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U.S. 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 June 30, 2002
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:
Common stock, par value $.01 per share 3,578,097 shares outstanding at July 31, 2002
- -------------------------------------- ---------------------------------------------
FFLC BANCORP, INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
at June 30, 2002 (unaudited) and at December 31, 2001.................................2
Condensed Consolidated Statements of Income -
Three and Six months ended June 30, 2002 and 2001 (unaudited).........................3
Condensed Consolidated Statement of Changes in Stockholders' Equity -
Six months ended June 30, 2002 (unaudited)............................................4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 2002 and 2001 (unaudited).................................5-6
Notes to Condensed Consolidated Financial Statements (unaudited).....................7-10
Review by Independent Certified Public Accountants.....................................11
Report on Review by Independent Certified Public Accountants...........................12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................................13-20
Item 3. Quantative and Qualitative Disclosures About Market Risk........................21
Part II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................................21
Item 2. Changes in Securities...........................................................21
Item 3. Default upon Senior Securities..................................................21
Item 4. Submission of Matters to a Vote of Security Holders..........................21-22
Item 5. Other Information...............................................................22
Item 6. Exhibits and Reports on Form 8-K................................................23
SIGNATURES..................................................................................24
1
FFLC BANCORP, INC.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
($ in thousands, except per share amounts)
At At
June 30, December 31,
-------- ------------
2002 2001
---- ----
Assets (unaudited)
Cash and due from banks $ 39,354 19,609
Interest-bearing deposits 24,586 30,183
--------- -------
Cash and cash equivalents 63,940 49,792
Securities available for sale 68,186 59,503
Loans, net of allowance for loan losses of $4,701 in 2002
and $4,289 in 2001 730,040 685,935
Accrued interest receivable 4,191 4,193
Premises and equipment, net 15,294 14,338
Foreclosed assets 304 373
Federal Home Loan Bank stock, at cost 8,200 7,700
Deferred income taxes 397 274
Other assets 1,385 1,043
--------- -------
Total $ 891,937 823,151
========= =======
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits 16,518 14,334
NOW and money-market accounts 125,587 111,961
Savings accounts 23,521 24,093
Certificates 470,905 434,740
--------- -------
Total deposits 636,531 585,128
Advances from Federal Home Loan Bank 164,000 154,000
Other borrowed funds 15,980 13,327
Accrued expenses and other liabilities 7,917 6,628
--------- -------
Total liabilities 824,428 759,083
--------- -------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none outstanding -- --
Common stock, $.01 par value, 9,000,000 shares authorized,
4,564,749 in 2002 and 4,542,953 in 2001 shares issued 46 45
Additional paid-in-capital 31,523 31,355
Retained income 54,997 51,575
Accumulated other comprehensive income 478 440
Treasury stock, at cost (986,982 shares in 2002 and
979,021 shares in 2001) (19,535) (19,347)
--------- -------
Total stockholders' equity 67,509 64,068
--------- -------
Total $ 891,937 823,151
========= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
2
FFLC BANCORP, INC.
Condensed Consolidated Statements of Income (Unaudited)
($ in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
2002 2001 2002 2001
---- ---- ---- ----
Interest income:
Loans $ 13,180 13,188 26,047 25,993
Securities available for sale 779 727 1,540 1,441
Other interest-earning assets 184 271 424 587
---------- ---------- ---------- ----------
Total interest income 14,143 14,186 28,011 28,021
---------- ---------- ---------- ----------
Interest expense:
Deposits 4,954 7,045 10,172 13,978
Borrowed funds 2,330 2,104 4,603 4,092
---------- ---------- ---------- ----------
Total interest expense 7,284 9,149 14,775 18,070
---------- ---------- ---------- ----------
Net interest income 6,859 5,037 13,236 9,951
Provision for loan losses 613 325 871 600
---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 6,246 4,712 12,365 9,351
---------- ---------- ---------- ----------
Noninterest income:
Deposit account fees 233 204 451 421
Other service charges and fees 530 437 1,012 784
Other 83 54 251 105
---------- ---------- ---------- ----------
Total noninterest income 846 695 1,714 1,310
---------- ---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits 2,134 1,764 4,150 3,471
Occupancy expense 585 489 1,158 970
Deposit insurance premium 26 25 52 49
Data processing expense 240 248 492 494
Professional services 95 102 197 187
Advertising and promotion 123 102 234 208
Other 394 322 758 636
---------- ---------- ---------- ----------
Total noninterest expense 3,597 3,052 7,041 6,015
---------- ---------- ---------- ----------
Income before income taxes 3,495 2,355 7,038 4,646
Income taxes 1,282 882 2,617 1,741
---------- ---------- ---------- ----------
Net income $ 2,213 1,473 4,421 2,905
========== ========== ========== ==========
Basic income per share of common stock $ .62 .41 1.24 .82
========== ========== ========== ==========
Weighted-average number of shares outstanding
for basic 3,571,226 3,537,364 3,569,466 3,536,243
========== ========== ========== ==========
Diluted income per share of common stock $ .60 .40 1.21 .80
========== ========== ========== ==========
Weighted-average number of shares outstanding
for diluted 3,645,834 3,629,597 3,643,210 3,625,623
========== ========== ========== ==========
Dividends per share $ .14 .13 .28 .26
========== ========== ========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements
3
FFLC BANCORP, INC.
Condensed Consolidated Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 2002 (Unaudited)
($ in thousands)
Accumulated
Other
Additional Compre- Total
Common Paid-In Treasury Retained hensive Stockholders'
Stock Capital Stock Income Income Equity
----- ------- ----- ------ ------ ------
Balance at December 31, 2001 $ 45 31,355 (19,347) 51,575 440 64,068
Comprehensive income:
Net income (unaudited) -- -- -- 4,421 -- 4,421
Change in unrealized gains on securities
available for sale, net of income taxes
of $23 (unaudited) -- -- -- -- 38 38
------
Comprehensive income (unaudited) 4,459
-----
Net proceeds from the issuance of 21,796 shares of
common stock, stock options exercised
(unaudited) 1 168 -- -- -- 169
Dividends paid (unaudited) -- -- -- (999) -- (999)
Purchase of treasury stock, 7,961 shares (unaudited -- -- (188) -- -- (188)
------- ------ ------- ------ --- ------
Balance at June 30, 2002 (unaudited) $ 46 31,523 (19,535) 54,997 478 67,509
======= ======= ======= ======= ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
4
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
($ in thousands)
Six Months Ended
June 30,
--------------------------
2002 2001
---- ----
Cash flows from operating activities:
Net income $ 4,421 2,905
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses 871 600
Depreciation 518 383
Credit for deferred income taxes (146) (58)
Gain on sale of foreclosed assets (30) (28)
Net amortization of premiums and discounts on securities 53 (75)
Net deferral of loan fees and costs (82) 70
Decrease (increase) in accrued interest receivable 2 (158)
Increase in other assets (342) (76)
Increase (decrease) in accrued expenses and other liabilities 1,289 (2,672)
------- -------
Net cash provided by operating activities 6,554 891
------- -------
Cash flows from investing activities:
Proceeds from principal repayments and maturities on securities available for sale 6,650 6,603
Purchase of securities available for sale (15,325) (14,893)
Loan disbursements (137,787) (92,759)
Principal repayments on loans 92,370 50,744
Purchase of premises and equipment, net (1,474) (1,535)
Purchase of Federal Home Loan Bank stock (500) (800)
Proceeds from sales of foreclosed assets 622 292
------- -------
Net cash used in investing activities (55,444) (52,348)
------- -------
Cash flows from financing activities:
Net increase in deposits 51,403 28,881
Net increase in advances from Federal Home Loan Bank 10,000 16,000
Net increase in other borrowed funds 2,653 6,125
Issuance of common stock 169 197
Purchase of treasury stock (188) (237)
Cash dividends paid (999) (919)
------- -------
Net cash provided by financing activities 63,038 50,047
Net increase (decrease) in cash and cash equivalents 14,148 (1,410)
Cash and cash equivalents at beginning of period 49,792 30,481
Cash and cash equivalents at end of period $ 63,940 29,071
========= ======
(continued)
5
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited), Continued
($ in thousands)
Six Months Ended
June 30,
2002 2001
---- ----
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $14,907 18,019
======= ======
Income taxes $ 2,780 1,965
======= =====
Noncash investing and financing activities:
Accumulated other comprehensive income, net change in unrealized
gain on securities available for sale, net of tax $ 38 261
======= ======
Transfer from loans to foreclosed assets $ 664 205
======= ======
Loans originated on sales of foreclosed assets $ 141 84
======= ======
Loans funded by and sold to correspondent $ 4,891 8,468
======= ======
See accompanying Notes to Condensed Consolidated Financial Statements.
6
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 "Holding Company"), the accompanying condensed consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position at
June 30, 2002 and the results of operations for the three- and six-month
periods ended June 30, 2002 and 2001 and cash flows for the six-month
periods ended June 30, 2002 and 2001. The results of operations for the
three-and six-month periods ended June 30, 2002, are not necessarily
indicative of results that may be expected for the year ending December 31,
2002.
The condensed consolidated financial statements include the accounts of the
Holding Company and its two subsidiaries, First Federal Savings Bank of
Lake County (the "Bank") and First Alliance Title, LLC, and the Bank's
wholly-owned subsidiary, Lake County Service Corporation (together, the
"Company"). All significant intercompany accounts and transactions have
been eliminated in consolidation.
2. Loans. The following table sets forth the composition of the Bank's loan
portfolio in dollar amounts and percentages at the dates indicated (in
thousands):
At June 30, 2002 At December 31, 2001
--------------------- --------------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
Mortgage loans:
One-to-four-family residential $ 427,149 56.41% $ 413,712 58.77%
Construction and land 25,869 3.42 22,951 3.26
Multi-family units 22,698 3.00 20,304 2.88
Commercial real estate, churches and other 124,038 16.38 108,804 15.46
------- ----- ------- -----
Total mortgage loans 599,754 79.21 565,771 80.37
Consumer loans 132,220 17.46 119,357 16.96
Commercial loans 25,179 3.33 18,814 2.67
------ ---- ------ ----
Total loans (1) 757,153 100.00% 703,942 100.00%
====== =======
Less:
Loans in process (23,177) (14,310)
Net deferred loan costs 765 592
Allowance for loan losses (2) (4,701) (4,289)
------ ------
Loans, net $ 730,040 $ 685,935
========= ===========
(1) Total loans outstanding by department consists of the following (in
thousands):
At
----------
June 30, 2002 December 31, 2001
---------------------------------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
Residential $ 418,248 55.24% $ 403,897 57.37%
Commercial 204,441 27.00 180,688 25.67
Consumer 134,464 17.76 119,357 16.96
--------- ------ --------- ------
$ 757,153 100.00% $ 703,942 100.00%
========= ====== ========= ======
(continued)
7
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
2. Loans, Continued.
(2) Total allowance for loan losses by department consist of the following
(in thousands):
At
---------------------
June 30, 2002 December 31, 2001
-------------------------------------------
% to % to
Gross Gross
Amount Loans Amount Loans
------ ----- ------ -----
Residential $1,189 .28% $1,229 .30%
Commercial 2,534 1.24 2,039 1.13
Consumer 978 .73 1,021 .86
------ --- ------ ----
$4,701 .62% $4,289 .61%
====== === ====== ===+
Total gross loans originated by department, including unfunded construction and
line of credit loans, consist of the following (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ---------------------
2002 2001 2002 2001
---- ---- ---- ----
Residential $40,076 26,475 70,953 45,539
Commercial 30,102 24,758 54,110 48,824
Consumer 24,378 18,680 42,481 36,562
------ ------ ------ ------
$94,556 69,913 167,544 130,925
======= ====== ======= =======
3. 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 No. 114 and 118.
An analysis of the change in the allowance for loan losses was as follows
(in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2002 2001 2002 2001
---- ---- ---- ----
Beginning balance $ 4,273 3,773 4,289 3,552
Provision for loan losses 613 325 871 600
Net loans charged-off (185) (44) (459) (98)
---- --- ---- ---
Ending balance $ 4,701 4,054 4,701 4,054
======= ===== ===== =====
(continued)
8
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
3. Loan Impairment and Loan Losses, Continued. There were no impaired loans at
June 30, 2002. The following summarizes the amount of impaired loans at
December 31, 2001, all of which were collateral dependent (in thousands):
Loans identified as impaired:
Gross loans with no related allowance for losses $ --
Gross loans with related allowance for losses recorded 306
Less: Allowances on these loans (150)
----
Net investment in impaired loans $ 156
=====
The average net investment in impaired loans and interest income
recognized and received on impaired loans was as follows (in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Average net investment in impaired loans $ -- 857 19 730
==== === == ===
Interest income recognized on impaired loans $ -- 70 -- 81
==== === == ===
Interest income received on impaired loans $ -- 70 -- 81
==== === == ===
During the three months ended June 30, 2001, an impaired loan in the amount
of $1.3 million was repaid.
(continued)
9
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
4. Income Per Share of Common Stock. Basic income per share of common stock
has been computed by dividing the net income for the period by the
weighted-average number of shares outstanding. Shares of common stock
purchased by the RRP incentive plans are only considered outstanding when
the shares are released or committed to be released for allocation to
participants. Diluted income per share is computed by dividing net income
by the weighted-average number of shares outstanding including the dilutive
effect of stock options computed using the treasury stock method. The
following table presents the calculation of basic and diluted income per
share of common stock:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------------
2002 2001 2002 2001
---- ---- ---- ----
Weighted-average shares of common stock issued and
outstanding before adjustments for RRP and
common stock options 3,573,961 3,540,099 3,572,201 3,538,978
Adjustment to reflect the effect of unallocated
RRP shares (2,735) (2,735) (2,735) (2,735)
--------- --------- --------- ---------
Weighted-average shares for basic income per share 3,571,226 3,537,364 3,569,466 3,536,243
========= ========= ========= =========
Basic income per share of common stock $ .62 .41 1.24 .82
========== === ==== ===
Total weighted-average common shares and
equivalents outstanding for basic income per
share computation 3,571,226 3,537,364 3,569,466 3,536,243
Additional dilutive shares using the average market
value for the period utilizing the treasury stock
method regarding stock options 74,608 92,233 73,744 89,380
--------- --------- --------- ---------
Weighted-average common shares and equivalents
outstanding for diluted income per share 3,645,834 3,629,597 3,643,210 3,625,623
========= ========= ========= =========
Diluted income per share of common stock $ .60 .40 1.21 .80
========== === ==== ===
5. Stock Option Plan. At the Company's annual meeting in May 2002, the
stockholders approved the 2002 Stock Option Plan (the "Plan"). Under
this Plan, up to 250,000 options can be granted to directors, officers
or employees of the Company. As of June 30, 2002, no options have been
granted under the Plan.
6. Reclassifications. Certain amounts in the 2001 condensed consolidated
financial statements have been reclassified to conform to the
presentation for 2002.
10
FFLC BANCORP, INC.
Review by Independent Certified Public Accountants
Hacker, Johnson & Smith PA, the Company's independent certified public
accountants, have made a limited review of the financial data as of June 30,
2002, and for the three- and six-month periods ended June 30, 2002 and 2001
presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
11
Report on Review by Independent Certified Public Accountants
The Board of Directors
FFLC Bancorp, Inc.
Leesburg, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of
FFLC Bancorp, Inc. and Subsidiaries (the "Company") as of June 30, 2002, the
related condensed consolidated statements of income for the three- and six-month
periods ended June 30, 2002 and 2001, the related condensed consolidated
statement of changes in stockholders' equity for the six-month period ended June
30, 2002 and the related condensed consolidated statements of cash flows for the
six-month periods ended June 30, 2002 and 2001. These financial statements are
the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with accounting principles generally accepted
in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 2001, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated January 11, 2002 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 2001, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
HACKER, JOHNSON & SMITH PA
Orlando, Florida
July 10, 2002
12
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 its
wholly-owned subsidiary, First Federal Savings Bank of Lake County (the
"Bank"), its 90% owned subsidiary, First Alliance Title, LLC, and the
Bank's wholly-owned subsidiary, Lake County Service Corporation (together,
the "Company"). The Company's consolidated results of operations are
primarily those of the Bank.
The 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, consumer loans and, to a lesser
extent, construction loans, 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 loan and mortgage-backed securities
portfolios and interest and dividends on its investment securities. The
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 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 Bank has 12 full-service banking facilities in Lake, Sumter and Citrus
Counties, Florida, and has a new branch under construction in the Clermont
area of Lake County. That branch is expected to open in the fourth quarter
of 2002. The Bank has also purchased two former branch sites from another
bank, one located in Marion County, and the other located in Lake County,
where the Bank expects to open branches in the fourth quarter of 2002. The
site acquired in Lake County will replace the Bank's existing Lake Square
office and provide the Bank with a larger facility needed to accommodate
the continued growth of that branch.
The Company's results of operations depend primarily on net interest
income, which is the difference between the interest income earned
primarily on its loan and securities portfolios, and its cost of funds,
consisting of the interest paid on its deposits and borrowings. The
Company's operating results are also affected, to a lesser extent, by fee
income. The Company's operating expenses consist primarily of salaries and
employee benefits, occupancy expenses, and other general and administrative
expenses. The Company'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.
13
FFLC BANCORP, INC.
Capital Resources
The Bank's primary sources of funds include proceeds from payments and
prepayments on mortgage loans and mortgage-backed securities, proceeds from
maturities of investment securities and increases in deposits. While
maturities and scheduled amortization of loans and investment securities
are predictable sources of funds, deposit inflows and mortgage prepayments
are greatly influenced by local conditions, general interest rates, and
regulatory changes.
At June 30, 2002, the Bank had outstanding commitments to originate $16.7
million of loans, commitments to fund approximately $23.2 million of the
undisbursed portion of loans in process and undisbursed lines of credit of
approximately $53.4 million. The Bank believes that it will have sufficient
funds available to meet its commitments. At June 30, 2002, certificates of
deposit which were scheduled to mature in one year or less totaled $310.2
million. Based on past experience, management believes, that a significant
portion of those funds will remain with the Bank.
The Bank is subject to various regulatory capital requirements administered
by the Federal banking agencies. Failure to meet minimum capital
requirements can require regulators to initiate certain mandatory- and
possibly additional discretionary-actions 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 Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts (set forth in the table) of
total and Tier I capital (as defined in the regulations) to risk-weighted
assets (as defined). Management believes that, as of June 30, 2002, the
Bank meets all capital adequacy requirements to which it is subject.
14
FFLC BANCORP, INC.
As of June 30, 2002, the most recent notification from the OTS categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must
maintain minimum tangible, Tier I (core), Tier I (risk-based) and total
risk-based capital percentages as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category.
The Bank's actual capital amounts and percentages at June 30, 2002 are also
presented in the table.
To Be Well
Minimum Capitalized
For Capital For Prompt
Adequacy Corrective Action
Actual Purposes Provisions
% Amount % Amount % Amount
- ------ - ------ - ------
($ in thousands)
Stockholders' equity,
and ratio to total
assets 7.2% $ 64,604
Less: investment in
nonincludable
subsidiary (510)
Less: unrealized gain on
securities available for sale (522)
----
Tangible capital,
and ratio to adjusted
total assets 7.1% $ 63,572 1.5% $ 13,366
======== =========
Tier 1 (core) capital, and
ratio to adjusted total
assets 7.1% $ 63,572 3.0% $ 26,732 5.0% $ 44,553
======== ========= =========
Tier 1 capital, and ratio
to risk-weighted assets 11.1% 63,572 4.0% $ 22,930 6.0% $ 34,395
========= =========
Less: Nonincludable investment
in 80% land loans (344)
Tier 2 capital (allowance for
loan losses) 4,541
-----
Total risk-based capital,
and ratio to risk-
weighted assets 11.8% $ 67,769 8.0% $ 45,860 10.0% $ 57,324
========= ========= =========
Total assets $ 892,089
=========
Adjusted total assets $ 891,063
=========
Risk-weighted assets $ 573,244
=========
15
FFLC BANCORP, INC.
The following table shows selected ratios for the periods ended or at the
dates indicated:
Six Months Six Months
Ended Year Ended Ended
June 30, December 31, June 30,
2002 2001 2001
---- ---- ----
Average equity as a percentage
of average assets 7.83% 8.05% 8.22%
Total equity to total assets at end of period 7.57% 7.78% 8.07%
Return on average assets (1) 1.05% .82% .79%
Return on average equity (1) 13.38% 10.20% 9.62%
Noninterest expense to average assets (1) 1.67% 1.68% 1.64%
Nonperforming assets to total assets
at end of period .22% .28% .28%
Operating efficiency ratio (1) 47.10% 53.63% 53.41%
(1) Annualized for the six months ended June 30, 2002 and 2001.
At At At
June 30, December 31, June 30,
2002 2001 2001
---- ---- ----
Weighted-average interest rates:
Interest-earning assets:
Loans 7.33% 7.61% 7.96%
Securities 4.68% 5.16% 5.86%
Other interest-earning assets 2.70% 2.48% 5.05%
Total interest-earning assets 6.94% 7.17% 7.74%
Interest-bearing liabilities:
Interest-bearing deposits 3.41% 3.85% 5.12%
Borrowed funds 5.16% 5.44% 5.85%
Total interest-bearing liabilities 3.80% 4.22% 5.28%
Interest-rate spread 3.14% 2.95% 2.46%
Change in Financial Condition
Total assets increased $68.8 million or 8.4%, from $823.2 million at December
31, 2001 to $891.9 million at June 30, 2002 primarily as a result of a $44.1
million increase in net loans and an increase in cash and cash equivalents of
$14.1 million. Deposits increased $51.4 million from $585.1 million at December
31, 2001 to $636.5 million at June 30, 2002. The $3.4 million net increase in
stockholders' equity during the six months ended June 30, 2002 resulted from net
income of $4.4 million, proceeds of $169,000 from stock options exercised and a
$38,000, net of tax increase in unrealized gains on securities available for
sale, partially offset by repurchases of the Company's stock of $188,000 and
dividends paid of $999,000.
16
FFLC BANCORP, INC.
Results of Operations
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average costs; (iii) net interest/dividend income; (iv) interest-rate spread;
and (v) net interest margin. Yields and costs were derived by dividing
annualized income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. The average balance of loans includes loans
on which the Company has discontinued accruing interest. The yields and costs
include fees which are considered to constitute adjustments to yields.
Three Months Ended June 30,
---------------------------------------------------------------------------
2002 2001
-------------------------------------- --------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
($ in Thousands)
Interest-earning assets:
Loans $717,233 13,180 7.35% $646,382 13,188 8.16%
Securities 76,542 779 4.07 47,352 727 6.14
Other interest-earning assets (1) 18,696 184 3.94 21,326 271 5.08
-- ------ --- ------ ---
Total interest-earning assets 812,471 14,143 6.96 715,060 14,186 7.94
------ ------
Noninterest-earning assets 42,125 32,239
------ ------
Total assets $854,596 $747,299
======== ========
Interest-bearing liabilities:
NOW and money-market accounts 125,838 405 1.29 92,137 586 2.54
Savings accounts 22,896 57 1.00 19,592 106 2.16
Certificates 438,890 4,492 4.09 416,786 6,353 6.10
Federal Home Loan Bank advances 160,044 2,253 5.63 127,022 1,966 6.19
Other borrowed funds 15,785 77 1.95 10,716 138 5.15
------ -- ------ ---
Total interest-bearing liabilities 763,453 7,284 3.82 666,253 9,149 5.49
----- -----
Noninterest-bearing deposits 15,985 13,588
Noninterest-bearing liabilities 8,262 6,545
Stockholders' equity 66,896 60,913
------ ------
Total liabilities and
stockholders' equity $854,596 $747,299
======== ========
Net interest income $ 6,859 $ 5,037
========= ========
Interest-rate spread (2) 3.14% 2.45%
==== ====
Net interest-earning assets,
net interest margin (3) $ 49,018 3.38% $48,807 2.82%
======= ==== ====== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.06 1.07
==== ====
(1) Includes interest-bearing deposits and Federal Home Loan Bank stock.
(2) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin is annualized net interest income divided by average
interest-earning assets.
17
FFLC BANCORP, INC.
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest and dividend income; (iv) interest-rate spread;
and (v) net interest margin. Yields and costs were derived by dividing
annualized income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. The average balance of loans includes loans
on which the Company has discontinued accruing interest. The yields and costs
include fees which are considered to constitute adjustments to yields.
Six Months Ended June 30,
---------------------------------------------------------------------------
2002 2001
----------------------------- ----------------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
($ in Thousands)
Interest-earning assets:
Loans $703,908 26,047 7.40% $637,656 25,993 8.15%
Securities 74,891 1,540 4.11 45,493 1,441 6.34
Other interest-earning assets (1) 25,122 424 3.38 21,084 587 5.57
-- ------ --- ---- ------ --- ----
Total interest-earning assets 803,921 28,011 6.97 704,233 28,021 7.96
------ ------
Noninterest-earning assets 40,319 30,675
------ ------
Total assets $844,240 $734,908
======= =======
Interest-bearing liabilities:
NOW and money-market accounts 122,941 805 1.31 89,943 1,166 2.59
Savings accounts 22,637 113 1.00 19,509 203 2.08
Certificates 437,139 9,254 4.23 412,272 12,609 6.12
Federal Home Loan Bank advances 157,039 4,455 5.67 125,022 3,862 6.18
Other borrowed funds 14,904 148 1.99 9,524 230 4.83
------ --- ---- ----- --- ----
Total interest-bearing liabilities 754,660 14,775 3.92 656,270 18,070 5.51
------ ------
Noninterest-bearing deposits 15,488 13,072
Noninterest-bearing liabilities 7,996 5,187
Stockholders' equity 66,096 60,379
------ ------
Total liabilities and stockholders' equity $844,240 $734,908
======= =======
Net interest income $13,236 $9,951
====== ======
Interest-rate spread (2) 3.05% 2.45%
==== =====
Net interest-earning assets,
net interest margin (3) $ 49,261 3.29% $47,963 2.83%
======= ==== ====== =====
Ratio of interest-earning assets to
interest-bearing liabilities 1.07 1.07
==== ====
(1) Includes interest-bearing deposits and Federal Home Loan Bank stock
(2) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin is annualized net interest income divided by average
interest-earning assets.
18
FFLC BANCORP, INC.
Comparison of the Three-Month Periods Ended June 30, 2002 and 2001
General Operating Results. Net income for the three-month period ended June 30,
2002 was $2.2 million, or $.62 per basic share and $.60 per diluted share,
compared to $1.5 million, or $.41 per basic share and $.40 per diluted
share, for the comparable period in 2001. The increase in net income was
primarily a result of an increase of $1.8 million in net interest income,
partially offset by an increase of $545,000 in noninterest expense.
Interest Income. Interest income decreased $43,000 to $14.1 million for the
three-month period ended June 30, 2002. The decrease was due to a decrease
in the average yield earned on interest-earning assets from 7.94% for the
three months ended June 30, 2001 to 6.96% for the three months ended June
30, 2002, partially offset by a $97.4 million or 13.6% increase in average
interest-earning assets outstanding for the three months ended June 30,
2002 compared to the 2001 period.
Interest Expense. Interest expense decreased $1.9 million or 20.4%, from $9.1
million for the three-month period ended June 30, 2001 to $7.3 million for
the three-month period ended June 30, 2002. The decrease was due primarily
to a decrease in the average cost of interest-bearing liabilities from
5.49% for the three months ended June 30, 2001 to 3.82% for the comparable
2002 period, partially offset by increases of $59.1 million and $38.1
million in average interest-bearing deposits and borrowings outstanding,
respectively. Average interest-bearing deposits increased from $528.5
million outstanding during the three months ended June 30, 2001 to $587.6
million outstanding during the comparable period for 2002. Average
borrowings increased from $137.7 million during the three months ended June
30, 2001 to $175.8 million for the comparable 2002 period.
Provision for Loan Losses. The provision for loan losses is charged to income to
increase the total allowance to a level deemed appropriate by management
and is based upon the volume and type of lending conducted by the Company,
charge-off experience, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the
Company's market area, and other factors related to the collectibility of
the Company's loan portfolio. The Company recorded provisions for loan
losses for the three-month periods ended June 30, 2002 and 2001 of $613,000
and $325,000, respectively. Net loans charged off for the three-month
periods ended June 30, 2002 and 2001 were $185,000 and $44,000,
respectively. The allowance for loan losses was $4.7 million or .62% of
gross loans at June 30, 2002. Management believes the allowance is adequate
at June 30, 2002.
Noninterest Income. Noninterest income increased $151,000 or 21.7% from $695,000
during the 2001 period to $846,000 during the 2002 period. The increase was
mainly due to a $93,000 increase in other service charges and fees.
Noninterest Expense. Noninterest expense increased by $545,000 or 17.9% from
$3.1 million for the three-month period ended June 30, 2001 to $3.6 million
for the three-month period ended June 30, 2002. The increase was primarily
due to increases of $370,000 in salaries and employee benefits and $96,000
in occupancy expense related to the overall growth of the Company.
Income Tax Provision. The income tax provision increased from $882,000 for the
three-month period ended June 30, 2001 (an effective tax rate of 37.5%) to
$1.3 million (an effective tax rate of 36.7%) for the corresponding period
in 2002.
19
FFLC BANCORP, INC.
Comparison of the Six-Month Periods Ended June 30, 2002 and 2001
General Operating Results. Net income for the six-month period ended June 30,
2002 was $4.4 million, or $1.24 per basic share and $1.21 per diluted
share, compared to $2.9 million, or $.82 per basic share and $.80 per
diluted share, for the comparable period in 2001. This increase was mainly
due to an increase in net interest income of $3.3 million, partially offset
by a increase in noninterest expense of $1.0 million.
Interest Income. Interest income decreased $10,000 to $28.0 million for the six
months ended June 30, 2002. The decrease was due to a decrease in the
average yield earned on interest-earning assets from 7.96% for the six
months ended June 30, 2001 to 6.97% for the six months ended June 30, 2002,
partially offset by a $99.7 million or 14.2% increase in average
interest-earning assets outstanding for the six months ended June 30, 2002
compared to the 2001 period.
Interest Expense. Interest expense decreased $3.3 million or 18.2%, from $18.1
million for the six-month period ended June 30, 2001 to $14.8 million for
the six-month period ended June 30, 2002. The decrease was due primarily to
a decrease in the average cost of interest-bearing liabilities from 5.51%
for the six months ended June 30, 2001 to 3.92% for the comparable 2002
period, partially offset by increases of $61.0 million and $37.4 million in
average interest-bearing deposits and borrowings outstanding, respectively.
Average interest-bearing deposits increased from $521.7 million outstanding
during the six months ended June 30, 2001 to $582.7 million outstanding
during the comparable period for 2002. Average borrowings increased from
$134.5 million outstanding during the six months ended June 30, 2001 to
$171.9 million for the comparable 2002 period.
Provision for Loan Losses. The provision for loan losses is charged to income to
increase the total allowance to a level deemed appropriate by management
and is based upon the volume and type of lending conducted by the Company,
charge-off experience, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the
Company's market area, and other factors related to the collectibility of
the Company's loan portfolio. The Company recorded provisions for loan
losses for the six-month periods ended June 30, 2002 and 2001 of $871,000
and $600,000, respectively. Net loans charged off for the six-month periods
ended June 30, 2002 and 2001 were $459,000 and $98,000, respectively. The
allowance for loan losses was $4.7 million or .62% of gross loans at June
30, 2002. Management believes the allowance is adequate at June 30, 2002.
Noninterest Income. Noninterest income increased $404,000, or 30.8% from $1.3
million for the six months ended June 30, 2001 to $1.7 million for the
comparable period in 2002. This was mainly due to an increase of $228,000
in other service charges and fees.
Noninterest Expense. Noninterest expense increased by $1.0 million or 17.1%,
from $6.0 million for the six-month period ended June 30, 2001 to $7.0
million for the six-month period ended June 30, 2002. The increase was
primarily due to increases in salaries and employee benefits of $679,000
and occupancy expense of $188,000 related to the overall growth of the
Company.
Income Tax Provision. The income tax provision was $2.6 million for the
six-month period ended June 30, 2002 (an effective tax rate of 37.2%)
compared to $1.7 million (an effective tax rate of 37.5%) for the
corresponding period for 2001.
20
FFLC BANCORP, INC.
Item 3. Quantitative and Qualitative Disclosures About 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. The Company has
little or no risk related to trading accounts, commodities or foreign
exchange.
The Company does not engage in trading or hedging activities and does not
invest in interest-rate derivatives or enter into interest rate swaps.
Management actively monitors and manages its interest rate risk exposure.
The primary objective in managing interest-rate risk is to limit, within
established guidelines, the adverse impact of changes in interest rates on
the Company's net interest income and capital, while adjusting the
Company's asset-liability structure to obtain the maximum yield-cost spread
on that structure. Management relies primarily on its asset-liability
structure to control interest rate risk. However, a sudden and substantial
increase in interest rates could 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.
There have been no significant changes in the Company's market risk
exposure since December 31, 2001.
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 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders (the "Annual Meeting") of FFLC Bancorp,
Inc. was held on May 9, 2002, to consider the election of two directors
each for a term of three years, approval of the 2002 Stock Option Plan and
the ratification of the appointment of the Company's independent auditors
for the year ending December 31, 2002. At the Annual Meeting, incumbent
Directors James P. Logan and Ted R. Ostrander, Jr., were reelected. The
terms of Directors Howard H. Hewitt, H.D. Robuck, Jr., Stephen T. Kurtz,
Joseph J. Junod, Claron D. Wagner and Paul K. Mueller continued after the
Annual Meeting.
At the Annual Meeting, 2,980,401 shares were present in person or by proxy.
The following is a summary and tabulation of the matters that were voted
upon at the Annual Meeting:
21
FFLC BANCORP, INC.
Item 4. Submission of Matters to a Vote of Security Holders, Continued
Proposal I.
The election of two directors, each for a term of three years:
Abstentions
and Broker
For Withheld Against Nonvotes
--- -------- ------- --------
James P. Logan 2,941,217 39,184 -- --
========= ====== ======= ======
Ted R. Ostrander, Jr 2,941,217 39,184 -- --
========= ====== ======= ======
Proposal II:
To approve the 2002 Stock Option Plan:
Abstentions
and Broker
For Withheld Against Nonvotes
--- -------- ------- --------
2,361,157 -- 111,895 507,349
========= ====== ======= =======
Proposal III:
To ratify the appointment of Hacker, Johnson & Smith PA as the Company's
independent auditors for the year ending December 31, 2002
Abstentions
and Broker
For Withheld Against Nonvotes
--- -------- ------- --------
2,927,267 -- 3,744 49,390
========= ===== ===== ======
Item 5. Other Information
Not applicable
22
FFLC BANCORP, INC.
Item 6. Exhibits and Reports on Form 8-K
(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**
99.1 CEO Certifications required under Section 906 of
Sarbanes-Oxley Act of 2002
99.2 CFO Certifications required under Section 906 of
Sarbanes-Oxley Act of 2002
* 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.
*** Incorporated herein by reference into this document from the September
30, 1999 FFLC Bancorp, Inc. Form 10-Q filed November 3, 1999.
(b) There were no reports on Form 8-K filed during the three months ended
June 30, 2002.
23
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: August 6, 2002 By: /s/ Stephen T. Kurtz
-------------- -------------------------------------------------
Stephen T. Kurtz, President and Chief Executive
Officer
Date: August 6, 2002 By: /s/ Paul K. Mueller
-------------- -------------------------------------------------
Paul K. Mueller, Executive Vice President and
Treasurer
24