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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, 2004
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 |_|
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12B-2 of the Exchange Act): 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:
5,405,179 shares outstanding at
Common stock, par value $.01 per share July 20, 2004
- -------------------------------------- -------------------------------
CONFORMED COPY
FFLC BANCORP, INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
----
Condensed Consolidated Balance Sheets -
at June 30, 2004 (Unaudited) and at December 31, 2003...................2
Condensed Consolidated Statements of Income (Unaudited) -
Three and Six months ended June 30, 2004 and 2003.......................3
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited) - Six months ended June 30, 2004 and 2003.................4-5
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Six months ended June 30, 2004 and 2003...............................6-7
Notes to Condensed Consolidated Financial Statements (Unaudited).......8-13
Review by Independent Registered Public Accounting Firm..................14
Report of Independent Registered Public Accounting Firm..................15
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................16-23
Item 3. Quantative and Qualitative Disclosures About Market Risk..........24
Item 4. Controls and Procedures...........................................24
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................25
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of
Equity Securities........................................................25
Item 3. Default upon Senior Securities....................................25
Item 4. Submission of Matters to a Vote of Security Holders...............26
Item 5. Other Information.................................................27
Item 6. Exhibits and Reports on Form 8-K..................................27
SIGNATURES....................................................................28
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,
2004 2003
---- ----
Assets (unaudited)
Cash and due from banks $ 36,129 35,072
Interest-earning deposits 17,160 27,088
----------- --------
Cash and cash equivalents 53,289 62,160
Securities available for sale 73,126 82,137
Loans, net of allowance for loan losses of $5,891 in 2004
and $5,490 in 2003 842,423 767,987
Accrued interest receivable 3,759 3,849
Premises and equipment, net 22,879 21,448
Foreclosed assets 1,151 881
Federal Home Loan Bank stock, at cost 7,650 6,900
Deferred income taxes 1,340 1,134
Other assets 5,378 1,418
----------- --------
Total $ 1,010,995 947,914
=========== ========
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits 39,953 31,481
NOW and money-market accounts 180,025 161,527
Savings accounts 28,344 26,636
Certificates 491,925 485,945
----------- --------
Total deposits 740,247 705,589
Advances from Federal Home Loan Bank 153,000 133,000
Other borrowed funds 17,242 17,786
Junior subordinated debentures 5,155 5,155
Accrued expenses and other liabilities 14,862 9,028
----------- --------
Total liabilities 930,506 870,558
----------- --------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none outstanding -- --
Common stock, $.01 par value, 15,000,000 shares authorized,
6,398,202 in 2004 and 6,397,202 in 2003 shares issued 64 64
Additional paid-in-capital 32,160 31,837
Retained income 68,346 65,071
Accumulated other comprehensive income (loss) (118) 297
Treasury stock, at cost (1,002,023 shares in 2004 and
1,000,048 shares in 2003) (19,963) (19,913)
----------- --------
Total stockholders' equity 80,489 77,356
----------- --------
Total $ 1,010,995 947,914
=========== ========
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,
------------------ -------------------
2004 2003 2004 2003
---- ---- ---- ----
Interest income:
Loans $ 12,704 12,590 25,196 25,312
Securities 566 537 1,169 1,125
Other 119 202 244 469
---------- --------- --------- ---------
Total interest income 13,389 13,329 26,609 26,906
---------- --------- --------- ---------
Interest expense:
Deposits 3,697 4,230 7,433 8,645
Borrowed funds 1,973 2,087 3,907 4,214
---------- --------- --------- ---------
Total interest expense 5,670 6,317 11,340 12,859
---------- --------- --------- ---------
Net interest income 7,719 7,012 15,269 14,047
Provision for loan losses 394 388 733 794
---------- --------- --------- ---------
Net interest income after provision
for loan losses 7,325 6,624 14,536 13,253
---------- --------- --------- ---------
Noninterest income:
Deposit account fees 356 255 615 486
Other service charges and fees 565 702 1,015 1,286
Net gain on sales of loans held for sale 130 359 280 630
Other 191 116 310 313
---------- --------- --------- ---------
Total noninterest income 1,242 1,432 2,220 2,715
---------- --------- --------- ---------
Noninterest expense:
Salaries and employee benefits 2,648 2,500 5,308 4,946
Occupancy expense 718 702 1,420 1,350
Data processing expense 389 280 780 553
Advertising and promotion 189 116 353 253
Professional services 138 120 270 223
Other 592 545 1,110 1,060
---------- --------- --------- ---------
Total noninterest expense 4,674 4,263 9,241 8,385
---------- --------- --------- ---------
Income before income taxes 3,893 3,793 7,515 7,583
Income taxes 1,479 1,427 2,837 2,863
---------- --------- --------- ---------
Net income $ 2,414 2,366 4,678 4,720
========== ========= ========= =========
Basic income per share $ .45 .44 .87 .88
========== ========= ========= =========
Weighted-average number of shares outstanding
for basic 5,396,185 5.385.407 5,395,344 5,380,428
========== ========= ========= =========
Diluted income per share $ .44 .43 .85 .86
========== ========= ========= =========
Weighted-average number of shares outstanding
for diluted 5,482,649 5,483,407 5,484,720 5,480,746
========== ========= ========= =========
Dividends per share $ .13 .10 .26 .20
========== ========= ========= =========
See accompanying Notes to Condensed Consolidated Financial Statements
3
FFLC BANCORP, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Six Months Ended June 30, 2004 and 2003
($ in thousands)
Common Stock Accumulated
------------------- Additional Other Total
Number of Paid-In Treasury Retained Comprehensive Stockholders'
Shares Amount Capital Stock Income Income Equity
--------- ------ ---------- -------- -------- ------------- -------------
Balance at December 31, 2002 4,574,944 $46 31,638 (19,667) 58,409 636 71,062
-------
Comprehensive income:
Net income (unaudited) -- -- -- -- 4,720 -- 4,720
Change in unrealized gains on securities
available for sale, net of income tax
benefit of $51 (unaudited) -- -- -- -- -- (86) (86)
Change in unrealized loss on derivative
instrument, net of income tax
benefit of $41 (unaudited) -- -- -- -- -- (66) (66)
-------
Comprehensive income (unaudited) 4,568
-------
Net proceeds from the issuance of common
stock, stock options exercised
(unaudited) 25,890 -- 174 -- -- -- 174
Dividends paid (unaudited) -- -- -- -- (1,084) -- (1,084)
Purchase of treasury stock, 8,379 shares
(unaudited) -- -- -- (247) -- -- (247)
Three-for-two stock split (unaudited) 1,792,269 18 (18) -- -- -- --
--------- --- ------- ------- ------- ---- -------
Balance at June 30, 2003 (unaudited) 6,393,103 $64 31,794 (19,914) 62,045 484 74,473
========= === ======= ======= ======= ==== =======
(continued)
4
FFLC BANCORP, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited), Continued
Six Months Ended June 30, 2004 and 2003
($ in thousands)
Common Stock Accumulated
-------------------- Additional Other Total
Number of Paid-In Treasury Retained Comprehensive Stockholders'
Shares Amount Capital Stock Income Income (Loss) Equity
--------- ------ ---------- -------- -------- ------------- -------------
Balance at December 31, 2003 6,397,202 $64 31,837 (19,913) 65,071 297 77,356
-------
Comprehensive income:
Net income (unaudited) -- -- -- -- 4,678 -- 4,678
Change in unrealized gains on securities
available for sale, net of income tax
benefit of $295 (unaudited) -- -- -- -- -- (488) (488)
Change in unrealized loss on derivative
instrument, net of income taxes
of $44 (unaudited) -- -- -- -- -- 73 73
-------
Comprehensive income (unaudited) 4,263
-------
Net proceeds from the issuance of common
stock, stock options exercised
(unaudited) 1,000 -- 17 -- -- -- 17
Tax benefit from stock compensation plans -- -- 306 -- -- -- 306
Dividends paid (unaudited) -- -- -- -- (1,403) -- (1,403)
Purchase of treasury stock, 1,975 shares
(unaudited) -- -- -- (50) -- -- (50)
--------- --- ------ ------- ------- ---- -------
Balance at June 30, 2004 (unaudited) 6,398,202 $64 32,160 (19,963) 68,346 (118) 80,489
========= === ====== ======= ======= ==== =======
See accompanying Notes to Condensed Consolidated Financial Statements.
5
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Six Months Ended
June 30,
-------------------
2004 2003
---- ----
Cash flows from operating activities:
Net income $ 4,678 4,720
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 733 794
Depreciation and amortization 663 632
Deferred income taxes 45 (282)
Net amortization of premiums and discounts on securities 244 559
Net amortization of deferred loan fees and costs 66 147
Net gain on sales of loans held for sale (280) (630)
Loans originated for sale (11,222) (41,851)
Proceeds from sales of loans held for sale 16,757 42,412
Tax benefit from stock compensation plans 306 --
Decrease in accrued interest receivable 90 335
(Increase) decrease in other assets (3,926) 65
Increase in accrued expenses and other liabilities 5,917 2,612
--------- --------
Net cash provided by operating activities 14,071 9,513
--------- --------
Cash flows from investing activities:
Proceeds from principal repayments and maturities on securities available for sale 12,218 13,748
Purchase of securities available for sale (4,234) (19,650)
Loan disbursements (150,225) (127,297)
Principal repayments on loans 68,666 117,889
Purchase of premises and equipment, net (2,094) (1,671)
(Purchase) redemption of Federal Home Loan Bank stock (750) 800
Net proceeds from sales of foreclosed assets 799 645
--------- --------
Net cash used in investing activities (75,620) (15,536)
--------- --------
Cash flows from financing activities:
Net increase in deposits 34,658 13,999
Net increase (decrease) in advances from Federal Home Loan Bank 20,000 (16,000)
Net (decrease) increase in other borrowed funds (544) 2,984
Issuance of common stock 17 174
Purchase of treasury stock (50) (247)
Cash dividends paid (1,403) (1,084)
--------- --------
Net cash provided by (used in) financing activities 52,678 (174)
--------- --------
Net decrease in cash and cash equivalents (8,871) (6,197)
Cash and cash equivalents at beginning of period 62,160 69,394
--------- --------
Cash and cash equivalents at end of period $ 53,289 63,197
========= ========
(continued)
6
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited), Continued
(In thousands)
Six Months Ended
June 30,
---------------------
2004 2003
---- ----
Supplemental disclosures of cash flow information-
Cash paid during the period for:
Interest $ 11,279 12,900
=========== ===========
Income taxes $ 2,798 3,383
=========== ===========
Noncash investing and financing activities:
Accumulated other comprehensive income:
Net change in unrealized gain on securities available for sale, net of tax $ (488) (86)
=========== ===========
Net change in unrealized loss on derivative instrument, net of tax $ 73 (66)
=========== ===========
Transfer from loans to foreclosed assets $ 1,069 873
=========== ===========
Loans originated on sales of foreclosed assets $ -- 136
=========== ===========
Loans funded by and sold to correspondent $ 3,068 7,633
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements.
7
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, 2004 and the results of operations for the three- and six-month
periods ended June 30, 2004 and 2003 and cash flows for the six-month
periods ended June 30, 2004 and 2003. The results of operations for the
three-and six-month periods ended June 30, 2004, are not necessarily
indicative of results that may be expected for the year ending December
31, 2004.
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. First Alliance Title, LLC ceased
operations in November 2003.
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, 2004 At December 31, 2003
-------------------- --------------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
First mortgage loans secured by:
One-to-four-family residential * $407,387 46.44% $384,514 48.22%
Construction and land 65,699 7.49 43,575 5.47
Multi-family units 14,032 1.60 12,453 1.56
Commercial real estate, churches and other 187,598 21.39 167,381 20.99
-------- -------- -------- --------
Total first mortgage loans 674,716 76.92 607,923 76.24
Consumer loans 165,916 18.91 155,438 19.50
Commercial loans 36,608 4.17 33,990 4.26
-------- -------- -------- --------
Total loans (1) 877,240 100.00% 797,351 100.00%
======== ========
Undisbursed portion of loans in process (29,830) (24,573)
Net deferred loan costs 904 699
Allowance for loan losses (2) (5,891) (5,490)
-------- --------
Loans, net $842,423 $767,987
======== ========
* Includes $10.3 million and $15.6 million of loans classified as held for
sale at June 30, 2004 and December 31, 2003, respectively.
(1) Total loans outstanding by department consisted of the following ($ in
thousands):
At
------------------
June 30, 2004 December 31, 2003
------------------ -----------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
Residential $ 399,506 45.54% $ 372,551 46.72%
Commercial 307,461 35.05 265,655 33.32
Consumer 170,273 19.41 159,145 19.96
--------- ------ --------- ------
$ 877,240 100.00% $ 797,351 100.00%
========= ====== ========= ======
(continued)
8
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
2. Loans, Continued.
(2) Total allowance for loan losses by department consisted of the following
($ in thousands):
At
-------------------
June 30, 2004 December 31, 2003
------------------- -------------------
% to % to
Gross Gross
Amount Loans Amount Loans
------ ----- ------ -----
Residential $ 820 .21% $ 911 .24%
Commercial 3,740 1.22 3,371 1.27
Consumer 1,331 .78 1,208 .76
------ ------
$5,891 .67% $5,490 .69%
====== ====== ====== ======
Total gross loans originated by department, including unfunded
construction and line of credit loans, consisted of the following (in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
---- ---- ---- ----
Residential $ 51,012 51,578 88,425 96,591
Commercial 43,141 27,038 81,107 52,936
Consumer 34,007 26,274 60,638 47,247
-------- ------- ------- -------
$128,160 104,890 230,170 196,774
======== ======= ======= =======
3. Loan Impairment and Loan Losses. The Company also prepares a quarterly
review of the adequacy of the allowance for loan losses to identify and
value impaired loans in accordance with the guidance in 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,
------------------ ----------------
2004 2003 2004 2003
---- ---- ---- ----
Beginning balance $ 5,646 5,311 5,490 5,181
Provision for loan losses 394 388 733 794
Net loans charged-off (149) (273) (332) (549)
------- ------ ------ ------
Ending balance $ 5,891 5,426 5,891 5,426
======= ====== ====== ======
(continued)
9
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
3. Loan Impairment and Loan Losses, Continued. The following summarizes the
amount of impaired loans, all of which were collateral dependent (in
thousands):
At
-----------------------
June 30, December 31,
-------- ------------
2004 2003
---- ----
Loans identified as impaired:
Gross loans with no related allowance for losses $ 2,992 2,971
Gross loans with related allowance for losses recorded 400 400
Less: Allowances on these loans (50) (50)
------- ------
Net investment in impaired loans $ 3,342 3,321
======= ======
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,
------------------ ----------------
2004 2003 2004 2003
---- ---- ---- ----
Average net investment in impaired loans $3,335 594 3,332 518
====== === ===== ===
Interest income recognized on impaired loans $ 6 7 12 9
====== === ===== ===
Interest income received on impaired loans $ 6 7 12 9
====== === ===== ===
Nonaccrual and accruing loans past due ninety days or more were as follows
(in thousands):
At
------------------------
June 30, December 31,
-------- ------------
2004 2003
---- ----
Nonaccrual loans $5,651 5,287
Accruing loans past due ninety days or more -- --
------ -----
Total $5,651 5,287
====== =====
(continued)
10
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 Retention and Recognition Plan ("RRP") 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. All per share amounts reflect the three-for-two
stock split declared on February 14, 2003. The following table presents
the calculation of basic and diluted income per share of common stock for
the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
---- ---- ---- ----
Weighted-average shares of common stock issued and
outstanding before adjustments for RRP and
common stock options 5,397,695 5,389,510 5,397,501 5,384,531
Adjustment to reflect the effect of unallocated
RRP average shares (1,510) (4,103) (2,157) (4,103)
---------- ---------- ---------- ----------
Weighted-average shares for basic income per share 5,396,185 5,385,407 5,395,344 5,380,428
========== ========== ========== ==========
Basic income per share $ .45 .44 .87 .88
========== ========== ========== ==========
Total weighted-average common shares and
equivalents outstanding for basic income per
share computation 5,396,185 5,385,407 5,395,344 5,380,428
Additional dilutive shares using the average market
value for the period utilizing the treasury stock
method regarding stock options 86,464 98,000 89,376 100,318
---------- ---------- ---------- ----------
Weighted-average common shares and equivalents
outstanding for diluted income per share 5,482,649 5,483,407 5,484,720 5,480,746
========== ========== ========== ==========
Diluted income per share $ .44 .43 .85 .86
========== ========== ========== ==========
5. Stock Split. On February 14, 2003, the Board of Directors declared a
three-for-two stock split in the nature of a dividend on the common shares
outstanding on February 28, 2003, which was distributed on March 14, 2003.
In lieu of fractional shares resulting from the split, stockholders
received cash based on the closing price on the record date.
(continued)
11
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
6. Stock Option Plans. During 2002, the Company adopted a new stock option
plan (the "2002 Plan") which authorizes the Company to issue up to 375,000
shares (adjusted) in connection with options granted to directors,
officers or employees of the Company. The terms and vesting periods will
be determined as each option is granted, but the option price cannot be
less than the then current market value of the common stock at the grant
date. At June 30, 2004, 367,447 options remain available for future grants
under the 2002 Plan.
The Company also has a 1993 stock option plan (the "1993 Plan") under
which common shares are authorized to be issued in connection with options
granted to directors, officers and employees of the Company. Options
granted under the 1993 Plan are exercisable at the market price of the
common stock at the date of grant. Such incentive stock options granted to
officers and employees are exercisable in three equal annual installments,
with the first installment becoming exercisable one year from the date of
grant. Options granted to outside directors are exercisable immediately,
but any common shares obtained from exercise of the options may not be
sold prior to one year from the date of grant. All options expire at the
earlier of ten years from the date of grant for officers and employees or
twenty years for directors or one year following the date which the
outside director, officer or employee ceases to serve in such capacity.
All authorized options under the 1993 Plan have been granted.
The following is a summary of stock option transactions during the
six-month periods ended June 30, 2004 and 2003 (all options and option
price per share information has been adjusted to reflect the three-for-two
stock split in 2003):
Weighted-
Average
Number Range of Exercise
of Options Exercise Prices Price
---------- --------------- --------
Outstanding, December 31, 2002 152,327 $ 4.00-14.17 6.61
Exercised (28,003) 4.00-11.75 5.50
-------
Outstanding, June 30, 2003 124,324 $ 4.00-14.17 6.97
======= ============ =====
Outstanding, December 31, 2003 170,796 $ 4.00-26.74 12.61
Granted 7,553 25.36 25.36
Exercised (1,000) 8.00-26.74 17.37
-------
Outstanding, June 30, 2004 177,349 $ 4.00-26.74 13.13
======= ============ =====
(continued)
12
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
6. Stock Option Plans, Continued Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, as amended by
SFAS No. 148, Accounting for Stock-Based Compensation Transition and
Disclosure (collectively, "SFAS 123") requires pro forma fair value
disclosures if the intrinsic value method is being utilized to value
stock-based compensation awards. For purposes of pro forma disclosure, the
estimated fair value of stock options granted is included in expense in
the period vesting occurs. The proforma information has been determined as
if the Company had accounted for its stock options under the fair value
method of SFAS No. 123. The Company accounts for the stock option plans
under the recognition and measurement principles of APB No. 25. No
stock-based employee compensation cost is reflected in net income during
the periods presented, as all stock options granted under the plans had an
exercise price equal to the market value of the underlying common stock on
the date of grant. The following table illustrates the effect on net
income and basic and diluted income per share as if the Company had
applied the fair value recognition provisions of SFAS No. 123 to
stock-based employee compensation ($ in thousands, except per share data):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
---- ---- ---- ----
Weighted-average grant-date fair value of stock
options issued during the period $ 42 N/A 42 N/A
========== ========== ========== ==========
Net income, as reported $ 2,414 2,366 4,678 4,720
Deduct: Total stock-based employee compensation
determined under the fair value based method
for all awards, net of related tax benefit (65) -- (104) --
---------- ---------- ---------- ----------
Proforma net income $ 2,349 2,366 4,574 4,720
========== ========== ========== ==========
Basic income per share, as reported $ .45 .44 .87 .88
========== ========== ========== ==========
Proforma basic income per share $ .44 .44 .85 .88
========== ========== ========== ==========
Diluted income per share, as reported $ .44 .43 .85 .86
========== ========== ========== ==========
Proforma diluted income per share $ .43 .43 .83 .86
========== ========== ========== ==========
7. Reclassifications. Certain amounts in the 2003 condensed consolidated
financial statements have been reclassified to conform to the 2004
presentation.
13
FFLC BANCORP, INC.
Review by Independent Registered Public Accounting Firm
Hacker, Johnson & Smith PA, the Company's independent registered public
accounting firm, have made a limited review of the financial data as of June 30,
2004, and for the three- and six-month periods ended June 30, 2004 and 2003
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.
14
Report of Independent Registered Public Accounting Firm
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, 2004, the
related condensed consolidated statements of income for the three- and six-month
periods ended June 30, 2004 and 2003 and the related condensed consolidated
statements of changes in stockholders' equity and cash flows for the six-month
periods ended June 30, 2004 and 2003. These interim financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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 the standards of the Public Company Accounting Oversight Board, 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 accompanying interim financial statements for them to be
in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with auditing standards of the
Public Company Accounting Oversight Board, the consolidated balance sheet as of
December 31, 2003, 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 16, 2004 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, 2003, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/ Hacker, Johnson & Smith PA
HACKER, JOHNSON & SMITH PA
Orlando, Florida
July 9, 2004
15
FFLC BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
General
FFLC Bancorp, Inc., (the "Holding Company") is the holding company for
First Federal Savings Bank of Lake County (the "Bank") and the Bank's
wholly-owned subsidiary, Lake County Service Corporation ("LCSC")
(together, the "Company"). The Holding Company's other subsidiary, First
Alliance Title, LLC ceased operations in November 2003. 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
borrowings and principal repayments on loans and investments and funds
generated from operations in loans. Those loans are primarily loans
secured by first mortgages on one-to-four-family homes or commercial real
estate. The Bank also makes commercial and consumer loans and, to a lesser
extent, construction, land and multi-family mortgage loans. In addition,
the Bank holds investments permitted by federal laws and regulations
including securities issued by the U.S. Government and its agencies. The
Bank's revenues are derived principally from interest on its loan and
securities portfolios. The Bank is a member of the Federal Home Loan Bank
("FHLB") system and its deposits are insured up 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 sixteen full-service banking facilities in Lake, Sumter,
Citrus and Marion Counties, Florida. The Bank's sixteenth branch opened
during the second quarter of 2004 in Sumter County.
The Company's results of operations depend primarily on its 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.
16
FFLC BANCORP, INC.
Off-Balance Sheet Arrangements
The Company'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 and
advances from the Federal Home Loan Bank and other borrowed funds. 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.
To meet the financing needs of its customers, the Company is a party to
financial instruments with off-balance sheet risk in the normal course of
business. In the event of nonperformance by the other party to the
off-balance sheet financial instrument, the Company's exposure to credit
loss is the contractual amount of those instruments. The Company uses the
same credit policies in making commitments as it does for on-balance-sheet
instruments. A summary of the contractual amounts of the Company's
financial instruments with off-balance sheet risk at June 30, 2004 follows
(in thousands):
Commitments to extend credit $34,554
=======
Unused lines of credit $96,182
=======
Undisbursed portion of loans in process $29,830
=======
Standby letters of credit $ 3,111
=======
Capital Resources
The Company believes that it will have sufficient funds available to meet
its commitments. At June 30, 2004, certificates of deposit which were
scheduled to mature in one year or less totaled $275.5 million. Based on
past experience, management believes that a significant portion of those
funds will remain with the Company.
Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum
capital requirements can result in regulators initiating 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, 2004, the
Bank meets all capital adequacy requirements to which it is subject.
17
FFLC BANCORP, INC.
As of June 30, 2004, 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, 2004 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 8.29% $ 83,842
Less: investment in
nonincludable
subsidiary (4,451)
Add: unrealized loss on
securities available for sale 13
-----------
Tangible capital,
and ratio to adjusted
total assets 7.89% $ 79,404 1.5% $ 15,100
=========== ========
Tier 1 (core) capital, and
ratio to adjusted total
assets 7.89% $ 79,404 3.0% $ 30,200 5.0% $ 50,333
=========== ======== ========
Tier 1 capital, and ratio
to risk-weighted assets 11.07% 79,404 4.0% $ 28,690 6.0% $ 43,035
======== ========
Tier 2 capital (allowance for
loan losses) 5,787
-----------
Total risk-based capital,
and ratio to risk-
weighted assets 11.88% $ 85,191 8.0% $ 57,380 10.0% $ 71,726
=========== ======== ========
Total assets $ 1,011,095
===========
Adjusted total assets $ 1,006,652
===========
Risk-weighted assets $ 717,255
===========
18
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,
2004 2003 2003
---------- ------------ ----------
Average equity as a percentage
of average assets 8.11% 8.02% 7.86%
Total equity to total assets at end of period 7.96% 8.16% 8.07%
Return on average assets (1) .96% .98% 1.01%
Return on average equity (1) 11.80% 12.23% 12.87%
Noninterest expense to average assets (1) 1.89% 1.86% 1.80%
Nonperforming assets to total assets
at end of period .67% .65% .64%
Operating efficiency ratio (1) 52.84% 51.66% 50.02%
(1) Annualized for the six months ended June 30, 2004 and 2003.
At At At
June 30, December 31, June 30,
2004 2003 2003
-------- ------------ --------
Weighted-average interest rates:
Interest-earning assets:
Loans 6.19% 6.45% 6.74%
Securities 3.25% 3.24% 4.24%
Other interest-earning assets 2.05% 1.45% 1.76%
Total interest-earning assets 5.86% 5.96% 6.31%
Interest-bearing liabilities:
Interest-bearing deposits 2.04% 2.22% 2.57%
Borrowed funds 4.75% 4.93% 5.09%
Total interest-bearing liabilities 2.56% 2.70% 2.96%
Interest-rate spread 3.30% 3.26% 3.35%
Changes in Financial Condition
Total assets increased $63.1 million or 6.7%, from $947.9 million at December
31, 2003 to $1,011.0 million at June 30, 2004, primarily as a result of a $74.4
million increase in net loans. Deposits increased $34.7 million from $705.6
million at December 31, 2003 to $740.2 million at June 30, 2004 and advances
from the Federal Home Loan Bank increased $20.0 million to $153.0 million at
June 30, 2004 from $133.0 million at December 31, 2003. The $3.1 million net
increase in stockholders' equity during the six months ended June 30, 2004
resulted primarily from net income of $4.7 million less dividends paid of $1.4
million.
19
FFLC BANCORP, INC.
Results of Operations
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average costs; (iii) net interest/dividend income; (iv) interest-rate spread;
and (v) net interest margin. Yields and costs were derived by dividing
annualized income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. The average balance of loans includes loans
on which the Company has discontinued accruing interest. The yields and costs
include certain fees which are considered to constitute adjustments to yields.
Three Months Ended June 30,
-----------------------------------------------------------------------
2004 2003
-------------------------------- -------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
($ in thousands)
Interest-earning assets:
Loans $ 815,700 12,704 6.23% $ 745,201 12,590 6.76%
Securities 83,070 566 2.73 85,725 537 2.51
Other interest-earning assets (1) 24,630 119 1.93 49,419 202 1.63
--------- --------- ---------- ---------
Total interest-earning assets 923,400 13,389 5.80 880,345 13,329 6.06
--------- ---------
Noninterest-earning assets 69,984 54,826
--------- ----------
Total assets $ 993,384 $ 935,171
========= ==========
Interest-bearing liabilities:
NOW and money-market accounts 170,293 166 .39 148,599 217 .58
Savings accounts 27,629 34 .49 25,835 40 .62
Certificates 504,136 3,497 2.77 487,400 3,973 3.26
Federal Home Loan Bank advances 138,989 1,853 5.33 141,582 1,963 5.55
Other borrowed funds (2) 21,966 120 2.19 21,226 124 2.34
--------- --------- ---------- ---------
Total interest-bearing liabilities 863,013 5,670 2.63 824,642 6,317 3.06
--------- ---------
Noninterest-bearing deposits 38,003 24,639
Noninterest-bearing liabilities 12,382 11,280
Stockholders' equity 79,986 74,610
--------- ----------
Total liabilities and
stockholders' equity $ 993,384 $ 935,171
========= ==========
Net interest income $ 7,719 $ 7,012
========= =========
Interest-rate spread (3) 3.17% 3.00%
==== ====
Net interest-earning assets,
net margin (4) $ 60,387 3.34% $ 55,703 3.19%
========= ==== ========== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.07 1.07
==== ====
(1) Includes interest-earnings deposits and Federal Home Loan Bank stock.
(2) Includes other borrowed funds and junior subordinated debentures.
(3) Interest-rate spread represents the difference between the average yield
on interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net margin is annualized net interest income divided by average
interest-earning assets.
20
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,
-----------------------------------------------------------------------
2004 2003
-------------------------------- -------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
($ in thousands)
Interest-earning assets:
Loans $ 800,322 25,196 6.30% $ 739,305 25,312 6.85%
Securities 84,557 1,169 2.76 83,188 1,125 2.70
Other interest-earning assets (1) 25,870 244 1.89 57,915 469 1.62
--------- --------- ---------- ---------
Total interest-earning assets 910,749 26,609 5.84 880,408 26,906 6.11
--------- ---------
Noninterest-earning assets 66,668 52,791
--------- ----------
Total assets $ 977,417 $ 933,199
========= ==========
Interest-bearing liabilities:
NOW and money-market accounts 171,723 331 .39 146,099 454 .62
Savings accounts 27,176 70 .52 25,781 81 .63
Certificates 496,212 7,032 2.83 488,355 8,110 3.32
Federal Home Loan Bank advances 135,994 3,667 5.39 145,271 3,965 5.46
Other borrowed funds (2) 22,307 240 2.15 20,697 249 2.41
--------- --------- ---------- ---------
Total interest-bearing liabilities 853,412 11,340 2.66 826,203 12,859 3.11
--------- ---------
Noninterest-bearing deposits 33,954 22,926
Noninterest-bearing liabilities 10,759 10,747
Stockholders' equity 79,292 73,323
--------- ----------
Total liabilities and stockholders' equity $ 977,417 $ 933,199
========= ==========
Net interest income $ 15,269 $ 14,047
========= =========
Interest-rate spread (3) 3.18% 3.00%
==== ====
Net interest-earning assets,
net margin (4) $ 57,337 3.35% $ 54,205 3.19%
========= ==== ========== ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.07 1.07
==== ====
(1) Includes interest-earnings deposits and Federal Home Loan Bank stock.
(2) Includes other borrowed funds and junior subordinated debentures.
(3) Interest-rate spread represents the difference between the average yield
on interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net margin is annualized net interest income divided by average
interest-earning assets.
21
FFLC BANCORP, INC.
Comparison of the Three-Month Periods Ended June 30, 2004 and 2003
General Operating Results. Net income for the three-month period ended June 30,
2004 was $2.4 million, or $.45 per basic share and $.44 per diluted share,
compared to $2.4 million, or $.44 per basic share and $.43 per diluted
share, for the comparable period in 2003. All per share information has been
adjusted to reflect the three-for-two stock split in 2003. The increase in
net income was primarily a result of an increase in net interest income,
partially offset by a decrease in noninterest income and an increase in
noninterest expense.
Interest Income. Interest income increased $60,000 to $13.4 million for the
three-month period ended June 30, 2003. The increase was due to a $43.1
million or 4.9% increase in average interest-earning assets outstanding for
the three months ended June 30, 2004 compared to the 2003 period, partially
offset by a decrease in the average yield earned on interest-earning assets
from 6.06% for the three months ended June 30, 2003 to 5.80% for the three
months ended June 30, 2004.
Interest Expense. Interest expense decreased $647,000 or 10.2%, from $6.3
million for the three-month period ended June 30, 2003 to $5.7 million for
the three-month period ended June 30, 2004. The decrease was primarily due
to a decrease in the average cost of interest-bearing liabilities from 3.06%
for the three months ended June 30, 2003 to 2.63% for the comparable 2004
period, partially offset by an increase of $38.4 million in average
interest-bearing liabilities outstanding. Average interest-bearing deposits
increased $40.2 million from $661.8 million outstanding during the three
months ended June 30, 2003 to $702.1 million outstanding during the
comparable period for 2004. Average borrowings decreased $1.9 million from
$162.8 million during the three months ended June 30, 2003 to $161.0 million
for the comparable 2004 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. It
is based upon the volume and type of lending conducted by the Company, the
Company's 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, 2004
and 2003 of $394,000 and $388,000, respectively. Net loans charged off for
the three-month periods ended June 30, 2004 and 2003 were $149,000 and
$273,000, respectively. Management believes that the allowance for loan
losses, which was $5.9 million or .67% of gross loans at June 30, 2004, is
adequate.
Noninterest Income. Noninterest income decreased $190,000 or 13.3% from $1.4
million during the 2003 period to $1.2 million during the 2004 period. The
decrease was partly due to a $229,000 decrease from period to period in gain
on sales of loans held for sale. The Company originated $8.2 million of
loans held for sale during the three months ended June 30, 2004 compared to
$25.9 million during the comparable 2003 period. This decrease in
originations and sales resulted from a general slow down in secondary market
activity with the recent increase in interest rates.
Noninterest Expense. Noninterest expense increased by $411,000 or 9.6% from $4.3
million for the three-month period ended June 30, 2003 to $4.7 million for
the three-month period ended June 30, 2004. The increase was primarily due
to increases of $148,000 in salaries and employee benefits and $109,000 in
data processing expense related to the overall growth of the Company.
Income Taxes. Income taxes increased from $1.4 million for the three-month
period ended June 30, 2003 (an effective tax rate of 37.6%) to $1.5 million
(an effective tax rate of 38.0%) for the corresponding period in 2004.
22
FFLC BANCORP, INC.
Comparison of the Six-Month Periods Ended June 30, 2004 and 2003
General Operating Results. Net income for the six-month period ended June 30,
2004 was $4.7 million, or $.87 per basic share and $.85 per diluted share,
compared to $4.7 million, or $.88 per basic share and $.86 per diluted
share, for the comparable period in 2003. All per share information has been
adjusted to reflect the three-for-two stock split in 2003. The decrease in
net income was primarily a result of a decrease in noninterest income and an
increase in noninterest expense, partially offset by an increase in net
interest income.
Interest Income. Interest income decreased $297,000 to $26.6 million for the
six-month period ended June 30, 2004. The decrease was due to a decrease in
the average yield earned on interest-earning assets from 6.11% for the six
months ended June 30, 2003 to 5.84% for the six months ended June 30, 2004,
partially offset by a $30.3 million or 3.4% increase in average
interest-earning assets outstanding for the six months ended June 30, 2004
compared to the 2003 period.
Interest Expense. Interest expense decreased $1.5 million or 11.8%, from $12.9
million for the six-month period ended June 30, 2003 to $11.3 million for
the six-month period ended June 30, 2004. The decrease was primarily due to
a decrease in the average cost of interest-bearing liabilities from 3.11%
for the six months ended June 30, 2003 to 2.66% for the comparable 2004
period, partially offset by an increase of $27.2 million in average
interest-bearing liabilities outstanding. Average interest-bearing deposits
increased $34.9 million from $660.2 million outstanding during the six
months ended June 30, 2003 to $695.1 million outstanding during the
comparable period for 2004. Average borrowings decreased $7.7 million from
$166.0 million during the six months ended June 30, 2003 to $158.3 million
for the comparable 2004 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. It
is based upon the volume and type of lending conducted by the Company, the
Company's 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, 2004 and
2003 of $733,000 and $794,000, respectively. Net loans charged off for the
six-month periods ended June 30, 2004 and 2003 were $332,000 and $549,000,
respectively. Management believes that the allowance for loan losses, which
was $5.9 million or .67% of gross loans at June 30, 2004, is adequate.
Noninterest Income. Noninterest income decreased $495,000 or 18.2% from $2.7
million during the 2003 period to $2.2 million during the 2004 period. The
decrease was mainly due to a $350,000 decrease from period to period in gain
on sales of loans held for sale. The Company originated $16.8 million of
loans held for sale during the six months ended June 30, 2004 compared to
$42.4 million during the same period for 2003. This decrease in originations
and sales resulted from a general slow down in secondary market activity as
interest rates began to rise in 2004.
Noninterest Expense. Noninterest expense increased by $856,000 or 10.2% from
$8.4 million for the six-month period ended June 30, 2003 to $9.2 million
for the six-month period ended June 30, 2004. The increase was primarily due
to increases of $362,000 in salaries and employee benefits and $227,000 in
data processing expense related to the overall growth of the Company.
Income Taxes. Income taxes decreased from $2.9 million for the six-month period
ended June 30, 2003 (an effective tax rate of 37.8%) to $2.8 million (an
effective tax rate of 37.8%) for the corresponding period in 2004.
23
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.
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, 2003. The Company does not believe
that the interest rate swap entered into in September 2002 exposes the
Company to significant interest rate risk.
Item 4. Controls and Procedures
a. Evaluation of disclosure controls and procedures. The Company
maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company
files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange
Commission. Based upon their evaluation of those controls and
procedures performed within 90 days of the filing date of this
report, the Chief Executive and Chief Financial officers of the
Company concluded that the Company's disclosure controls and
procedures were adequate.
b. Changes in internal controls. The Company made no significant
changes in its internal controls or in other factors that could
significantly affect these controls subsequent to the date of the
evaluation of those controls by the Chief Executive and Chief
Financial officers.
24
FFLC BANCORP, INC.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceeding to which FFLC Bancorp, Inc.
or any of its subsidiaries is a party or to which any of their property is
subject.
Item 2. Changes in Securities and Use of Proceeds
Common Stock. The following table shows information relating to the repurchase
of shares of its common stock by the Holding Company during the three
months ended June 30, 2004:
Total Number Maximum
of Shares Number
Purchased as of Shares
Part of Publicly that May Yet Be
Total Number Average Announced Purchased Under
of Shares Price Paid Plans or the Plans or
Purchased Per Share Programs Programs
------------ ---------- ---------------- ---------------
April -- $ -- -- 232,573
May -- -- -- 232,573
June 1,875 25.00 1,875 230,698
------- -------
Total 1,875 $ 25.00 1,875 230,698
======= ======= ======= =======
Junior Subordinated Debentures. The Holding Company has the right at one or more
times, unless an event of default exists under the floating rate junior
subordinated deferrable interest debentures due September 26, 2032 (the
"Debentures"), to defer interest payments on the Debentures for up to
twenty consecutive quarterly periods. During that time, the Holding
Company will be prohibited from declaring or paying cash dividends on its
common stock.
Item 3. Defaults upon Senior Securities
Not applicable
25
FFLC BANCORP, INC.
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 13, 2004, to consider: (i) the election of three
directors each for a term of three years and (ii) the ratification of the
appointment of the Company's independent auditors for the year ending
December 31, 2004. At the Annual Meeting, incumbent Directors Howard H.
Hewitt, H.D. Robuck, Jr., and Stephen T. Kurtz were reelected. The terms
of Directors Joseph J. Junod, Claron D. Wagner, Paul K. Mueller, James P.
Logan and Ted R. Ostrander, Jr. continued after the Annual Meeting.
At the Annual Meeting, 4,624,561 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:
Proposal I.
The election of three directors, each for a term of three years:
Abstentions
and Broker
For Against Nonvotes
--- ------- -----------
Howard H. Hewitt 4,591,322 33,239 --
========= ========= =========
H.D. Robuck, Jr 4,444,431 180,130 --
========= ========= =========
Stephen T. Kurtz 4,504,480 120,081 --
========= ========= =========
Proposal II:
To ratify the appointment of Hacker, Johnson & Smith PA as the Company's
independent auditors for the year ending December 31, 2004:
Abstentions
and Broker
For Against Nonvotes
--- ------- -----------
4,597,273 14,691 12,597
========= ========= =========
26
FFLC BANCORP, INC.
Item 5. Other Information
Not applicable
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 Amended 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**
31.1 Certification of Chief Executive Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act
31.2 Certification of Chief Financial Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to 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) The following Forms 8-K were filed during the three-month period
ended June 30, 2004:
On April 9, 2004, the Company filed a Form 8-K to disclose that the
Company had issued a press release to announce the Company's first
quarter earnings and declaration of a dividend.
On May 10, 2004, the Company filed a Form 8-K to disclose that the
Company had issued a press release to announce that the Company will
be participating in the 2004 America's Community Bankers' Community
Bank Investor Conference in New York City.
On May 14, 2004, the Company filed Form 8-K to disclose that the
Company had issued a press release to announce that a new Chairman,
Vice Chairman and Director had been elected for the Board of the
Company.
27
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 hereunto duly authorized.
Date: July 23, 2004
FFLC Bancorp, Inc.
By: /s/ Stephen T. Kurtz
-----------------------------------
Name: Stephen T. Kurtz, President and
Chief Executive Officer
By: /s/ Paul K. Mueller
-----------------------------------
Name: Paul K. Mueller, Executive Vice
President and Treasurer
28