 336 233
Deposit insurance premium 51 48
Data processing expense 140 115
Professional services 56 50
Advertising and promotion 78 77
Other 269 233
----------- ------------
Total noninterest expense 2,374 2,017
----------- ------------
Income before income taxes 2,818 1,672
Income taxes 1,084 681
----------- ------------
Net income $ 1,734 991
=========== ============
Basic income per share of common stock $ .49 .28
=========== ============
Weighted-average number of shares outstanding for basic 3,571,598 3,602,638
=========== ============
Diluted income per share of common stock $ .47 .26
=========== ============
Weighted-average number of shares outstanding for diluted 3,720,042 3,803,382
=========== ============
Dividends per share $ .11 .09
=========== ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
FFLC BANCORP, INC.
Condensed Consolidated Statement of Stockholders' Equity
Three Months Ended March 31, 1999
($ in thousands)
<TABLE>
<CAPTION>
Stock Accumulated
Held by Other
Additional Incentive Compre- Total
Common Paid-In Treasury Plan Retained hensive Stockholders'
Stock Capital Stock Trusts Income Income Equity
------- --------- --------- ---------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1998 $ 44 29,286 (15,125) (631) 39,714 (65) 53,223
Comprehensive income:
Net income (unaudited) -- -- -- -- 1,734 -- 1,734
Net change in unrealized loss
on securities available for
sale, net of tax of $9
(unaudited) -- -- -- -- -- (15) (15)
------- ------- -------
Comprehensive income (unaudited) -- -- -- -- 1,734 (15) 1,719
------- ------- -------
Net proceeds from the issuance
of 31,815 shares of common
stock (unaudited) -- 191 -- -- -- -- 191
Dividends paid, net of $6 of
dividends on ESOP shares
recorded as compensation
expense (unaudited) -- -- -- -- (399) -- (399)
Purchase of treasury stock,
15,979 shares (unaudited) -- -- (272) -- -- -- (272)
Shares committed to participants
in incentive plans (unaudited) -- 135 -- 79 -- -- 214
------- ------- ------- ------- ------- ------- -------
Balance at March 31, 1999
(unaudited) $ 44 29,612 (15,397) (552) 41,049 (80) 54,676
======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
March 31,
1999 1998
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,734 991
Adjustments to reconcile net income
to net cash provided by operations:
Provision for loan losses 200 148
Depreciation 114 98
Provision (credit) for deferred income taxes 146 (205)
Shares committed and dividends to incentive plan participants 220 268
Net amortization of premiums or discounts on securities 25 (5)
Accretion of deferred loan fees and unearned income 15 3
Deferral of net loan fees collected, net of costs deferred 61 61
Gain on sale of foreclosed real estate (4) (4)
Gain on sale of real estate held for development (886) --
(Increase) decrease in accrued interest receivable (231) 14
Increase in other assets (206) (181)
Increase in accrued expenses and other liabilities 465 718
-------- --------
Net cash provided by operating activities 1,653 1,906
-------- --------
Cash flows from investing activities:
Proceeds from maturities and principal repayments on securities
held to maturity 2,088 2,794
Proceeds from maturities and principal repayments on securities
available for sale 922 2,738
Purchase of securities available for sale (2,122) (141)
Loan disbursements (47,369) (31,170)
Principal repayments on loans 20,230 18,586
Purchase of premises and equipment, net (1,542) (43)
Purchase of Federal Home Loan Bank stock (359) (433)
Proceeds from sales of foreclosed real estate 11 --
Proceeds from sale of real estate held for development 1,008 --
-------- --------
Net cash used in investing activities (27,133) (7,669)
-------- --------
(continued)
</TABLE>
5
<PAGE>
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows, Continued
($ in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1999 1998
(unaudited)
<S> <C> <C>
Cash flows from financing activities:
Net increase in savings, demand, NOW and money-market accounts $ 3,214 5,235
Net increase in certificate accounts 17,561 2,134
Net increase in advances from Federal Home Loan Bank 7,000 --
Net increase in other borrowed funds 619 --
Stock options exercised 191 230
Purchase of treasury stock (272) (666)
Cash dividends paid (405) (336)
-------- --------
Net cash provided by financing activities 27,908 6,597
-------- --------
Net increase in cash and cash equivalents 2,428 834
Cash and cash equivalents at beginning of period 22,928 15,684
-------- --------
Cash and cash equivalents at end of period $ 25,356 16,518
======== ========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 4,901 4,165
======== ========
Income taxes $ 105 120
======== ========
Noncash investing and financing activities:
(Decrease) increase in accumulated other comprehensive income $ (15) 28
======== ========
Loans originated on sales of foreclosed real estate $ 153 64
======== ========
Loans funded by and sold to correspondent $ 3,883 1,366
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation. In the opinion of the management of FFLC Bancorp,
Inc., the accompanying condensed consolidated financial statements
contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position at March 31, 1999 and
the results of operations and cash flows for the three-month periods
ended March 31, 1999 and 1998. The results of operations and other data
for the three-month period ended March 31, 1999, are not necessarily
indicative of results that may be expected for the year ending December
31, 1999.
The condensed consolidated financial statements include the accounts of
FFLC Bancorp, Inc. (the "Holding Company"), its wholly-owned subsidiary,
First Federal Savings Bank of Lake County (the "Savings Bank") and the
Savings Bank's wholly-owned subsidiary, Lake County Service Corporation
(together, the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
2. Loan Impairment and Loan Losses. The Company prepares a quarterly review
of the adequacy of the allowance for loan losses to also identify and
value impaired loans in accordance with guidance in the Statements of
Financial Accounting Standards Nos. 114 and 118. No impaired loans were
identified by the Company during the three months ended March 31, 1999
or 1998.
An analysis of the change in the allowance for loan losses was as
follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Balance at January 1 $ 2,283 1,684
Provision for loan losses 200 148
Loans charged-off (101) -
Recoveries 17 2
------- ------
Balance at March 31 $ 2,399 1,834
===== =====
(continued)
</TABLE>
7
<PAGE>
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
4. Per Share Amounts. Income per share of common stock has been determined
by dividing net income for the period by the weighted-average number of
shares outstanding. Shares of common stock purchased by the ESOP and RRP
incentive plans are only considered outstanding when the shares are
released for allocation to participants. Stock options are regarded as
common stock equivalents and are therefore considered in both basic and
diluted income per share calculations. Common stock equivalents are
computed using the treasury stock method. The following table presents
the calculation of basic and diluted income per share:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
Weighted-average shares of common stock issued and
outstanding before adjustments for ESOP, RRP and
common stock options 3,674,817 3,758,462
Adjustment to reflect the effect of unallocated ESOP and
RRP shares (103,219) (155,824)
---------- ----------
Weighted-average shares for basic net income per share 3,571,598 3,602,638
========== ==========
Basic net income per share $ .49 .28
========== ==========
Total weighted-average common shares and equivalents
outstanding for basic net income per share computation 3,571,598 3,602,638
Additional dilutive shares using the average market value for
the period utilizing the treasury stock method regarding stock options 148,444 200,744
---------- ----------
Weighted-average common shares and equivalents outstanding for
diluted net income per share 3,720,042 3,803,382
========== ==========
Diluted net income per share $ .47 .26
========== ==========
</TABLE>
8
<PAGE>
FFLC BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
General
FFLC Bancorp, Inc. (the "Holding Company") is the holding company for
First Federal Savings Bank of Lake County (the "Savings Bank") and its
wholly-owned subsidiary, Lake County Service Corporation (together, the
"Company"). The Company's consolidated results of operations are primarily
those of the Savings Bank.
The Savings Bank's principal business continues to be attracting retail
deposits from the general public and investing those deposits, together
with principal repayments on loans and investments and funds generated
from operations, primarily in mortgage loans secured by one-to-four-family
owner-occupied homes, commercial loans, securities and, to a lesser
extent, construction loans, consumer and other loans, and multi-family
residential mortgage loans. In addition, the Savings Bank holds
investments permitted by federal laws and regulations including securities
issued by the U.S. Government and agencies thereof. The Savings Bank's
revenues are derived principally from interest on its mortgage loan and
mortgage-backed securities portfolios and interest and dividends on its
investment securities. The Savings Bank is a member of the Federal Home
Loan Bank ("FHLB") system and its deposits are insured to the applicable
limits by the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation (the "FDIC"). The Savings Bank is subject to
regulation by the Office of Thrift Supervision (the "OTS") as its
chartering agency, and the FDIC as its deposit insurer.
The Savings Bank has 10 full-service locations in Lake, Sumter and Citrus
Counties, Florida.
The Savings Bank's results of operations are dependent primarily on net
interest income, which is the difference between the interest income
earned primarily on its loans and securities portfolios, and its cost of
funds, consisting of the interest paid on its deposits and borrowings. The
Savings Bank's operating results are also affected, to a lesser extent, by
fee income and by gains or losses on the sale of loans, securities
available for sale and foreclosed real estate. The Savings Bank's
operating expenses consist primarily of salaries and employee benefits,
occupancy expenses, deposit insurance premiums and other general and
administrative expenses. The Savings Bank's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies, and
actions of regulatory authorities.
9
<PAGE>
FFLC BANCORP, INC.
Liquidity and Capital Resources
The Company's most liquid assets are cash, amounts due from depository
institutions and interest-bearing deposits. The levels of these assets are
dependent on the Company's lending, investing, operating, and deposit
activities during any given period. At March 31, 1999, cash, amounts due
from depository institutions and interest-bearing deposits, totaled $25.4
million.
The Savings Bank is required to maintain an average daily balance of
specified liquid assets equal to a monthly average of not less than a
specified percentage of its net withdrawable deposit accounts plus
short-term borrowings. This liquidity requirement is currently 4% but may
be changed from time to time by the OTS to any amount within the range of
4% to 10% depending upon economic conditions and the savings flows of
member institutions. Monetary penalties may be imposed for failure to meet
this liquidity requirement. The Savings Bank's liquidity ratio at March
31, 1999 exceeded the requirement.
The Savings Bank's primary sources of funds include proceeds from payments
and prepayments on loans and mortgage-backed securities, proceeds from
maturities of investment securities, and increases in deposits. While
maturities and scheduled amortization of loans, mortgage-backed and
investment securities are predictable sources of funds, deposit inflows
and mortgage and mortgage-backed securities prepayments are greatly
influenced by local conditions, general interest rates, and regulatory
changes.
At March 31, 1999, the Savings Bank had outstanding commitments to
originate $14.7 million of loans and to fund the undisbursed portion of
loans in process of approximately $12.7 million and undisbursed commercial
lines of credit of approximately $24.6 million. The Savings Bank believes
that it will have sufficient funds available to meet its commitments. At
March 31, 1999, certificates of deposit which were scheduled to mature in
one year or less totaled $169.1 million. Management believes, based on
past experience, that a significant portion of those funds will remain
with the Savings Bank.
The Savings Bank is subject to various regulatory capital requirement
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 Savings Bank must meet specific capital guidelines
that involve quantitative measures of the Savings Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Savings Bank's capital amounts and
classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Savings Bank to maintain minimum amounts (set forth in the
table below) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined). Management believes, as of March 31,
1999, that the Savings Bank meets all capital adequacy requirements to
which it is subject.
10
<PAGE>
FFLC BANCORP, INC.
As of March 31, 1999, the most recent notification from the OTS
categorized the Savings Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized, the Savings Bank must maintain minimum tangible, Tier I
(core), Tier I (risk-based) and total risk-based capital ratios as set
forth in the table. There are no conditions or events since that
notification that management believes have changed the institution's
category.
<PAGE>
The Savings Bank's actual capital amounts and ratios at March 31, 1999 are
also presented in the table.
<TABLE>
<CAPTION>
To Be Well
Minimum Capitalized
For Capital For Prompt
Adequacy Corrective Action
Actual Purposes Provisions
------------------ ----------------- -----------------
Ratio Amount Ratio Amount Ratio Amount
----- ------ ----- ------ ----- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Stockholders' equity,
and ratio to total
assets 9.7% $ 48,181
Less: investment in
nonincludable
subsidiary (1,073)
Add back: unrealized loss on
securities available for sale 7
Tangible capital,
and ratio to adjusted
total assets 9.5% $ 47,115 1.5% $ 7,401
====== =======
Tier 1 (core) capital, and
ratio to adjusted total
assets 9.5% $ 47,115 3.0% $ 14,803 5.0% $ 24,671
====== ====== ======
Tier 1 capital, and ratio
to risk-weighted assets 16.4% 47,115 4.0% $ 11,525 6.0% $ 17,287
====== ======
Tier 2 capital (allowance for
loan losses and deductible
assets) 2,274
Total risk-based capital,
and ratio to risk-
weighted assets 17.1% $ 49,389 8.0% $ 23,085 10.0% $ 28,856
======= ====== ======
Total assets $ 494,491
=======
Adjusted total assets $ 493,425
=======
Risk-weighted assets $ 288,564
=======
</TABLE>
11
<PAGE>
FFLC BANCORP, INC.
The following table shows selected ratios for the periods ended or at the
dates indicated:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Year Ended Ended
March 31, December 31, March 31,
1999 1998 1998
---- ---- ----
<S> <C> <C> <C>
Average equity as a percentage
of average assets 11.43% 12.52% 12.83%
Total equity to total assets at end of period 11.06% 11.47% 12.71%
Return on average assets (1) 1.46% 1.05% .98%
Return on average equity (1) 12.73% 8.37% 7.64%
Noninterest expense to average assets (1) 1.99% 2.01% 2.00%
Nonperforming assets to total assets
at end of period .15% .17% .31%
Operating efficiency ratio 52.69%(2) 52.25% 52.57%
</TABLE>
(1) Annualized for the three months ended March 31, 1999 and 1998.
(2) Excludes gain on sale of real estate held for development.
<PAGE>
<TABLE>
<CAPTION>
At At At
March 31, December 31, March 31,
1999 1998 1998
---- ---- ----
<S> <C> <C> <C>
Weighted-average interest rates:
Interest-earning assets:
Loans receivable 7.89% 7.96% 8.16%
Securities 6.14% 6.37% 6.51%
Other interest-earning assets 5.53% 5.32% 6.21%
Total interest-earning assets 7.66% 7.72% 7.87%
Interest-bearing liabilities:
Deposits 4.49% 4.58% 4.69%
Borrowed funds 5.16% 5.27% 6.01%
Total interest-bearing liabilities 4.59% 4.67% 4.80%
Interest-rate spread 3.07% 3.05% 3.07%
</TABLE>
Change in Financial Condition
Total assets increased $30.4 million or 6.6%, from $463.8 million at December
31, 1998 to $494.3 million at March 31, 1999, primarily as a result of an
increase in loans receivable of $27.0 million. Deposits increased $20.8 million
from $351.0 million at December 31, 1998 to $371.8 million at March 31, 1999.
The $1.5 million net increase in stockholders equity during the three months
ended March 31, 1999 resulted from net income of $1.7 million, credits to equity
totaling $214,000 related to the stock incentive plans and proceeds of $191,000
from stock options exercised, partially offset by repurchases of the Company's
stock of $272,000, dividends paid of $399,000 and $15,000 decrease in
accumulated other comprehensive income.
12
<PAGE>
FFLC BANCORP, INC.
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest income; (iv) interest-rate spread; and (v) net
interest margin. Yields and costs were derived by dividing income or expense by
the average balance of assets or liabilities, respectively, for the periods
shown. The average balance of loans receivable includes loans on which the
Company has discontinued accruing interest. The yields and costs include fees
which are considered to constitute adjustments to yields.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------------------
1999 1998
-------------------------------- -----------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost BalanceInterest Cost
------- -------- ---- --------------- ----
($ in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1) $ 401,630 8,086 8.05% $ 317,721 6,620 8.33%
Securities 39,584 565 5.71 56,609 908 6.42
Other interest-earning assets (2) 15,192 200 5.27 15,518 225 5.80
-------- ------ ------- ------
Total interest-earning assets 456,406 8,851 7.76 389,848 7,753 7.95
----- -----
Noninterest-earning assets 19,980 14,335
------- -------
Total assets $ 476,386 $ 404,183
======= =======
Interest-bearing liabilities:
NOW and money-market accounts 57,761 331 2.29 46,216 246 2.13
Passbook and statement savings accounts 22,694 116 2.04 24,609 147 2.39
Certificates 264,163 3,493 5.29 240,388 3,301 5.49
FHLB advances 61,444 798 5.19 30,000 450 6.00
Other borrowings 872 10 4.59 - - -
--------- ------ ----------- -----
Total interest-bearing liabilities 406,934 4,748 4.67 341,213 4,144 4.85
----- -----
Noninterest-bearing deposits 9,084 6,829
Noninterest-bearing liabilities 5,902 4,274
Stockholders' equity 54,466 51,867
------- -------
Total liabilities and stockholders' equity $ 476,386 $ 404,183
======= =======
Net interest income $ 4,103 $ 3,609
===== =====
Interest-rate spread (3) 3.09% 3.10%
==== ====
Net average interest-earning assets, net margin (4) $ 49,472 3.60% $ 48,635 3.70%
======= ==== ======= ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.12 1.14
======== =======
</TABLE>
<PAGE>
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits and FHLB stock.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest- bearing
liabilities.
(4) Net interest margin is net interest income divided by average
interest-earning assets.
13
<PAGE>
FFLC BANCORP, INC.
Comparison of the Three Months Ended March 31, 1999 and 1998
Results of Operations
General Operating Results. Net income for the three-month period ended March 31,
1999 was $1.7 million compared to $991,000 for the comparable 1998 period.
Net income for the 1999 period included a gain on sale of real estate held
for development of $886,000 ($553,000, net of tax). An increase in net
interest income of $494,000, partially offset by a $357,000 increase in
noninterest expense and a $52,000 increase in the provision for loan losses
also contributed to the increase in net income.
Interest Income. Interest income increased $1.1 million, or 14.2%, from $7.8
million for the three-month period ended March 31, 1998 to $8.9 million for
the three-month period ended March 31, 1999. The increase was due to a $66.6
million increase in the average volume of interest-earning assets
outstanding during the three-month period ended March 31, 1999, compared to
the 1998 period, partially offset by a decrease in the average yield on
interest-earning assets from 7.95% for the three-month period ended March
31, 1998, to 7.76% for the three-month period ended March 31, 1999.
Interest Expense. Interest expense increased $604,000 or 14.6%, from $4.1
million for the three-month period ended March 31, 1998 to $4.7 million for
the three-month period ended March 31, 1999. The increase was due to
increases of $33.4 million and $32.3 million in average deposits and
borrowed funds outstanding, respectively. Average deposits increased from
$311.2 million outstanding during the three months ended March 31, 1998 to
$344.6 million outstanding during the comparable period for 1999. Average
borrowed funds increased from $30.0 million outstanding during the three
months ended March 31, 1998 to $62.3 million outstanding during the three
months ended March 31, 1999.
Noninterest Income. Noninterest income increased by $1.1 million from the
three-month period ended March 31, 1998 to the three-month period ended
March 31, 1999. This was mainly due to a gain on sale of real estate held
for development of $886,000 recognized during 1999.
Noninterest Expense. Noninterest expense increased by $357,000, or 17.7% from
the three-month period ended March 31, 1998 to the three-month period ended
March 31, 1999. The increase was primarily due to increases in salaries and
employee benefits of $183,000 and in occupancy expense of $103,000 related
to the overall growth of the Company.
Income Tax Provision. The income tax provision increased from $681,000 for the
three-month period ended March 31, 1998 (an effective tax rate of 40.7%) to
$1.1 million (an effective tax rate of 38.5%) for the corresponding period
in 1999.
14
<PAGE>
FFLC BANCORP, INC.
Year 2000 Readiness Disclosure
The Company is acutely aware of the many areas affected by the Year 2000
computer issue, as addressed by the Federal Financial Institutions Examination
Council ("FFIEC") in its interagency statement which provided an outline for
institutions to manage the Year 2000 challenges effectively. A Year 2000 plan
has been approved by the Board of Directors which includes multiple phases,
tasks to be completed, and target dates for completion. Issues addressed in the
plan include awareness, assessment, renovation, validation, implementation,
testing, and contingency planning.
The Company has formed a Year 2000 committee that is charged with the oversight
of completing the Year 2000 project on a timely basis. The Company has completed
its awareness, assessment and renovation phases and is actively involved in
validating and implementing its plan. At the present time, the Company has
substantially completed its testing phase, the results of which indicate that
the Company's internal systems appear to be Year 2000 ready. Since it routinely
upgrades and purchases technologically advanced software and hardware on a
continual basis, the Company has determined that the cost of making
modifications to correct any Year 2000 issues will not materially affect
reported operating results. Management does not believe that the Company has
incurred or will incur material costs associated with the Year 2000 issue.
The Company's vendors and suppliers have been contacted for written confirmation
of their product readiness for Year 2000 compliance. Negative or deficient
responses are analyzed and periodically reviewed to prescribe timely actions
within the Company's contingency planning. The Company's main service provider
has completed testing of its mission critical application software and item
processing software; the test results, which have been documented and validated,
are deemed to be Year 2000 compliant. FFIEC guidance on testing Year 2000
compliance of service providers states that proxy tests are acceptable
compliance tests. In proxy testing, the service provider tests with a
representative sample of financial institutions that use a particular service,
with the results of such testing shared with all similarly situated clients of
the service provider. The Company has authorized the acceptance of proxy testing
since the proxy tests have been conducted with financial institutions that are
similar in type and complexity to its own using the same version of the Year
2000 ready software and the same hardware and operating systems.
The Company also recognizes the importance of determining that its borrowers are
facing the Year 2000 problem in a timely manner to avoid deterioration of the
loan portfolio solely due to this issue. By December 31, 1998 all material
relationships were identified through completed questionnaires or direct contact
with the customer to determine Year 2000 readiness. On an ongoing basis, new
commercial loan borrowers are asked to certify that their systems are Year 2000
compliant. Deposit customers have received statement stuffers and informational
material in this regard.
Notwithstanding our actions, there can be no assurances that all hardware and
software that the Company will use will be Year 2000 compliant. Management
cannot predict the amount of financial difficulties it may incur due to
customers and vendors inability to perform according to their agreements with
the Company or the effects that other third parties may cause as a result of
this issue. Therefore, there can be no assurance that the failure or delay of
others to address the issue or that the costs involved in such process will not
have a material adverse effect on the Company's business, financial condition,
and results of operations.
<PAGE>
Based on testing results to date (as noted above), the Company's mission
critical systems have been deemed to be Year 2000 ready. However, a written
contingency plan has been developed to address problems that might be caused
from Year 2000 system failures. Testing of the contingency plan is in progress
and is scheduled to be completed by June 30, 1999. With regard to non-mission
critical internal systems, the Company's contingency plans are to replace those
systems that test as being noncompliant. Alternatively, some systems could be
handled manually on an interim basis. Should outside service providers not be
able to provide compliant systems, the Company will terminate those
relationships and transfer to other vendors. It is anticipated that the
Company's deposit customers will have increased demands for cash in the latter
part of 1999 and, correspondingly, the Company will maintain higher liquidity
levels.
15
<PAGE>
FFLC BANCORP, INC.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceeding to which FFLC Bancorp, Inc.
or any of its subsidiaries is a party or to which any of their property is
subject.
Item 2. Changes in Securities
Not applicable
Item 3. Default upon Senior Securities
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit 27 Financial Data Schedule (for SEC use only):
b. There were no reports on Form 8-K filed during the three months ended
March 31, 1999.
16
<PAGE>
FFLC BANCORP, INC.
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.
FFLC BANCORP, INC.
(Registrant)
Date: May 3, 1999 By: /s/ Stephen T. Kurtz
------------------- ---------------------
Stephen T. Kurtz, President and Chief Executive
Officer
Date: May 3, 1999 By: /s/ Paul K. Mueller
------------------- --------------------
Paul K. Mueller, Executive Vice President and
Treasurer
17
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