Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number 0-22608
FFLC BANCORP, INC.
------------------
(Exact name of registrant as specified in its charter)
Delaware 59-3204891
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
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
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was $41,922,223 and is based upon the last sales price as quoted on
the NASDAQ Stock Market for March 8, 2000.
The Registrant had 3,593,498 shares outstanding as of March 8, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year Ended
December 31, 1999. (Part II and IV)
2. Portions of Proxy Statement for the 2000 Annual Meeting of
Stockholders. (Part III)
INDEX
PART I
Page
Item I. Description of Business
Business 3
Market Area and Competition 3
Market Risk 4
Lending Activities 4-9
Asset Quality 9-14
Investment Activities 15
Mortgage-Backed Securities 15-16
Investment Securities 16-17
Sources of Funds 18-20
Borrowings 21
Subsidiary Activities 21
Personnel 22
Regulation and Supervision 22-28
Year 2000 28
Federal and State Taxation 29-30
Item 2. Properties 31
Item 3. Legal Proceedings 32
Item 4. Submission of Matters to a Vote of Security Holders 32
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 32
Item 6. Selected Financial Data 32
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 32
Item 8. Financial Statements and Supplementary Data 32
Item 9. Change In and Disagreements with Accountants on
Accounting and Financial Disclosure 32
PART III
Item 10. Directors and Executive Officers of the Registrant 33
Item 11. Executive Compensation 33
Item 12. Security Ownership of Certain Beneficial Owners and Management 33
Item 13. Certain Relationships and Related Transactions 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 34
SIGNATURES 35
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business
FFLC Bancorp, Inc., ("FFLC" or the "Company") was incorporated in Delaware on
September 16, 1993, and acquired First Federal Savings Bank of Lake County (the
"Bank") in connection with the Bank's conversion to stock form on January 4,
1994. The Company is a savings and loan holding company subject to regulation by
the Office of Thrift Supervision ("OTS") which transacts its business through
its subsidiary, the Bank. At December 31, 1999, the Company had total assets of
$590.4 million and stockholders' equity of $55.6 million.
The Bank was established in 1934 as a federally-chartered mutual savings and
loan association. The Bank is a member of the Federal Home Loan Bank ("FHLB")
System and its deposit accounts are insured to the maximum allowable amount by
the Federal Deposit Insurance Corporation ("FDIC"). At December 31, 1999, the
Bank had total assets of $590.4 million and stockholders' equity of $52.4
million.
The principal business of the Bank is attracting retail deposits from the
general public and investing those deposits, together with payments and
repayments on loans and investments and funds generated from operations,
primarily in mortgage loans secured by one-to-four-family owner-occupied homes,
commercial real estate loans and securities, and, to a lesser extent,
construction, consumer, commercial and other loans, and multi-family residential
mortgage loans. In addition, the Bank holds investments permitted by federal
laws and regulations including securities issued by the U.S. Government and
agencies thereof. The 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.
Market Area and Competition
The Bank is a community-oriented savings institution offering a variety of
financial services to meet the needs of the communities it serves. The Bank's
deposit gathering and lending markets are primarily concentrated in the
communities surrounding its full service offices located in Lake, Sumter and
Citrus counties in central Florida. The Bank's competition for loans comes
principally from commercial banks, savings institutions, and mortgage banking
companies. The Bank's most direct competition for savings has historically come
from commercial banks, savings institutions and credit unions. The Bank faces
additional competition for savings from money-market mutual funds and other
corporate and government securities funds. The Bank also faces increased
competition for deposits from other financial intermediaries such as securities
brokerage firms and insurance companies.
3
Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates.
The Company"s market risk arises primarily from interest-rate risk inherent in
its lending and deposit taking activities. To that end, management actively
monitors and manages its interest-rate risk exposure. The measurement of market
risk associated with financial instruments is meaningful only when all related
and offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified. Disclosures about the fair value of
financial instruments, which reflect changes in market prices and rates, can be
found in Note 9 of Notes to Consolidated Financial Statements.
The Company"s primary objective in managing interest-rate risk is to minimize
the adverse impact of changes in interest rates on the Bank"s net interest
income and capital, and to adjust the Company"s asset-liability structure to
obtain the maximum yield-cost spread on that structure. The Company relies
primarily on its asset-liability management to control interest-rate risk.
However, a sudden and substantial increase in interest rates may adversely
impact the Company"s earnings, to the extent that the interest rates borne by
assets and liabilities do not change at the same speed, to the same extent, or
on the same basis. The Company does not engage in trading activities.
Lending Activities
Loan Portfolio. The Bank's loan portfolio consists primarily of conventional
first mortgage loans secured by one-to-four-family residences. At December 31,
1999, the Bank's total gross loans outstanding were $519.0 million, of which
$354.3 million or 68.28% of the Bank's total loan portfolio were
one-to-four-family residential first mortgage loans. Of the one-to-four-family
residential mortgage loans outstanding at that date, 37.44% were fixed rate
loans and 62.56% were adjustable-rate ("ARM") loans. At the same date,
commercial real estate loans and other loans on improved real estate totaled
$61.1 million, or 11.76% of the Bank's total loan portfolio; construction
(excluding construction/permanent loans) and land loans totaled $11.9 million or
2.29% of the Bank's total loan portfolio; and multi-family mortgage loans
totaled $13.4 million or 2.58% of the Bank's total loan portfolio. Consumer,
commercial and other loans held by the Bank, which principally consist of home
equity loans, deposit, consumer, commercial and other loans, totaled $78.3
million or 15.09% of the Bank's total loan portfolio at December 31, 1999.
4
The following table sets forth the composition of the Bank's loan portfolio in
dollar amounts and percentages at the dates indicated:
1995 1996 1997
-------------------- ------------------- --------------------
% of % of % of
Amount Total Amount Total Amount Total
------- -------- ------- ------- ------- ------
(Dollars in thousands)
Mortgage loans:
One-to-four-family $ 159,170 84.32% $ 191,788 80.95% $ 245,524 74.64%
Construction and land 5,343 2.83% 5,489 2.32% 3,528 1.07%
Multi-family 3,098 1.64% 4,180 1.76% 4,464 1.36%
Commercial real estate
and other 6,654 3.53% 13,565 5.73% 37,975 11.54%
------- -------- ------- ------- ------- ------
Total mortgage
loans 174,265 92.32% 215,022 90.76% 291,491 88.61%
Consumer loans 14,493 7.68% 21,899 9.24% 32,834 9.98%
Commercial loans - - - - 4,632 1.41%
---------- --------- ----------- --------- --------- -------
Total loans
receivable 188,758 100.00% 236,921 100.0% 328,957 100.0%
====== ===== =====
Less:
Loans in process (4,267) (8,007) (12,253)
Unearned discounts,
premiums and
deferred loan fees,
net (66) 97 333
Allowance for loan losses (977) (1,063) (1,684)
------- ------- --------
Loans receivable,
net $ 183,448 $ 227,948 $ 315,353
========= ========= =========
1998 1999
--------------------- ---------------------
% of % of
Amount Total Amount Total
------- ----- ------- ------
Mortgage loans:
One-to-four-family $ 283,372 70.59% $ 354,317 68.28%
Construction and land 11,683 2.91 11,861 2.29%
Multi-family 8,165 2.04 13,394 2.58%
Commercial real estate
and other 44,211 11.01 61,052 11.76%
------- ----- ------- ------
Total mortgage
loans 347,431 86.55% 440,624 84.91%
Consumer loans 43,490 10.83% 64,042 12.34%
Commercial loans 10,532 2.62% 14,285 2.75%
------- ------ ------- ------
Total loans
receivable 401,453 100.0% 518,951 100.0%
===== =====
Less:
Loans in process (10,637) (15,907)
Unearned discounts,
premiums and
deferred loan fees,
net 526 898
Allowance for loan losses (2,283) (2,811)
--------- -------
Loans receivable,
net $ 389,059 $ 501,131
========= =========
5
Purchase of Mortgage Loans. From time to time, the Bank purchases mortgage loans
originated by other lenders. At December 31, 1999, $2.0 million, or .38% of the
Bank's total loan portfolio consisted of purchased mortgage loans or loan
participations. Purchased mortgage loans consist primarily of one-to-four-family
residential mortgage loans.
Secondary Market Activities. The Bank participates in the secondary market
through a correspondent relationship, originating loans (primarily 30-year
fixed-rate loans) which are funded by the investor correspondent. Funding by the
correspondent eliminates the Bank's interest-rate risk on such loans. Such loans
are closed on the Bank's documents with funds provided by the investor
correspondent at closing with all credit conditions established by the investor
correspondent being satisfied prior to the issuance of a loan commitment. The
Bank receives a fee for originating, processing and closing the loans and
reports the loans to the OTS as loans originated and sold. In the year ended
December 31, 1999, such loans amounted to $7.0 million or 4.5% of total mortgage
loans originated.
Loan Originations, Purchases, Sales and Principal Repayments. The following
table sets forth the Bank's loan originations, purchases, sales and principal
repayments for the periods indicated.
Year Ended December 31,
---------------------------------------------
1997 1998 1999
--------- --------- ---------
(In thousands)
Mortgage loans (gross):
At beginning of year $ 215,022 291,491 347,431
Mortgage loans originated:
One-to-four-family (1) 86,976 107,418 136,456
Construction and land 2,502 1,193 2,387
Multi-family 2,759 634 1,037
Commercial real estate 25,142 10,230 14,345
--------- --------- ---------
Total mortgage loans originated (1) 117,379 119,475 154,225
Mortgage loans purchased - - -
--------- --------- ---------
Total mortgage loans originated and
purchased 117,379 119,475 154,225
Transfer of loans to real estate owned (444) (193) (425)
Principal repayments (37,997) (54,959) (53,619)
Sales of loans (1) (2,469) (8,383) (6,988)
--------- --------- ---------
At end of year $ 291,491 347,431 440,624
========= ========= =========
Consumer loans (gross):
At beginning of year 21,899 32,834 43,490
Loans originated 18,356 27,264 40,873
Principal repayments (7,421) (16,608) (20,321)
--------- --------- ---------
At end of year $ 32,834 43,490 64,042
========= ========= =========
Commercial loans (gross):
At beginning of year - 4,632 10,532
Loans originated 9,022 13,055 6,924
Principal repayments (4,390) (7,155) (3,171)
--------- --------- ---------
At end of year $ 4,632 10,532 14,285
========= ========= =========
(1) Represents loans originated for and funded by correspondents of $2.5
million, $8.4 million and $7.0 million for 1997, 1998 and 1999,
respectively.
6
Maturities of Loans. The following table shows the contractual maturities of the
Bank's loan portfolio at December 31, 1999. Loans that have adjustable rates are
shown as amortizing to final maturity rather than when the interest rates are
next subject to change. The table does not include prepayments or scheduled
principal repayments. Prepayments and scheduled principal repayments on the
Bank's loans totaled $49.8 million, $77.8 million and $77.1 million for the
years ended December 31, 1997, 1998 and 1999, respectively.
Mortgage Loans
--------------------
One-to- Total
Four- Commercial Consumer Loans
Family Other Loans Loans Receivable
--------- ------ ------ ------ -------
(In thousands)
Amounts due:
Within 1 year $ 1,737 4,866 3,181 3,637 13,421
--------- ------ ------ ------ -------
1 to 3 years 3,177 25,252 7,731 20,254 56,414
3 to 5 years 2,947 7,651 3,118 14,332 28,048
5 to 10 years 11,595 8,146 255 11,491 31,487
10 to 20 years 55,722 29,941 - 14,328 99,991
Over 20 years 279,139 10,451 - - 289,590
--------- ------ ------ ------ -------
Total due after 1 year 352,580 81,441 11,104 60,405 505,530
--------- ------ ------ ------ -------
Total amounts due 354,317 86,307 14,285 64,042 518,951
Loans in process (15,744) - - (163) (15,907)
Net deferred loan fees and costs 668 - 230 - 898
Allowance for loan losses (528) (1,459) (377) (447) (2,811)
--------- ------ ------ ------ -------
Loans receivable, net $ 338,713 84,848 14,138 63,432 501,131
========= ====== ====== ====== =======
Loans Due After December 31, 2000. The following table sets forth at December
31, 1999, the dollar amount of all loans due or scheduled to reprice after
December 31, 2000, classified according to whether such loans have fixed or
adjustable interest rates.
Due after December 31, 2000
-------------------------------------
Fixed Adjustable Total
----- ---------- -----
(In thousands)
Mortgage loans:
One-to-four-family $132,004 220,576 352,580
Construction and land 3,174 6,113 9,287
Multi-family 2,452 10,333 12,785
Commercial real estate 20,721 38,648 59,369
Consumer loans 53,670 6,735 60,405
Commercial loans 5,083 6,021 11,104
-------- -------- --------
Total $ 217,104 288,426 505,530
======== ======== ========
7
One-to-Four-Family Mortgage Lending. The Bank's primary lending emphasis is on
the origination of first mortgage loans secured by one-to-four-family residences
within its primary lending area. Such residences are primarily single family
homes, including condominium and townhouses, that serve as the primary residence
of the owner. To a lesser degree, the Bank makes loans on residences used as
second homes or as investments. The Bank also offers second mortgage loans which
are underwritten applying the same standards as for first mortgage loans.
In the years ended December 31, 1997, 1998 and 1999, the Bank's total mortgage
loan originations amounted to $117.4 million, $119.5 million and $154.2 million,
respectively, of which $87.0 million, $107.4 million and $136.5 million,
respectively, were secured by one-to-four-family properties.
At December 31, 1999, 68.28% of total loans receivable consisted of
one-to-four-family residential loans, of which 62.56% were ARM loans. The Bank's
ARM loans may carry an initial interest rate which is less than the fully
indexed rate for the loan. The initial discounted rate is determined by the Bank
in accordance with market and competitive factors. The Bank offers one-, three-
and five-year ARM loans which adjust by a maximum of 2% per adjustment period,
with lifetime caps on increases of 5% to 6%, depending upon the program chosen.
The Bank's policy on one-to-four-family residential mortgage loans generally is
to lend up to 80% of the appraised value of property securing the loan, or up to
95% if private mortgage insurance is obtained on the amount of the loan which
exceeds 80%.
Commercial and Multi-Family Real Estate Lending. As of December 31, 1999, $61.1
million, or 11.76% of the Bank's total loan portfolio consisted of commercial
real estate loans and $13.4 million, or 2.58% of the Bank's total loan
portfolio, consisted of multi-family residential loans.
The commercial real estate loans in the Bank's portfolio consist of fixed-rate
and ARM loans which were originated at prevailing market rates. The Bank's
policy has been to originate commercial or multi-family loans only in its
primary market area. Commercial and multi-family residential loans are generally
made in amounts up to 80% of the appraised value of the property. In making such
loans, the Bank primarily considers the net operating income generated by the
real estate to support the debt service, the financial resources and income
level and managerial expertise of the borrower, the marketability of the
property and the Bank's lending experience with the borrower.
Commercial Loans. As of December 31, 1999, $14.3 million or 2.75% of the Bank"s
total loan portfolio, consisted of commercial loans.
Construction and Land Loans. The Bank originates loans to finance the
construction of one-to-four-family homes and, to a much lesser extent,
originates loans for the acquisition and development of land (either unimproved
land or improved lots) on which the purchaser can then build. At December 31,
1999, construction (excluding construction/permanent loans) and land loans
totaled $11.9 million or 2.29% of the Bank's total loan portfolio.
At December 31, 1999, the Bank had loans in process (undisbursed loan proceeds
of construction loans) of $15.9 million which was mainly secured by residential
mortgages. The Bank makes residential construction loans to homeowners on a
long-term basis with amortization beginning at the conclusion of construction,
usually a period of about six months. Such loans are carried in the
one-to-four-family category and are not separately classified as construction
loans. Residential construction loans to builders are carried in the
construction and land category.
Construction and land loans also include construction loans for
one-to-four-family residential property for which the borrower will obtain
permanent financing from another lender. Such loans bear a fixed rate of
interest that equals prime plus 1.0% during the construction period. The Bank
obtains a commitment for the permanent financing from the other lender prior to
originating the construction loan.
8
Consumer Lending. At December 31, 1999, $64.0 million or 12.34% of the Bank's
total loan portfolio consisted of consumer loans, including home equity loans,
lines of credit and direct and indirect auto and truck loans for consumer
purposes and, to a lesser extent, home improvement loans and secured and
unsecured personal loans.
The Bank's home equity loans are originated on one-to-four-family residences,
either on a fixed-rate basis with terms of up to 15 years or as balloon loans
with terms up to five years with fifteen year amortization periods. Those loans
are generally limited to aggregate outstanding indebtedness on the property
securing the loan of 90% of the loan to value ratio. The Bank also offers home
equity lines of credit, which bear prime-based adjustable interest rates with
terms up to fifteen years. Such loans generally require monthly payments of
interest plus 1.5% of the balance outstanding.
Consumer loans are offered primarily on a fixed-rate, short-term basis. Except
for second mortgage loans which are underwritten pursuant to the standards
applicable to one-to-four-family residential loans, the underwriting standards
employed by the Bank for consumer loans include a determination of the
applicant's payment history on other debts and an assessment of the borrower's
ability to make payments on the proposed loan and other indebtedness.
Loan Approval and Authority. Mortgage loan approval authority for loans
exceeding $1,000,000 is vested in the Executive Committee of the Board which
meets weekly to consider loan recommendations of the Loan Committee. The Loan
Committee is comprised of three outside directors, the President and the Senior
Lending Officers of the Bank and has been delegated authority to approve
mortgage loans, home equity loans, home equity lines of credit and secured
consumer loans up to $1,000,000.
The Bank's policy is to require title and hazard insurance on all real estate
loans, except home equity loans for which a title search is conducted in lieu of
obtaining title insurance. Borrowers may be permitted to pay real estate taxes
and hazard insurance premiums applicable to the secured property for a mortgage
loan. In some instances, borrowers may be required to advance funds together
with each payment of principal and interest to a mortgage escrow account from
which the Bank makes disbursements for items such as real estate taxes, hazard
insurance premiums and private mortgage insurance premiums.
Asset Quality
Delinquent Loans and Nonperforming Assets. Loans are generally placed on
nonaccrual status when the collection of principal or interest is 90 days or
more past due, or earlier if collection is deemed uncertain. The Bank provides
an allowance for accrued interest deemed uncollectible. Accrued interest
receivable is reported net of the allowance for uncollected interest. Loans may
be reinstated to accrual status when all payments are brought current and, in
the opinion of management, collection of the remaining balance can be reasonably
expected.
9
At December 31, 1997, 1998 and 1999, delinquencies in the Bank's loan portfolio
were as follows:
At December 31, 1997 At December 31, 1998
---------------------------------------------- --------------------------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
-------------------- ----------------- -------------------- -------------------
Number Principal Number Principal Number Principal Number Principal
of Balance of Balance of Balance of Balance
Loans of Loans Loans of Loans Loans of Loans Loans of Loans
----- -------- ----- -------- ----- -------- ----- --------
(Dollars in thousands)
One-to-four-family 7 341 8 240 - - 3 87
Construction and land - - 1 2 - - 6 343
Multi-family - - - - - - - -
Commercial real estate - - - - - - - -
----- ----- ----- ----- ----- ----- ----- -----
Total mortgage loans 7 341 9 242 - - 9 430
Consumer loans 4 24 - - 4 40 3 14
----- ----- ----- ----- ----- ----- ----- -----
Total loans 11 365 9 242 4 40 12 444
===== ===== ===== ===== ===== ===== ===== =====
Delinquent loans to total loans .11% .07% .01% .11%
===== ===== ===== =====
At December 31, 1999
----------------------------------------------
60-89 Days 90 Days or More
-------------------- -------------------
Number Principal Number Principal
of Balance of Balance
Loans of Loans Loans of Loans
----- -------- ----- --------
One-to-four-family 3 107 5 561
Construction and land 1 36 1 172
Multi-family - - 1 119
Commercial real estate - - 1 1,348
----- ----- ----- -----
Total mortgage loans 4 143 8 2,200
Consumer loans 7 75 13 162
----- ----- ----- -----
Total loans 11 218 21 2,362
===== ===== ===== =====
Delinquent loans to total loans .04% .46%
===== =====
10
Nonperforming Assets. The following table sets forth information with respect to
the Bank's nonperforming assets at the dates indicated.
At December 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(Dollars in thousands)
Nonaccrual mortgage loans 70 613 242 434 853
Nonaccrual commercial and consumer loans 104 53 - 10 1,509
----- ----- --- --- -----
Total nonperforming loans 174 666 242 444 2,362
Real estate owned 165 361 507 366 400
----- ----- --- --- -----
Total nonperforming assets $ 339 1,027 749 810 2,762
===== ===== === === =====
Nonperforming loans to total loans .09% .28% .07% .11% .46%
===== ===== === === =====
Total nonperforming assets to total assets .10% .30% .19% .17% .47%
===== ===== === === =====
At December 31, 1999, the Bank had no accruing loans which were contractually
past due 90 days or more as to principal and interest and no troubled debt
restructurings as defined by Statement of Financial Accounting Standards No. 15.
Nonaccrual loans for which interest has been reduced totaled approximately $2.4
million, $444,000 and $242,000 at December 31, 1999, 1998 and 1997,
respectively. For the year ended December 31, 1999, interest income that would
have been recorded under the original terms of nonaccrual loans at December 31,
1999 and interest income actually recognized is summarized below:
Interest income that would have been recorded $ 214
Interest income recognized (115)
---
Interest income foregone $ 99
=====
Classified Assets. Federal regulations and the Bank's policy require the
classification of loans and other assets, such as debt and equity securities,
considered to be of lesser quality as "substandard", "doubtful" or "loss"
assets. An asset is considered "substandard" if it is inadequately protected by
the current net worth and paying capacity of the obligor or of the collateral
pledged, if any. "Substandard" assets include those characterized by the
"distinct possibility" that the institution will sustain "some loss" if the
deficiencies are not corrected. Assets classified as "doubtful" have all of the
weaknesses inherent in those classified "substandard," with the added
characteristic that the weaknesses present make "collection or liquidation in
full", on the basis of currently existing facts, conditions, and values, "highly
questionable and improbable." Assets classified as "loss" are those considered
"uncollectible" and of such little value that their continuance as assets
without the establishment of a specific loss reserve is not warranted. In
addition, the Bank's policies require that assets which do not currently expose
the insured institution to sufficient risk to warrant classification as
substandard but possess other weaknesses are designated "special mention" by
management.
11
If an asset is classified, the estimated fair value of the asset is determined
and if that value is less than the then carrying value of the asset, the
difference is established as a specific reserve. If an asset is classified as
loss, the amount of the asset classified as loss is reserved. General reserves
or general valuation allowances represent loss allowances which have been
established to recognize the inherent risk associated with lending activities
but, unlike specific reserves, are not allocated to particular assets.
The following table sets forth information concerning the number and dollar
amount of loans and real estate owned classified as "special mention" or
"substandard" at the dates indicated. No loans or real estate owned were
classified "doubtful" or "loss" at those dates.
Special Mention Substandard
------------------ ----------------
Number Amount Number Amount
------ ------ ------ ------
(Dollars in thousands)
At December 31, 1999:
Loans 10 $1,090 25 $ 3,014
Real estate owned:
One-to-four-family properties - - 8 389
Other - - 1 11
------ ------ ------ ------
Total 10 $1,090 34 $3,414
====== ====== ====== ======
At December 31, 1998:
Loans 14 $2,718 7 $ 275
Real estate owned:
One-to-four-family properties - - 2 92
Other - - 5 274
------ ------ ------ ------
Total 14 $2,718 14 $ 641
====== ====== ====== ======
Allowance for Loan Losses. The Bank's allowance for loan losses is established
and maintained through a provision for loan losses based on management's
evaluation of the risk inherent in its loan portfolio and the condition of the
local economy in the Bank's market area. Such evaluation, which includes a
review of all loans on which full collectibility may not be reasonably assured,
considers, among other matters, the estimated fair value of the underlying
collateral, economic and regulatory conditions, and other factors that warrant
recognition in providing for an adequate loan loss allowance. Although
management believes it uses the best information available to make
determinations with respect to the Bank's allowance for loan losses, future
adjustments may be necessary if economic conditions vary substantially from the
economic conditions in the assumptions used in making the initial determinations
or if other circumstances change.
12
The following table sets forth the Bank's allowance for loan losses at the dates
indicated, the provisions made and the charge-offs and recoveries effected
during the years indicated.
At or For the Year Ended December 31,
--------------------------------------------
1995 1996 1997 1998 1999
----- ----- ----- ----- -----
(Dollars in thousands)
Balance at beginning of year $ 869 977 1,063 1,684 2,283
Provision for loan losses 124 107 649 682 719
Charge-offs:
One-to-four-family - (9) (12) (80) -
Construction and land (16) - - - (44)
Multi-family - - - - -
Commercial real estate - - - - -
Commercial and consumer loans - (12) (16) (6) (166)
----- ----- ----- ----- -----
Total charge-offs by category (16) (21) (28) (86) (210)
Recoveries - - - 3 19
----- ----- ----- ----- -----
Balance at end of year $ 977 1,063 1,684 2,283 2,811
===== ===== ===== ===== =====
The following table sets forth the ratios of the Bank's charge-offs and
allowances for losses for the years indicated.
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
Net charge-offs during the year
as a percentage of average loans
outstanding during the year .01% .01% .01% .03% .04%
Allowance for loan losses as a
percentage of gross loans receivable
at end of year .52% .45% .51% .57% .54%
Allowance for loan losses as a
percentage of total nonperforming
assets at end of year 288.48% 103.51% 224.83% 281.85% 101.77%
Allowance for loan losses as a
percentage of nonperforming loans
at end of year 561.49% 159.61% 695.87% 514.19% 119.01%
13
The following table sets forth the Bank's specific and general allowance for
possible loan losses by type of loan for the years indicated.
At December 31,
--------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------------ ----------------- ----------------- ------------------ ---------------
% of % of % of % of % of
Loans to Loans to Loans to Loans to Loans to
Total Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(Dollars in thousands)
At end of year allocated to:
One-to-four-family $ 275 84.32% $ 302 80.95% $ 507 74.64% $ 575 70.59% $ 528 68.28%
Construction and land 146 2.83 152 2.32 240 1.07 338 2.91 408 2.29
Multi-family 183 1.64 169 1.76 268 1.36 295 2.04 301 2.58
Commercial real estate 150 3.53 165 5.73 383 11.54 565 11.01 750 11.76
Consumer loans 223 7.68 275 9.24 229 9.98 304 10.83 447 12.34
Commercial loans - - - - 57 1.41 206 2.62 377 2.75
----- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total $ 977 100.00% $ 1,063 100.00% $ 1,684 100.00% $ 2,283 100.00% $ 2,811 100.00%
===== ====== ======= ====== ======= ====== ======= ====== ======= ======
14
Investment Activities
The investment policy of the Bank, which is established by the Board of
Directors and implemented by the Chief Executive Officer who is designated as
the Investment Officer, is designed primarily to provide and maintain liquidity,
to generate a favorable return on investments without incurring undue interest
rate and credit risk, and to complement the Bank's lending activities. In
establishing its investment strategies, the Bank considers its business and
growth plans, the economic environment, the types of securities to be held and
other factors. Federally chartered savings institutions have the authority to
invest in various types of assets, including U.S. Treasury obligations,
securities of various federal agencies, certain certificates of deposit of
insured banks and savings institutions, certain bankers acceptances, repurchase
agreements, loans on federal funds, and, subject to certain limits, commercial
paper and mutual funds.
On January 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115. That statement requires investment and mortgage-backed
securities that the Company has the positive intent and ability to hold to
maturity to be classified as held-to-maturity securities and reported at
amortized cost. Securities that are held principally for selling in the near
term are to be classified as trading securities and reported at fair value, with
unrealized gains and losses included in earnings. Securities not classified as
either held-to-maturity securities or trading securities are to be classified as
available-for-sale securities and reported at fair value, with unrealized gains
and losses excluded from earnings and reported in a separate component of
stockholders' equity.
The Company adopted FAS 133 effective July 1, 1999. As allowed by this standard,
the Company reclassified all securities held to maturity with a book value of
$14,784,000 and a market value of $14,969,000 to available for sale on July 1,
1999.
Mortgage-Backed Securities
The Bank invests in collateralized mortgage obligations ("CMOs") and
mortgage-backed securities such as government pass-through certificates. At
December 31, 1999, the Bank's mortgage-backed securities portfolio totaled $17.4
million, or 2.96% of total assets. The mortgage-backed securities are not due at
a single maturity date, and accordingly, contractual maturity information is not
presented herein. CMOs, net of related premiums and discounts, totaled $2.3
million or 13.10% of total mortgage-backed securities.
CMOs are typically issued by a special purpose entity, which may be organized in
any of a variety of legal forms, such as a trust, a corporation or a
partnership. The entity combines pools of pass-through securities, which are
used to collateralize the mortgage related securities. Once combined, the cash
flows can be divided into different "tranches" or "classes" of securities,
thereby creating more predictable average lives for each tranch or class than is
provided by the underlying pass-through pools. Under this structure, all
principal repayments from the various mortgage pools can be allocated to a
mortgage-related securities class or classes structured to have priority until
it has been paid off. Thus, these securities are designed to address the
reinvestment concerns associated with mortgage-backed security pass-throughs,
namely that they tend to pay off more rapidly when interest rates fall. The
Bank's CMOs have coupon rates ranging from 6.09% to 7.00% and had a weighted
average yield of 6.54% at December 31, 1999.
The Bank's policy is to purchase CMOs rated AA or better by nationally
recognized rating services. The majority of the CMOs owned by the Bank are
insured or guaranteed either directly or indirectly, through mortgage-backed
securities underlying the obligations issued by FNMA, FHLMC or GNMA.
At December 31, 1999, the Bank had $2.3 million in CMOs representing .39% of
total assets. Of that amount, $2.2 million or 96.12% had floating rates which
adjust on a monthly basis.
15
The Company's mortgage-backed securities consist of securities issued by the
Government National Mortgage Association ("GNMA"), the Federal Home Loan
Mortgage Corporation ("FHLMC") and the Federal National Mortgage Association
("FNMA").
These mortgage-backed securities totaled $15.2 million or 86.90% of total
mortgage-backed securities. Other mortgage-backed securities consist of
pass-through certificates issued by the FNMA, FHLMC or GNMA.
The following table sets forth mortgage-backed security purchases, sales,
amortization and repayments during the periods indicated:
Year Ended December 31,
-------------------------------------
1997 1998 1999
-------- ------ ------
(In thousands)
At beginning of year $ 65,736 38,291 24,784
Purchases - 6,025 -
Amortization and repayments (27,566) (19,553) (7,334)
Change in unrealized loss on securities
available for sale 121 21 40
-------- ------ ------
At end of year $ 38,291 24,784 17,490
======== ====== ======
Investment Securities
At December 31, 1999, the Bank held $19.4 million in investment securities, all
of which were classified available for sale, consisting of $8.9 million in U.S.
Government and agency securities, $8.8 million in mutual funds and $1.7 million
in other investment securities. In addition, the Bank holds $17.0 million in
interest-earning deposits and $5.0 million of FHLB of Atlanta stock.
The following table sets forth certain information regarding the amortized cost
and market values of the Bank's interest-earning deposits, FHLB stock and
investment securities at the dates indicated:
At December 31,
----------------------------------------------------------------------
1997 1998 1999
-------------------- --------------------- ---------------------
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- -----
(In thousands)
Interest-earning deposits $ 8,562 8,562 13,413 13,413 17,026 17,026
======== ====== ====== ====== ====== ======
FHLB stock $ 2,304 2,304 2,800 2,800 4,950 4,950
======== ====== ====== ====== ====== ======
Investment securities:
Held-to-maturity:
SBA-related investment securities $ 3,031 3,077 2,320 2,366 - -
======== ====== ====== ====== ====== ======
Available-for-sale:
U.S. Government and
agency securities 7,965 7,937 4,036 4,058 8,998 8,919
Other investment securities 151 156 97 99 1,666 1,671
Investment in mutual funds 9,258 9,183 9,238 9,131 9,065 8,829
------ ------ ------ ------ ------ -------
Total available-for-sale $ 17,374 17,276 13,371 13,288 19,729 19,419
======== ====== ====== ====== ====== ======
16
The following table sets forth information concerning the amortized cost and
weighted average yields by maturity on investment securities and FHLB stock at
December 31, 1999.
Due After Due After
One Through Five Through Due After
Due Within One Year Five Years 10 Years 10 Years
----------------------- ----------------------- ----------------------- ---------------------
Annualized Annualized Annualized Annualized
Weighted Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield Cost Yield
---- ----- ---- ----- ---- ----- ---- -----
(Dollars in thousands)
FHLB stock (no
defined maturity) $ 4,950 7.75%
======= ====
Investment securities:
U.S. Government
and agency
obligations $ 3,022 5.95% $ 5,976 5.80% $ - - % $ - - %
Other investment
securities - - - - 63 7.88 1,603 6.59
Mutual funds (no
defined maturity) 9,065 5.61% - - - - - -
------- ---- ------ ---- ------ ---- ------- ----
Total investment
securities $12,087 5.70% $5,976 5.80% $ 63 7.88% $ 1,603 6.59%
======= ==== ====== ==== ====== ==== ======= ====
Total
------------------------
Approximate
Amortized Market
Cost Value
---- -----
FHLB stock (no
defined maturity)
Investment securities: $ 4,950 $4,950
U.S. Government ======= ======
and agency
obligations
Other investment
securities $ 8,998 8,919
Mutual funds (no
defined maturity) 1,666 1,671
Total investment 9,065 8,829
securities -------- --------
$ 19,729 $ 19,419
======== ========
17
Sources of Funds
General. Repayments and maturities of mortgage-backed and investment securities,
loan repayments, deposits and cash flows generated from operations are the
primary sources of the Bank's funds for use in lending, investing and for other
general purposes.
Deposits. The Bank offers a variety of deposit accounts having a range of
interest rates and terms. The Bank's deposits consist of regular savings,
non-interest-bearing checking, NOW checking, money market and certificate
accounts. Of the deposit accounts at December 31, 1999, $35.2 million or 8.12%
consist of individual retirement accounts ("IRAs").
The Bank seeks to retain core deposits consisting of passbook and statement
savings, money market, noninterest-bearing checking, and NOW accounts, which
contribute to a low cost of funds. Such core deposits represented 23.8%, 26.2%
and 25.5% of total deposits at December 31, 1997, 1998 and 1999, respectively.
The following table shows the distribution of the Bank's deposits by type at the
dates indicated and the weighted-average nominal interest rates on each category
of deposits presented at December 31, 1999 (dollars in thousands).
At December 31,
------------------------------------------------------------------------------------
1997 1998 1999
----------------- ------------------- -----------------------------------
Percent Percent Percent Weighted-
of Total of Total of Total Average
Amount Deposits Amount Deposits Amount Deposits Rate
------ -------- ------ -------- ------ -------- ----
Demand accounts:
Noninterest-bearing
checking $ 6,968 2.20% $ 8,379 2.39% $ 11,100 2.58% --%
NOW and money-
market accounts 43,629 13.84 60,437 17.21 77,293 18.01 2.67
Passbook and
statement savings 24,503 7.77 23,038 6.56 21,110 4.92 2.00
------- ----- ------- ------- ------- ------ ----
Total 75,100 23.81 91,854 26.16 109,503 25.51 2.27
------- ----- ------- ------ ------- ------ ----
Certificate accounts:
1-3 months 9,834 3.12 9,549 2.72 8,552 1.99 4.19
91 day 538 .17 379 .11 358 .08 3.90
182 day 12,171 3.86 11,391 3.25 9,741 2.27 4.31
7 months - - - - 5,748 1.34 4.73
9 months 16,554 5.25 12,411 3.53 5,975 1.39 4.43
10 months 18,791 5.95 654 .19 20,729 4.83 5.70
12 months 39,975 12.67 31,697 9.03 31,298 7.29 4.64
12 month IRA 14,431 4.58 12,527 3.57 10,211 2.38 4.54
13 months - - 24,835 7.07 10,486 2.44 4.82
18 months 2,824 .90 2,485 .71 6,637 1.55 4.52
20 months 23,152 7.34 93,181 26.55 63,454 14.79 5.57
22 months - - - - 108,261 25.22 5.55
24 months 60,477 19.18 29,429 8.38 16,031 3.73 5.39
30 months 8,841 2.80 6,482 1.85 4,970 1.16 5.03
60 months 32,702 10.37 24,156 6.88 17,320 4.03 6.21
------- ------ ------- ------- ------- ------- ----
Total 240,290 76.19 259,176 73.84 319,771 74.49 5.30
------- ------ ------- ------ ------- ------ ----
Total deposits $ 315,390 100.00% 351,030 100.00% 429,274 100.00% 4.53%
======= ====== ======= ====== ======= ====== ====
18
The following table presents the deposit activity of the Bank for the years
indicated.
Year Ended December 31,
---------------------------------------
1997 1998 1999
---- ---- ----
(In thousands)
Deposits $ 744,064 1,003,698 1,414,959
Withdrawals (721,501) 979,194 (1,349,451)
------- --------- ---------
Deposits in excess of withdrawals 22,563 24,504 65,508
Interest credited on deposits 10,163 11,136 12,736
------- ---------- ----------
Total increase in deposits $ 32,726 35,640 78,244
======= ========== ==========
The following table presents the amount of time deposit accounts in amounts of
$100,000 or more at December 31, 1999 maturing as follows (in thousands):
Maturity Period
One month through three months $ 3,205
Over three through six months 4,601
Over six through 12 months 10,938
Over 12 months 18,527
--------
Total $ 37,271
========
19
The following table presents, by various rate categories, the amount of
certificate accounts outstanding at December 31, 1997, 1998 and 1999 and the
periods to maturity of the certificate accounts outstanding at December 31,
1999.
Period to Maturity from December 31, 1999
At December 31, --------------------------------------------------------------------
--------------------------------- Within 1 to 2 to 3 to 4 to
1997 1998 1999 1 Year 2 Years 3 Years 4 Years 5 Years Total
--------- ------- ------- ------- ------- ----- ----- ------- -------
(In thousands)
3.01% to 4.00% $ - 374 358 358 - - - - 358
4.01% to 5.00% 23,215 56,059 106,202 88,811 15,858 604 282 647 106,202
5.01% to 6.00% 187,028 176,729 181,001 106,986 69,184 2,028 2,803 - 181,001
6.01% to 8.00% 30,047 26,014 32,210 9,435 22,671 76 28 - 32,210
$ 240,290 259,176 319,771 205,590 107,713 2,708 3,113 647 319,771
========= ======= ======== ======= ======= ===== ===== === =======
20
Borrowings
The Bank is authorized to obtain advances from the Federal Home Loan Bank
("FHLB") of Atlanta which are generally collateralized by a blanket lien against
the Bank's mortgage portfolio. Such advances may be made pursuant to several
different credit programs, each of which has its own interest rate and range of
maturities. The maximum amount that the FHLB of Atlanta will advance to member
institutions, including the Bank, for purposes other than meeting withdrawals,
fluctuates from time to time in accordance with the policies of the Federal
Housing Finance Board and the FHLB of Atlanta. At December 31, 1999, the Bank
had $99.0 million in FHLB advances outstanding.
During 1997, the Bank entered into agreements with nationally recognized primary
securities dealers under which the Bank sells securities subject to repurchase
agreements. Such agreements are accounted for as borrowings by the Bank and are
secured by the securities sold. At December 31, 1999 and 1998, the Bank did not
have any such borrowings outstanding. During 1998, the Bank began borrowing
under retail repurchase agreements with customers of the Bank. These agreements
are also accounted for as borrowings and are secured by securities owned by the
Bank.
The following table sets forth certain information relating to the Bank's
borrowings at the dates indicated:
At or For the Year Ended
Ended December 31,
1997 1998 1999
--------- ----------- -----------
(Dollars in thousands)
FHLB advances:
Average balance outstanding $ 13,226 $ 33,718 $ 74,515
========= =========== ===========
Maximum amount outstanding at any month end during the year $ 30,000 $ 56,000 $ 99,000
========= =========== ===========
Balance outstanding at end of year $ 30,000 $ 56,000 $ 99,000
========= =========== ===========
Weighted average interest rate during the year 6.15% 5.91% 5.42%
========= =========== ===========
Weighted average interest rate at end of year 6.01% 5.28% 5.64%
========= =========== ===========
Other borrowed funds:
Average balance outstanding $ 5,629 $ 14 $ 1,916
========= =========== ===========
Maximum amount outstanding at any month end during the year $ 11,952 $ 789 $ 3,914
========= =========== ===========
Balance outstanding at end of year $ -- $ 789 $ 3,914
========= =========== ===========
Weighted average interest rate during the year 5.74% 4.65% 4.85%
========= =========== ===========
Weighted average interest rate at end of year -- % 4.65% 4.75%
========= =========== ===========
Total borrowings:
Average balance outstanding $ 18,855 $ 33,732 $ 76,431
====== ====== =======
Maximum amount outstanding at any month end during the year $ 41,952 $ 56,789 $ 102,914
====== ====== =======
Balance outstanding at end of year $ 30,000 $ 56,789 $ 102,914
====== ====== =======
Weighted average interest rate during the year 6.03% 5.89% 5.40%
======= ======= ========
Weighted average interest rate at end of year 6.01% 5.27% 5.61%
======= ======= ========
Subsidiary Activities
The Bank has one wholly-owned subsidiary; Lake County Service Corporation
("LCSC") formed to develop a 100-lot subdivision, which is substantially sold
out. During 1999, LCSC sold an 8.4 acre commercial parcel and a one-acre lot
that adjoins the Bank's main office. The gain on the sale of the commercial
property was $553,000 after tax and $886,000 before tax. During 1999, LCSC
purchased two commercial building sites for possible future bank branches and
purchased an existing branch building in Inverness, which is rented to the Bank.
21
Personnel
As of February 14, 2000, the Bank had 166 full-time employees and 15 part-time
employees. The employees are not represented by a collective bargaining unit and
the Bank considers its relationship with its employees to be good.
REGULATION AND SUPERVISION
General
As a savings and loan holding company, the Company is required by federal law to
file reports with, and otherwise comply with, the rules and regulations of the
OTS. The Bank is subject to extensive regulation, examination and supervision by
the OTS, as its primary federal regulator, and the FDIC, as the deposit insurer.
The Bank is a member of the Federal Home Loan Bank System and, with respect to
deposit insurance, of the Savings Association Insurance Fund ("SAIF") managed by
the FDIC. The Bank must file reports with the OTS and the FDIC concerning its
activities and financial condition in addition to obtaining regulatory approvals
prior to entering into certain transactions such as mergers with, or
acquisitions of, other savings institutions. The OTS and/or the FDIC conduct
periodic examinations to test the Bank's safety and soundness and compliance
with various regulatory requirements. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the insurance fund and
depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such regulatory requirements and
policies, whether by the OTS, the FDIC or the Congress, could have a material
adverse impact on the Company, the Bank and their operations. Certain of the
regulatory requirements applicable to the Bank and to the Company are referred
to below or elsewhere herein. The description of statutory provisions and
regulations applicable to savings institutions and their holding companies set
forth in this Form 10-K does not purport to be a complete description of such
statutes and regulations and their effects on the Bank and the Company.
Holding Company Regulation
The Company is a nondiversified unitary savings and loan holding company within
the meaning of federal law. Under prior law, a unitary savings and loan holding
company, such as the Company was not generally restricted as to the types of
business activities in which it may engage, provided that the Bank continued to
be a qualified thrift lender. See "Federal Savings Institution Regulation - QTL
Test." The Gramm-Leach-Bliley Act of 1999 provides that no company may acquire
control of a savings association after May 4, 1999 unless it engages only in the
financial activities permitted for financial holding companies under the law or
for multiple savings and loan holding companies as described below. Further, the
Gramm-Leach-Bliley Act specifies that existing savings and loan holding
companies may only engage in such activities. The Gramm-Leach-Bliley Act,
however, grandfathered the unrestricted authority for activities with respect to
unitary savings and loan holding companies existing prior to May 4, 1999, such
as the Company, so long as the Bank continues to comply with the QTL Test. Upon
any non-supervisory acquisition by the Company of another savings institution or
Bank that meets the qualified thrift lender test and is deemed to be a savings
institution by the OTS, the Company would become a multiple savings and loan
holding company (if the acquired institution is held as a separate subsidiary)
and would generally be limited to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the
prior approval of the OTS, and certain activities authorized by OTS regulation.
22
A savings and loan holding company is prohibited from, directly or indirectly,
acquiring more than 5% of the voting stock of another savings institution or
savings and loan holding company, without prior written approval of the OTS and
from acquiring or retaining control of a depository institution that is not
insured by the FDIC. In evaluating applications by holding companies to acquire
savings institutions, the OTS considers the financial and managerial resources
and future prospects of the company and institution involved, the effect of the
acquisition on the risk to the deposit insurance funds, the convenience and
needs of the community and competitive factors.
The OTS may not approve any acquisition that would result in a multiple savings
and loan holding company controlling savings institutions in more than one
state, subject to two exceptions: (i) the approval of interstate supervisory
acquisitions by savings and loan holding companies and (ii) the acquisition of a
savings institution in another state if the laws of the state of the target
savings institution specifically permit such acquisitions. The states vary in
the extent to which they permit interstate savings and loan holding company
acquisitions.
Although savings and loan holding companies are not subject to specific capital
requirements or specific restrictions on the payment of dividends or other
capital distributions, federal regulations do prescribe such restrictions on
subsidiary savings institutions as described below. The Bank must notify the OTS
30 days before declaring any dividend to the Company. In addition, the financial
impact of a holding company on its subsidiary institution is a matter that is
evaluated by the OTS and the agency has authority to order cessation of
activities or divestiture of subsidiaries deemed to pose a threat to the safety
and soundness of the institution.
Federal Savings Institution Regulation
Business Activities. The activities of federal savings institutions are governed
by federal law and regulations. These laws and regulations delineate the nature
and extent of the activities in which federal associations may engage. In
particular, many types of lending authority for federal association, e.g.,
commercial, non-residential real property loans and consumer loans, are limited
to a specified percentage of the institution's capital or assets.
Capital Requirements. The OTS capital regulations require savings institutions
to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4%
leverage ratio (3% for institutions receiving the highest rating on the CAMELS
rating system) and an 8% risk-based capital ratio. In addition, the prompt
corrective action standards discussed below also establish, in effect, a minimum
2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving
the highest rating on the CAMEL financial institution rating system), and,
together with the risk-based capital standard itself, a 4% Tier 1 risk-based
capital standard. The OTS regulations also require that, in meeting the
tangible, leverage and risk-based capital standards, institutions must generally
deduct investments in and loans to subsidiaries engaged in activities as
principal that are not permissible for a national bank.
The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the OTS capital regulation based on the risks
believed inherent in the type of asset. Core (Tier 1) capital is defined as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus, and minority interests in equity
accounts of consolidated subsidiaries less intangibles other than certain
mortgage servicing rights and credit card relationships. The components of
supplementary capital currently include cumulative preferred
23
stock, long-term perpetual preferred stock, mandatory convertible securities,
subordinated debt and intermediate preferred stock, the allowance for loan and
lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45%
of unrealized gains on available-for-sale equity securities with readily
determinable fair market values. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.
The capital regulations also incorporate an interest rate risk component.
Savings institutions with "above normal" interest rate risk exposure are subject
to a deduction from total capital for purposes of calculating their risk-based
capital requirements. For the present time, the OTS has deferred implementation
of the interest rate risk capital charge. At December 31, 1999, the Bank met
each of its capital requirements.
The following table presents the Bank's capital position at December 31, 1999.
Capital Ratios
Actual Required Excess Actual Required
Capital Capital Amount Percent Percent
------- ------- ------ ------- -------
(Dollars in thousands)
Tangible $ 51,177 8,841 42,336 8.68% 1.50%
Core (Leverage) $ 51,177 17,681 33,496 8.68 3.00
Risk-based $ 53,894 28,893 25,001 14.92 8.00
Prompt Corrective Regulatory Action. The OTS is required to take certain
supervisory actions against undercapitalized institutions, the severity of which
depends upon the institution's degree of undercapitalization. Generally, a
savings institution that has a ratio of total capital to risk weighted assets of
less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less
than 4% or a ratio of core capital to total assets of less than 4% (3% or less
for institutions with the highest examination rating) is considered to be
"undercapitalized." A savings institution that has a total risk-based capital
ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio
that is less than 3% is considered to be "significantly undercapitalized" and a
savings institution that has a tangible capital to assets ratio equal to or less
than 2% is deemed to be "critically undercapitalized." Subject to a narrow
exception, the OTS is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the OTS within 45 days of the
date a savings institution receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." Compliance
with the plan must be guaranteed by any parent holding company. In addition,
numerous mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion. The OTS could also take any one of a number of discretionary
supervisory actions, including the issuance of a capital directive and the
replacement of senior executive officers and directors.
Insurance of Deposit Accounts. The Bank is a member of the SAIF. The FDIC
maintains a risk-based assessment system by which institutions are assigned to
one of three categories based on their capitalization and one of three
subcategories based on examination ratings and other supervisory information. An
institution's assessment rate depends upon the categories to which it is
assigned. Assessment rates for SAIF member institutions are determined
semiannually by the FDIC and currently range from zero basis points for the
healthiest institutions to 27 basis points for the riskiest.
24
In addition to the assessment for deposit insurance, institutions are required
to make payments on bonds issued in the late 1980s by the Financing Corporation
("FICO") to recapitalize the predecessor to the SAIF. During 1999, FICO payments
for SAIF members approximated 6.1 basis points, while Bank Insurance Fund
("BIF") members paid 1.2 basis points. By law, there is equal sharing of FICO
payments between SAIF and BIF members beginning on January 1, 2000.
The Bank paid no assessment for 1999, however its payments toward the FICO bonds
amounted to $213,749. The FDIC has authority to increase insurance assessments.
A significant increase in SAIF insurance premiums would likely have an adverse
effect on the operating expenses and results of operations of the Bank.
Management cannot predict what insurance assessment rates will be in the future.
Insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or the OTS. The
management of the Bank does not know of any practice, condition or violation
that might lead to termination of deposit insurance.
Loans to One Borrower. Federal law provides that savings institutions are
generally subject to the limits on loans to one borrower applicable to national
banks. A savings institution may not make a loan or extend credit to a single or
related group of borrowers in excess of 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired capital
and surplus, if secured by specified readily-marketable collateral. At December
31, 1999, the Bank's limit on loans to one borrower was $8.1 million, and the
Bank's largest aggregate outstanding balance of loans to one borrower was $7.6
million.
QTL Test. The HOLA requires savings institutions to meet a qualified thrift
lender test. Under the test, a savings association is required to either qualify
as a "domestic building and loan association" under the Internal Revenue Code or
maintain at least 65% of its "portfolio assets" (total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed securities) in at least 9 months
out of each 12 month period.
A savings institution that fails the qualified thrift lender test is subject to
certain operating restrictions and may be required to convert to a bank charter.
As of December 31, 1999, the Bank maintained 79.30% of its portfolio assets in
qualified thrift investments and, therefore, met the qualified thrift lender
test. Recent legislation has expanded the extent to which education loans,
credit card loans and small business loans may be considered "qualified thrift
investments."
Limitation on Capital Distributions. OTS regulations impose limitations upon all
capital distributions by a savings institution, including cash dividends,
payments to repurchase its shares and payments to shareholders of another
institution in a cash-out merger. The rule effective in the first quarter of
1999 established three tiers of institutions based primarily on an institution's
capital level. An institution that exceeded all capital requirements before and
after a proposed capital distribution ("Tier 1 Bank") and had not been advised
by the OTS that it was in need of more than normal supervision, could, after
prior notice but without obtaining approval of the OTS, make capital
distributions during the calendar year equal to the greater of (i) 100% of its
net earnings to date during the calendar year plus the amount that would reduce
by one-half the excess capital over its capital requirements at the beginning of
the calendar year or (ii) 75% of its net income for the previous four quarters.
Any additional
23
capital distributions required prior regulatory approval. Effective April 1,
1999, the OTS's capital distribution regulation changed. Under the new
regulation, an application to and the prior approval of the OTS is required
prior to any capital distribution if the institution does not meet the criteria
for "expedited treatment" of applications under OTS regulations (i.e.,
generally, examination ratings in the two top categories), the total capital
distributions for the calendar year exceed net income for that year plus the
amount of retained net income for the preceding two years, the institution would
be undercapitalized following the distribution or the distribution would
otherwise be contrary to a statute, regulation or agreement with OTS. If an
application is not required, the institution must still provide prior notice to
OTS of the capital distribution if, like the Bank, it is a subsidiary of a
holding company. In the event the Bank's capital fell below its regulatory
requirements or the OTS notified it that it was in need of more than normal
supervision, the Bank's ability to make capital distributions could be
restricted. In addition, the OTS could prohibit a proposed capital distribution
by any institution, which would otherwise be permitted by the regulation, if the
OTS determines that such distribution would constitute an unsafe or unsound
practice.
Liquidity. The 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%. Monetary penalties may
be imposed for failure to meet these liquidity requirements. The Bank's
liquidity ratio for December 31, 1999 was 18.7%, which exceeded the applicable
requirements. The Bank has never been subject to monetary penalties for failure
to meet its liquidity requirements.
Assessments. Savings institutions are required to pay assessments to the OTS to
fund the agency's operations. The general assessments, paid on a semi-annual
basis, are computed upon the savings institution's total assets, including
consolidated subsidiaries, as reported in the Bank's latest quarterly thrift
financial report. The Bank was not assessed any payments for the fiscal year
ended December 31, 1999.
Transactions with Related Parties. The Bank's authority to engage in
transactions with "affiliates" (e.g., any company that controls or is under
common control with an institution, including the Company and its non-savings
institution subsidiaries) is limited by federal law. The aggregate amount of
covered transactions with any individual affiliate is limited to 10% of the
capital and surplus of the savings institution. The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus. Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in federal law. The
purchase of low quality assets from affiliates is generally prohibited. The
transactions with affiliates must be on terms and under circumstances, that are
at least as favorable to the institution as those prevailing at the time for
comparable transactions with non-affiliated companies. In addition, savings
institutions are prohibited from lending to any affiliate that is engaged in
activities that are not permissible for bank holding companies and no savings
institution may purchase the securities of any affiliate other than a
subsidiary.
The Bank's authority to extend credit to executive officers, directors and 10%
shareholders ("insiders"), as well as entities such persons control, is also
governed by federal law. Such loans are required to be made on terms
substantially the same as those offered to unaffiliated individuals and not
involve more than the normal risk of repayment. Recent legislation created an
exception for loans made pursuant to a benefit or compensation program that is
widely available to all employees of the institution and does not give
preference to insiders over other employees. The law limits both the
26
individual and aggregate amount of loans the Bank may make to insiders based, in
part, on the Bank's capital position and requires certain board approval
procedures to be followed.
Enforcement. The OTS has primary enforcement responsibility over savings
institutions and has the authority to bring actions against the institution and
all institution-affiliated parties, including stockholders, and any attorneys,
appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured institution. Formal
enforcement action may range from the issuance of a capital directive or cease
and desist order to removal of officers and/or directors to institution of
receivership, conservatorship or termination of deposit insurance. Civil
penalties cover a wide range of violations and can amount to $25,000 per day, or
even $1 million per day in especially egregious cases. The FDIC has the
authority to recommend to the Director of the OTS that enforcement action to be
taken with respect to a particular savings institution. If action is not taken
by the Director, the FDIC has authority to take such action under certain
circumstances. Federal law also establishes criminal penalties for certain
violations.
Standards for Safety and Soundness. The federal banking agencies have adopted
Interagency Guidelines prescribing Standards for Safety and Soundness. The
guidelines set forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository institutions
before capital becomes impaired. If the OTS determines that a savings
institution fails to meet any standard prescribed by the guidelines, the OTS may
require the institution to submit an acceptable plan to achieve compliance with
the standard.
Federal Home Loan Bank System
The Bank is a member of the Federal Home Loan Bank System, which consists of 12
regional Federal Home Loan Banks. The Federal Home Loan Bank provides a central
credit facility primarily for member institutions. The Bank, as a member of the
Federal Home Loan Bank, is required to acquire and hold shares of capital stock
in that Federal Home Loan Bank in an amount at least equal to 1.0% of the
aggregate principal amount of its unpaid residential mortgage loans and similar
obligations at the beginning of each year, or 1/20 of its advances (borrowings)
from the Federal Home Loan Bank, whichever is greater. The Bank was in
compliance with this requirement with an investment in Federal Home Loan Bank
stock at December 31, 1999 of $4.95 million.
The Federal Home Loan Banks are required to provide funds for the resolution of
insolvent thrifts in the late 1980s and to contribute funds for affordable
housing programs. These requirements could reduce the amount of dividends that
the Federal Home Loan Banks pay to their members and could also result in the
Federal Home Loan Banks imposing a higher rate of interest on advances to their
members. If dividends were reduced, or interest on future Federal Home Loan Bank
advances increased, The Bank's net interest income would likely also be reduced.
Recent legislation has changed the structure of the Federal Home Loan Banks
funding obligations for insolvent thrifts, revised the capital structure of the
Federal Home Loan Banks and implemented entirely voluntary membership for
Federal Home Loan Banks. Management cannot predict the effect that these changes
may have with respect to its Federal Home Loan Bank membership.
27
Federal Reserve System
The Federal Reserve Board regulations require savings institutions to maintain
non-interest earning reserves against their transaction accounts (primarily NOW
and regular checking accounts). The regulations generally provide that reserves
be maintained against aggregate transaction accounts as follows: for accounts
aggregating $44.3 million or less (subject to adjustment by the Federal Reserve
Board) the reserve requirement is 3%; and for accounts aggregating greater than
$44.3 million, the reserve requirement is $1.329 million plus 10% (subject to
adjustment by the Federal Reserve Board between 8% and 14%) against that portion
of total transaction accounts in excess of $44.3 million. The first $5.0 million
of otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) are exempted from the reserve requirements. The Bank complies with the
foregoing requirements.
Year 2000
The Company's operating and financial systems have been found to be compliant;
the "Y2K Problem" has not adversely affected the Company's operations nor does
management expect that it will.
28
FEDERAL AND STATE TAXATION
Federal Taxation
General. The Company and the Bank report their income on a consolidated basis
using the accrual method of accounting, and are subject to federal income
taxation in the same manner as other corporations with some exceptions,
including particularly the Bank's reserve for bad debts discussed below. The
following discussion of tax matters is intended only as a summary and does not
purport to be a comprehensive description of the tax rules applicable to the
Bank or the Company. The Bank was last audited by the IRS for the year ended
December 31, 1996. For its 1999 taxable year, the Bank is subject to a maximum
federal income tax rate of 34%.
Bad Debt Reserves. For fiscal years beginning prior to December 31, 1995, thrift
institutions which qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986 (the "Code") were permitted to
use certain favorable provisions to calculate their deductions from taxable
income for annual additions to their bad debt reserve. A reserve could be
established for bad debts on qualifying real property loans (generally secured
by interests in real property improved or to be improved) under (i) the
Percentage of Taxable Income Method (the "PTI Method") or (ii) the Experience
Method. The reserve for nonqualifying loans was computed using the Experience
Method.
The Small Business Job Protection Act of 1996 (the "1996 Act"), which was
enacted on August 20, 1996, requires savings institutions to recapture (i.e.,
take into income) certain portions of their accumulated bad debt reserves. The
1996 Act repeals the reserve method of accounting for bad debts effective for
tax years beginning after 1995. Thrift institutions that would be treated as
small banks are allowed to utilize the Experience Method applicable to such
institutions, while thrift institutions that are treated as large banks (those
generally exceeding $500 million in assets) are required to use only the
specific charge-off method. Thus, the PTI Method of accounting for bad debts is
no longer available for any financial institution.
A thrift institution required to change its method of computing reserves for bad
debts will treat such change as a change in method of accounting, initiated by
the taxpayer, and having been made with the consent of the IRS. Any Section
481(a) adjustment required to be taken into income with respect to such change
generally will be taken into income ratably over a six-taxable year period,
beginning with the first taxable year beginning after 1995, subject to the
residential loan requirement.
Under the residential loan requirement provision, the recapture required by the
1996 Act is suspended for each of two successive taxable years, beginning with
1996, in which the Bank originates a minimum of certain residential loans based
upon the average of the principal amounts of such loans made by the Bank during
its six taxable years preceding its current taxable year. Under the 1996 Act,
for its current and future taxable years, the Bank is permitted to make
additions to its tax bad debt reserves. In addition, the Bank is required to
recapture (i.e., take into income) over a six year period the excess of the
balance of its tax bad debt reserves as of December 31, 1995 over the balance of
such reserves as of December 31, 1987. At December 31, 1999, the Bank had
approximately $606,000 of deferred tax liabilities recorded for the recapture of
its bad debt reserves.
29
Distributions. Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Bank's unrecaptured tax bad debt reserves (including the
balance of its reserves as of December 31, 1987) to the extent thereof, and then
from the Bank's supplemental reserve for losses on loans, to the extent thereof,
and an amount based on the amount distributed (but not in excess of the amount
of such reserves) will be included in the Bank's income. Non-dividend
distributions include distributions in excess of the Bank's current and
accumulated earnings and profits, as calculated for federal income tax purposes,
distributions in redemption of stock, and distributions in partial or complete
liquidation. Dividends paid out of the Bank's current or accumulated earnings
and profits will not be so included in the Bank's income.
The amount of additional taxable income triggered by a non-dividend is an amount
that, when reduced by the tax attributable to the income, is equal to the amount
of the distribution. Thus, if the Bank makes a non-dividend distribution to the
Company, approximately one and one-half times the amount of such distribution
(but not in excess of the amount of such reserves) would be includable in income
for federal income tax purposes, assuming a 35% federal corporate income tax
rate. The Bank does not intend to pay dividends that would result in a recapture
of any portion of its bad debt reserves.
Corporate Alternative Minimum Tax. The Code imposes a tax on alternative minimum
taxable income ("AMTI") at a rate of 20%. For fiscal years beginning prior to
January 1, 1996, the excess of the bad debt reserve deduction using the
percentage of taxable income method over the deduction that would have been
allowable under the experience method is treated as a preference item for
purposes of computing the AMTI. Only 90% of AMTI can be offset by net operating
loss carryovers. The adjustment to AMTI based on book income is an amount equal
to 75% of the amount by which a corporation's adjusted current earnings exceeds
its AMTI (determined without regard to this adjustment and prior to reduction
for net operating losses). In addition, for taxable years through 1995, an
environmental tax of .12% of the excess of AMTI (with certain modifications)
over $2.0 million is imposed on corporations, including the Bank, whether or not
an Alternative Minimum Tax ("AMT") is paid. The Bank does not expect to be
subject to the AMT.
Dividends Received Deduction and Other Matters. The Company may exclude from its
income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company and the Bank will not file a consolidated tax return,
except that if the Company and the Bank own more than 20% of the stock of a
corporation distributing a dividend, 80% of any dividends received may be
deducted.
Florida Taxation. The Bank files Florida franchise tax returns. For Florida
franchise tax purposes, savings institutions are presently taxed at a rate equal
to 5.5% of taxable income. For this purpose, "taxable income" generally means
federal taxable income, subject to certain adjustments (including the addition
of interest income on State and municipal obligations). The Bank is not
currently under audit with respect to its Florida franchise tax returns.
30
ITEM 2. PROPERTIES
The Bank conducts its business through its main office and 12 branch offices.
The following table sets forth certain information regarding the Bank's office
properties:
Net Book Value of Land
Date and Buildings at
Location Acquired December 31, 1999
- -------- -------- -----------------
(Dollars in thousands)
Main Office
800 North Boulevard, West
Leesburg, Florida 34748-5053 1961 $ 356
Wildwood
837 South Main Street
Wildwood, Florida 34785-5302 1967 293
Main Street
1409 West Main Street
Leesburg, Florida 34748-4854 1972 201
Clermont
481 East Highway 50
Clermont, Florida 34711-4032 1982 710
Eustis
2901 South Bay Street
Eustis, Florida 32726-6551 1979 568
Fruitland Park
410 Palm Street
Fruitland Park, Florida 34731-4013 1983 377
Lady Lake
431 US Highway 441/27
Lady Lake, Florida 32159-3046 1995 1,204
Lake Square
10105 US Highway 441
Leesburg, Florida 34788-3952 1995 503
South Leesburg (1)
27405 US Highway 27, Suite 123
Leesburg, Florida 34748-7914 1996 118
South Leesburg (2)
US Highway 27
Leesburg, Florida 34748 1996 375
Inverness (3)
2709 East Gulf to Lake Highway
Inverness, Florida 34453-3245 1998 869
Four Corners
16550 Woodcrest Way
Clermont, Florida 34711-7004 1998 1,073
Bushnell (4)
1128 North Main Street
Bushnell, Florida 33513 1998 282
Administration (5)
Leesburg, Florida 1961 78
Sumter County (6) 1999 401
(1) Leased branch office opened February, 1997.
(2) Parcel of land purchased by the Bank for a future branch office location.
(3) Leased branch office opened February, 1999. Owned by Lake County Service
Corp.
(4) Leased branch office opened May, 1999.
(5) Parcel of land owned by Bank for future administration offices.
(6) Two parcels of land purchased by Lake County Service Corp. for future
branch office locations.
The Bank owns and operates personal computers, teller terminals and associated
equipment. At December 31, 1999, such equipment had a net book value of $996.
31
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which FFLC Bancorp, Inc., or
any of its subsidiaries is a party or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the stockholders during the fourth
quarter of the fiscal year ended December 31, 1999, through the solicitation of
proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The above-captioned information appears under "Common Stock Prices and
Dividends" in the Registrant's 1999 Annual Report to Stockholders and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The above-captioned information appears under "Selected Consolidated Financial
Data" on page 6 and 7 of the Registrant's 1999 Annual Report to Stockholders and
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The above-captioned information appears under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Registrant's
1999 Annual Report to Stockholders on pages 8 through 18 and is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of FFLC Bancorp, Inc. and Subsidiary,
together with the report thereon by Hacker, Johnson, Cohen & Grieb PA appear in
the Registrant's 1999 Annual Report to Stockholders on pages 19 through 50 and
are incorporated herein by reference.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements with the Registrant's accountants on any
matters of accounting principles or practices or financial statement
disclosures.
32
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information related to Directors and Executive Officers of the Registrant is
incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on May 4, 2000 at pages 5 through 8.
ITEM 11. EXECUTIVE COMPENSATION
The information relating to executive compensation is incorporated herein by
reference to the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 4, 2000 at pages 12 through 15.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information relating to security ownership of certain beneficial owners and
management is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 4, 2000 at
pages 5 through 7.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information relating to certain relationships and related transactions is
incorporated herein by reference to pages 15 and 16 of the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 4, 2000.
33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements of the Company are incorporated by
reference from the following indicated pages of the 1999 Annual Report to
Stockholders.
Page
----
Independent Auditor's Report 50
Consolidated Balance Sheets as of December 31, 1999 and 1998 19
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997 20
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997 21-23
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997 24-25
Notes to Consolidated Financial Statements for the Years
Ended December 31, 1999, 1998 and 1997 26-49
The remaining information appearing in the Annual Report to Stockholders is
not deemed to be filed as part of this report, except as expressly provided
herein.
(2) All schedules are omitted because they are not required or applicable,
or the required information is shown in the consolidated financial
statements or the notes thereto.
(3) Exhibits
(a) The following exhibits are filed as part of this report.
3.1 Certificate of Incorporation of FFLC Bancorp, Inc.*
3.2 Bylaws of FFLC Bancorp, Inc.
4.0 Stock Certificate of FFLC Bancorp, Inc.*
10.1 First Federal Savings Bank of Lake County Recognition
and Retention Plan**
10.2 First Federal Savings Bank of Lake County Recognition
and Retention Plan for Outside Directors**
10.3 FFLC Bancorp, Inc. Incentive Stock Option Plans for
Officers and Employees**
10.4 FFLC Bancorp, Inc. Stock Option Plan for Outside
Directors**
13.0 Annual Report to Stockholders (filed herewith)
99 Proxy Statement for Annual Meeting (filed herewith)
* Incorporated herein by reference into this document from the Exhibits
to Form S-1, Registration Statement, initially filed on September 27,
1993, Registration No. 33-69466.
** Incorporated herein by reference into this document from the Proxy
Statement for the Annual Meeting of Stockholders held on May 12, 1994.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the
fourth quarter.
34
Pursuant to the requirements of Section 13 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.
By: /s/ Stephen T. Kurtz
Stephen T. Kurtz
Chief Executive Officer
and President
Dated: March 16, 2000
--------------
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
Name Title Date
---- ----- ----
/s/ Joseph J. Junod Chairman of the Board March 16, 2000
- -------------------
Joseph J. Junod
/s/ Claron D. Wagner Vice Chairman of the Board March 16, 2000
- --------------------
Claron D. Wagner
/s/ James P. Logan Director March 16, 2000
- ------------------
James P. Logan
/s/ Ted R. Ostrander, Jr. Director March 16, 2000
- -------------------------
Ted R. Ostrander
/s/ H.D. Robuck, Jr. Director March 16, 2000
- --------------------
H.D. Robuck, Jr.
/s/ Stephen T. Kurtz Chief Executive Officer, March 16, 2000
- -------------------- President and Director
Stephen T. Kurtz
/s/ Paul K. Mueller Executive Vice President, Chief March 16, 2000
- ------------------- Operating Officer and Treasurer
Paul K. Mueller and Director
35