Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Year Fiscal Ended December 31, 2000
Commission File Number 33 Act File No. -33-90524
VALRICO BANCORP, INC.
---------------------------------------------------
(Exact name of registrant as specified in its Charter)
Florida
---------------------------------------------------
(State or other jurisdiction of incorporation or organization)
65-0553757
---------------------------------------------------
(I.R.S. employer Identification No.)
1815 East State Road 60, Valrico, Florida 33594
---------------------------------------------------
(Address of Principal executive offices and zip code)
(813) 689-1231
---------------------------------------------------
(Registrant's telephone number, including area code)
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.
(1) Yes [X] (2) No [ ]
As of December 31, 2000, there were 304,324 shares of common stock outstanding.
2
REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders
of Valrico Bancorp, Inc. and Subsidiary
The audit referred to in our opinion dated February 15, 2001, on the financial
statements of Valrico Bancorp, Inc. and Subsidiary as of December 31, 2000 and
December 31, 1999, and for each of the three years in the period ended December
31, 2000, included examination of the related supplemental financial schedules
II and III, which, when considered in relation to the basic financial
statements, present fairly, in all material respects, the information shown
therein.
Rex Meighen & Company, LLP
Certified Public Accountants
Tampa, Florida
February 15, 2001
3
ITEM 1. BUSINESS
GENERAL
Valrico Bancorp, Inc. (the "Company") is a one-bank holding company which was a
newly-formed corporation on May 31, 1995 with its principal place of business in
Valrico, Florida. The Company subsequently acquired all of the outstanding
common stock of Valrico State Bank (the "Bank"), a wholly-owned subsidiary. All
shares held by the Bank's shareholders were exchanged on a one-to-one basis for
Valrico Bancorp, Inc. shares. The Company's common stock, no par value,
authorized 1,000,000 shares, had 304,324 issued and outstanding shares as of
December 31, 2000. The Company derives substantially all of its income from
dividends and lease from its subsidiary. The Bank and the Company share the same
board of directors, which is comprised of nine individuals. Those individuals
are LeVaughn Amerson, Jerry L. Ball, C. Dennis Carlton, H. Leroy English,
Gregory L. Henderson, Douglas A. Holmberg, Charles E. Jennings, Jr., J.E.
McLean, III, Justo Noriega, Jr..
SUBSIDIARY BANK
Valrico State Bank (the "Bank") was incorporated under the laws of the state of
Florida on August 29, 1988. The Bank was chartered as a Florida state bank
effective June 23, 1989 after receiving approval to organize from the Florida
Department of Banking and Finance (the "Florida Department"). The Bank commenced
operations on June 23, 1989. The Bank is supervised, regulated and regularly
examined by the Florida State Banking Department and the Federal Deposit
Insurance Corporation. The Bank is not currently a member of the Federal Reserve
Bank.
DESCRIPTION OF BUSINESS
The Company, through its subsidiary bank, conducts a general commercial banking
business from its main office located at 1815 East State Road 60, Valrico,
Florida 33594-3623 and its four branch facilities located at 102 West Robertson
Street, Brandon, Florida 33511, 305 South Wheeler Street, Plant City, Florida
33566, 2602 Jim Redman Parkway, Plant City, Florida 33566 and 10101 Bloomingdale
Ave, Riverview, Florida 33569. The Company's primary telephone number is (813)
689-1231. Valrico is a community located in the eastern portion of Hillsborough
County, Florida, and is approximately 14 miles east of Tampa, Florida, which is
located on the west coast of the state of Florida. While the Bank's overall
market area extends throughout Hillsborough County, it expects to draw most of
its business from eastern Hillsborough County (the Brandon/Valrico/Dover/Plant
City/Riverview area) and estimates that more than 75% of its business will come
from customers whose businesses or residences are located in an area within a
radius of approximately five miles of the Bank's principle offices (the "Bank's
Assessment Area"). The Company, through its subsidiary bank, intends for the
near future, to service (with few exceptions) only residents and businesses
located in Hillsborough County, but may choose to accept some business from
outside of Hillsborough County. The Bank received approval in January 1994 from
the Federal Deposit Insurance Corporation and the Florida Department of Banking
and Finance to open a branch located at 102 West Robertson Street, Brandon,
Florida 33511. Therefore, the Bank successfully opened its first branch on April
29, 1994, which is located approximately one and a half miles west of the main
office and located in our current community and assessment area. The location is
in the center of Brandon, extremely convenient to many businesses and
professional offices. The Bank, after receiving regulatory approval, opened its
second branch on September 15, 1995, in Plant City located at 305 South Wheeler
Street (corner of Renfro and Wheeler). The Bank purchased, from Barnett Bank, a
former Glendale Federal Bank branch, a free standing building with approximately
2,400 square feet including the land and furniture. This positioned the Bank to
better service the Plant City market in which the Bank was already servicing a
small customer base. The Bank, after receiving regulatory approval, opened its
third branch on June 23, 1997 as an in-store branch facility in the Wal-Mart
Supercenter on Jim Redman Parkway in Plant City, Florida. The Bank leases the
facilities at this site. The Bank, after receiving regulatory approval, opened
its fourth branch on January 22, 1999, in Riverview located at 10101
Bloomingdale Ave (corner of Bloomingdale and US 301). The Bank purchased, from
Nationsbank, a free standing building with approximately 6,000 square feet, the
purchased included the land surrounding the building.
The Company, through it subsidiary, conducts substantially the same business
operations as a typical independent commercial bank with special emphasis on
retail banking. The Bank offers a wide range of consumer and commercial banking
services traditionally offered by commercial banks, such as personal and
commercial checking accounts, regular negotiable order of withdrawal ("NOW")
accounts, certificates of deposits, money market accounts, savings accounts, IRA
accounts, foreign currency exchanges, credit cards, debit cards, money orders,
travelers' cheques, notary service, safe deposit boxes and wire transfers. It
also offers discounted brokerage services, profit sharing programs, 401(k)s and
other similar programs. These depository services are further complemented by
direct deposit programs, night depository services, and bank by mail. The Bank's
Main, Brandon and the new North Riverview offices lobby hours are from 9:00 a.m.
to 4:00 p.m., Mondays through Thursdays, 9:00 a.m. to 6:00 p.m. on Fridays, and
9:00 a.m. to 12:00 p.m. on Saturdays. The Bank also offers drive-up teller
facilities which are open from 8:00 a.m. to 6:00 p.m., Mondays through Fridays,
and 9:00 a.m. to 12:00 p.m. on Saturdays. The Wheeler Street branches have the
same office hours, except they have no Saturday lobby hours. The Jim Redman
Parkway branch offers extended hours of service from 10:00 a.m. to 8:00 p.m.
Monday through Saturday. The Bank does currently owns three automatic teller
machines (ATM) at the Jim Redman Parkway, Main, and North Riverview offices and
may purchase additional machines in the immediate future. It also offers ATM and
Mastermoney Debit cards to its customers which can be used at ATM
4
machines which are members of the Southeast Switch, which includes HONOR Network
(Florida and other southeastern states) and CIRRUS (a worldwide network).
The Bank originates a wide range of loans including, but not limited to,
commercial and consumer loans, as well as loans secured by deposit accounts and
other marketable collateral. As of December 31, 2000, commercial and consumer
loans accounted for approximately 60.8%and 14.1%, respectively, of the Bank's
loan portfolio. Loans are also made to enable borrowers to purchase, refinance,
construct or improve residential or other real estate and usually are secured by
mortgages on such real estate. As of December 31, 2000, residential real estate
mortgage loans accounted for approximately 6.4% of the Bank's loan portfolio. To
service the agricultural segment of the Bank's market area, the Bank employs an
agricultural lender. As of December 31, 2000, 18.7% of the total loan portfolio
was comprised of agricultural loans. All loans are made in compliance with
applicable Federal and state regulations.
The Bank uses a computer system to handle all accounting and statement
processing. In addition, the Bank makes extensive use of personal computers in
its teller and lobby locations, which allows for efficient handling and tracking
of new accounts, loans and other paper intensive services, and provides every
employee of the Bank access to complete customer profiles at all times. We have
recently upgraded many of our desktop systems in order to effectively utilize
many of the newer programs available today.
The Bank offers a complete brokerage service through a third party which permits
its customers to buy and sell stocks and bonds and otherwise trade in securities
at a discount with full accountability of their transactions. The Bank offers,
through third parties, standard and self-directed IRA, the new Roth and
Educational IRA, qualified pension plans, SEPs, Keogh and profit-sharing plans,
including 401(k) plans, etc.
Management of the Company believes that the emerging dominance of large regional
holding companies in the banking industry has created a need for more
locally-owned institutions with personalized banking services. The Bank was
organized as a locally-owned, locally-managed community financial institution,
owned and managed by people who are actively involved in the Bank's market area
and committed to its economic growth and development. With local ownership,
management and directors, the Bank believes it can be more responsive to the
community it serves and tailor services to its customers' needs rather than the
standardized services that large holding companies tend to offer. Local
ownership and operation will allow faster, more responsive and flexible
decision-making, which may not be available at the majority of financial
institutions in or near the Bank's Assessment Area which are branch offices of
large regional holding company banks with headquarters located elsewhere in
Florida or in the United States.
The principal business of the Bank is to attract deposits from the general
public, and to invest those funds in various types of loans and other
interest-earning assets. Funds provide for the operations of the Bank through
proceeds from the sale of investments and loans, from amortization and repayment
of outstanding loans, from borrowings, and from working capital. Earnings of the
Bank depend primarily upon the difference between (1) the interest and fees
received by the Bank from loans, the securities held in its investment
portfolio, and other investments, and (2) expenses incurred by the Bank in
connection with obtaining funds for lending (including interest paid on deposits
and other borrowings) and expenses relating to day-to-day operations.
The primary sources of the Bank's funds for lending and for other general
business purposes are the Bank's capital, deposits, loan repayments, borrowings
and funds provided from operations. The Bank expects that loan repayments and
funds provided from operations will be relatively stable sources of funds, while
deposit inflows and outflows will be significantly influenced by prevailing
interest rates, money market and general economic conditions. Generally,
short-term borrowings are used to compensate for reductions in normal sources of
funds while longer-term borrowings are used to support expanded lending
activities. The Bank's customers are primarily individuals, professionals, small
and medium size businesses, and citrus and agricultural enterprises located
predominantly in eastern and southern Hillsborough County, Florida. The Bank's
business is not dominated by a single customer or by a few customers. The loss
of any one or more would not have a materially adverse effect on the business of
the Bank. The Bank attempts to tailor its services to the needs of its customers
since there is a heavy emphasis on retail and service-oriented businesses in the
Company's market area. Moreover, the Bank's main office location is on a major
east-west artery in one of eastern Hillsborough County's faster growing areas in
terms of the number of new residents. The exposure provided by the site and the
population growth of the area are expected to contribute to the growth of the
Company.
The Bank continually seeks to develop new business through an ongoing program of
personal calls on both present and potential customers. As a local independent
bank, the Bank utilizes traditional local advertising media, as well as direct
mailings, telephone contacts, and brochures to promote the Bank and develop
loans and deposits. In addition, the Company's directors all have worked and/or
lived in or near eastern Hillsborough County for a number of years. The Bank
believes that this factor, coupled with the past and continued involvement of
the directors in various local community activities, will further promote its
image as a locally-oriented independent institution, which management believes
is an important factor to its targeted customer base.
5
The banking business in Florida in general, and in Hillsborough County in
particular, is highly competitive with respect to both loans and deposits. The
Bank competes with other commercial banks in Hillsborough County and the
surrounding area for all services customarily provided by commercial banks. In
addition, the Bank competes with savings and loan associations, finance
companies, insurance companies, money market mutual funds, credit unions, other
financial institutions and various other non-bank competitors. Many of these
competitors are larger and have greater resources, including more personnel and
a larger asset base, than the Bank and provide certain services, such as trust
services, which the Bank does not currently provide.
As of December 31, 2000, there were 14 commercial banks (including the Company's
subsidiary bank) with 32 offices and 1 savings and loan association with 4
offices; at least 10 credit unions; and various other financial entities as
competitors in the Bank's Assessment Area. The Company expects to receive
substantial competition from most of these financial institutions. The Bank's
main office is located on East State Road 60, a primary east-west artery in the
Bank's Assessment Area, and 800 feet west of Valrico Road, a primary north-south
artery in the Bank's Assessment Area. The Brandon branch facility is located in
the center of Brandon, the Plant City branch facility is located in the center
of Plant City, and the Jim Redman Parkway branch is located in the eastern
section of Plant City. The North Riverview Branch is located at the intersection
of US 301 and Bloomingdale Ave in the Riverview community. The Bank is one of
only four financial institutions which have their headquarters in eastern
Hillsborough County. The other financial institutions, being Sunshine State
Savings and Loan and Hillsboro Bank in Plant City, and Platinum Bank in Brandon.
All others are branches of institutions which have their headquarters in other
parts of Hillsborough County or elsewhere in Florida. Several actually are owned
by banks with headquarters in Georgia, Alabama, North Carolina, Ohio, and New
Jersey. The Bank's second branch was opened in 1995 in the Plant City market and
the Bank expanded in this market area with an in-store branch which opened on
June 23, 1997 within a Walmart Supercenter on Jim Redman Parkway. This location
is in a growing area and a very active shopping center with an estimated 50,000
plus customers per week. This Wal-Mart is one of their largest supercenters in
Florida. The bank expanded its market area with the opening of its fourth branch
on January 22, 1999 in Riverview area. In order to compete with major financial
institutions and others in the Bank's Assessment Area, the Bank will continue to
emphasize specialized services, local promotional activity and personal contacts
by the Bank's officers, directors and employees. The Bank believes that its
local ownership and community-oriented operating philosophy and personalized
banking services are competitive factors in which it has strength.
As of December 31, 2000, total deposits of the Bank were distributed among
demand deposits (17.4%), savings and time deposits (53.7%) and NOW and money
market deposits (28.9%). The Bank's deposits are attracted primarily from
individuals, professionals, small and medium size businesses and citrus and
agricultural enterprises located predominantly in eastern Hillsborough County,
Florida. As of December 31, 2000, approximately 20.6% of the Bank's total
deposits were from businesses and 79.4% were from individuals. Management of the
Bank has no reason to believe that the loss of any one or a few of its deposit
accounts would have a material adverse effect upon the operations of the Bank or
erode its deposit base.
The Company is regulated under both State and Federal law. The Company is
regulated by the Federal Reserve Bank of Atlanta and is subject to the rules and
regulations of the Securities and Exchange Commission. The Company's subsidiary
bank is not a member of the Federal Reserve System, but is subject to the rules
and regulations of the Federal Deposit Insurance Corporation ("FDIC") which
agency also insures the Bank's deposits up to applicable limits. As a
state-chartered bank, the Bank is subject to the regulations of the Florida
Department. The Bank will be subject to periodic examinations by both the FDIC
and the Florida Department focusing on fund reserves, loans and loan policy,
investments, management policy and practices, and various other aspects of the
Bank's operations.
Neither the Company nor its subsidiary hold any patents, registered trademarks,
licenses (other than licenses which have been obtained from appropriate banking
regulatory agencies), franchises or concessions.
Prior to the organization of the Bank, the organizers of the Bank conducted
economic and other surveys to evaluate the banking needs for the community of
Valrico and its immediate environs. The results of those surveys were used to
support the application to the Florida Department for permission to organize the
Bank and the application to the FDIC for insurance of the Bank's accounts. Since
it commenced operations, officers of the Bank have engaged continually in
marketing activities, including the evaluation of development of new services,
to enable the Bank to improve its competitive position in the Bank's Assessment
Area. The cost to the Bank for these marketing activities cannot be calculated
with any degree of certainty. In the fourth quarter of 1993, the Bank gathered
and reviewed new economic data for the purpose of supporting an application to
the Florida Department for permission to open a full service branch facility in
Brandon, Florida, and performed similar research in the summer of 1995 to
support an application to the Florida Department for permission to open a full
service branch in Plant City, Florida. The cost of collecting and evaluating
this information likewise cannot be determined with any degree of certainty, as
most of the information was collected from public sources and other sources
already utilized by the Company for its day-to-day evaluations. In the
6
fourth quarter of 1996, the Bank reviewed data submitted by International
Banking Technologies for the purpose of supporting the application for the
in-store branch in Plant City. In the fourth quarter of 1998, the Bank gathered
and reviewed new economic data for the purpose of supporting an application to
the Florida Department for permission to open a full service branch facility in
Riverview, Florida.
As of December 31, 2000, the Bank employed 46 full-time employees, of which two
were executive officers, and 16 part-time employees, of which one is a bank
officer. The Bank's employees are not represented by a collective bargaining
group, and the Bank considers its relations with its employees to be excellent.
The Bank also maintains training and educational programs designed to equip
employees for positions of increasing responsibility in both management and
operating positions. The Bank provides employees certain benefits customary in
the banking industry, which includes major medical insurance, group term life
insurance and normal vacation and sick leave. The Bank implemented a K-SOP plan
in 1997.
As of December 31, 2000, the Bank has been in operation for eleven and one-half
years. Management believes that there is some seasonality in its deposit base
due primarily to its agricultural relationships. The seasonality in these
deposits, however, has not been substantial to impact the core base of deposits,
therefore, management does not believe its deposit relationship is affected. In
its lending portfolio, the Bank sees a greater affect on this seasonal business
during the period from September to May reflecting larger outstandings in the
agricultural portfolio.
ITEM 2. PROPERTIES
The Company, through its subsidiary, has a principal office located at 1815 East
State Road 60 in Valrico, Florida, in a traditional, southern, Greek
neo-classical two-story building with 9,860 square feet. The Brandon office,
located at 102 West Robertson Street in Brandon, Florida, is in a leased 3,000
square foot end unit in a retail plaza at a major intersection in the center of
Brandon. The Plant City office is located at 305 South Wheeler Street in
facilities purchased in July 1995. The Jim Redman office, located at 2606 Jim
Redman Parkway, is in a leased 507 square foot unit located within the Wal-Mart
Supercenter in Plant City. The North Riverview Office, located at the
intersection of US 301 and Bloomingdale Avenue in Riverview was purchased in
October of 1998.
In January, 1997, the premises, previously leased from Roy J. and Ann M. Winter,
were purchased by Valrico Bancorp, Inc. for approximately $1,683,000. The annual
lease payments from the Bank to the Company is $204,000.
The Bank leases its Brandon branch office space pursuant to an agreement dated
March 31, 1994 (the "Lease") with J. "Bill" Noriega, Jr. (the "Lessor"). Mr.
Noriega currently serves as a director of the Bank. This lease expired March 31,
2000 and was renewed with a new expiration date of March 31, 2003 at an annual
rental of $42,000. The Bank has the option to renew the lease for three
additional three-year terms at rentals to be negotiated at the time of the
renewal.
The Company, through its subsidiary, purchased from Barnett Bank, a former
Glendale Federal Bank branch with approximately 2,400 square feet. The purchase
included building and land located at 305 South Wheeler Street (corner of Renfro
and Wheeler). On September 15, 1995, the Bank opened its second branch at this
location.
The Bank leases its Jim Redman Parkway branch office space pursuant to an
agreement dated December 31, 1996 (the "Walmart Lease").
The aggregate lease expense paid by the Bank under these leases, excluding the
Bank building lease, totaled $67,000 for the fiscal year ended December 31,
2000.
The Company, through its subsidiary, owns a parcel of land for future expansion.
The partially improved property, totaling approximately one acre, is immediately
adjacent to the Company's main office property on the west side. The site is
ideally located for the development of an Operations Center when the growth of
the Company will require additional space beyond that which is available in the
existing Company facility.
The Company, through its subsidiary, purchased from Nationsbank, a building with
approximately 6,000 square feet. The purchase included building and land located
at 10101 Bloomingdale Avenue (corner of US 301 and Bloomingdale). On January 22,
1999 the bank opened its fourth branch at this location.
During 1999, the Bank purchased three parcels of land adjacent to the main
office facility.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this Annual Report, the management of the Company has no
knowledge of any material pending legal proceedings, including proceedings
contemplated by governmental authorities, to which the Company and its
subsidiary or any of its property is subject.
7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to votes of the stockholders of the Company
during the last quarter of 2000.
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
There is no trading market at the current time for the Common Stock of the
Company, and it is not expected that a trading market will develop for shares of
the Company's Common Stock in the near future. The Company is aware of 14 sale
transactions that occurred during fiscal year 2000 at prices ranging from $20.00
to $24.00 per share, exclusive of commissions. The Bank is also aware of 14 sale
transactions that occurred during fiscal year 1999 at prices ranging from $16.00
to $21.00 per share, exclusive of commissions. As of March 1, 2001, there were
493 holders of record of the Common Stock of the Company.
Holders of Common Stock are entitled to share pro rata in the distribution of
dividends when and as declared by the Board of Directors from funds legally
available for such purpose. The Bank cannot pay dividends in any one year in
which its net income from the current year, combined with its retained net
income for the preceding two years, is a loss or which would cause the capital
accounts of the Bank to fall below the minimum amount required by law.
Additionally, under certain circumstances, approval of the FDIC and the Florida
Department may be required prior to the payment of a dividend.
At the discretion of the Board of Directors of the Company and after careful
review of certain factors, such as results of operations, capital requirements,
regulatory restrictions, tax considerations and general economic conditions, the
Board declared its first dividend in September 1993 at ten cents per share and
paid said dividend on October 5, 1993. It likewise paid a similar dividend in
1994, 1995, 1996 and 1997. In 1998 and 1999, the dividend paid increased to
twelve cents per share. In 2000, the bank increased the dividend to fourteen
cents a share. The dividends were based on respective year earnings and paid on
October 1 of each year.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, in summary form, certain comparative financial
data of the Company for a five year period encompassing the periods ended
December 31, 1996, December 31, 1997, December 31, 1998, December 31, 1999 and
December 31, 2000. This information should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations, and Other Statistical Disclosure" and the audited financial
statements of the Company for the years ended December 31, 1998, 1999 and 2000,
and related notes thereto included elsewhere herein.
8
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(in Thousands, except Per Share Data)
INCOME STATEMENT DATA
Interest income $ 7,255 $ 6,267 $ 5,543 $ 4,711 $ 4,206
Interest expense -2880 -2,522 -2,199 -1,887 -1,544
-------- -------- -------- -------- --------
Net interest income 4,375 3,745 3,344 2,824 2,662
Provision for loan losses -250 -101 -210 -300 -181
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses 4,125 3,644 3,134 2,524 2,481
Non-interest income 940 838 657 516 431
Non-interest expense -3,693 -3,519 -2,912 -2,616 -2,408
-------- -------- -------- -------- --------
Income before income taxes 1,372 963 879 424 504
Income taxes -438 -324 -318 -100 -156
-------- -------- -------- -------- --------
Net income $ 934 $ 639 $ 561 $ 324 $ 348
======== ======== ======== ======== ========
PER SHARE DATA
Net income $ 3.09 $ 2.09 $ 1.88 $ 1.09 $ 1.17
Cash dividends 0.14 0.12 0.12 0.10 0.10
Book value 20.74 17.42 16.00 14.17 13.10
Number of shares used in net
income-per-share calculations(1) 302,138 305,565 299,221 297,026 297,545
BALANCE SHEET DATA
Total assets $ 95,883 $ 84,366 $ 80,685 $ 63,802 $ 54,919
Total investment securities 8,852 9,134 8,832 7,942 10,400
Total net loans(2) 66,826 62,385 55,694 47,873 37,897
Total deposits 83,925 73,733 70,505 55,047 48,876
Shareholders' equity 6,312 5,251 4,924 4,237 3,899
(1) Based on average shares outstanding during the period.
(2) Net loans means total loans net of allowance for possible future loan
losses.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The purpose of this discussion is to focus on significant changes in
the financial condition and results of the operations of the Company and it's
subsidiary during the past three years. This discussion and analysis is intended
to supplement and highlight information contained in the accompanying financial
statements and the selected financial data presented elsewhere in this report,
and is based on the fiscal years of 2000, 1999, and 1998. The company's fiscal
year runs from January 1st through December 31st of each respective year.
Results of Operations
The company had a net income after taxes of $934,000, $639,000 and
$561,000 during the years 2000, 1999, and 1998. This corresponds to per share
amounts of $3.09, $2.09 and $1.88 during those three years respectively.
The banks net interest income increased 16.82% in 2000, up from the
increase of 11.99% in 1999 and down from the 18.41% increase during 1998. This
net interest income is a major component of the Bank's earning capacity and is
the difference or spread between interest income and interest expense. These
Earning Assets are primarily loans, federal funds Sold (funds loaned on a
short-term basis to other banks) and investment securities. The spread is
considered positive when interest income exceeds interest expense and negative
when interest expense exceeds interest income. Net interest income is also
affected by changes in interest rates earned and interest rates paid and by
changes in the volume of interest-earning assets and interest-bearing
liabilities. In 2000, the net interest income was $4,375,000 which was an
increase of $630,000 over the 1999 net interest income of $3,745,000. This was
an increase of $401,000 over the 1998 net interest income of $3,344,000. The
continued increase is primarily a result of the Bank's continued growth coupled
with a continuance of a strong ratio of loans to other earning assets. This has
allowed the interest earned on loans to increase from $4,802,000 in 1998 to
$6,206,000 in 2000 or an increase of 29.2%. Also increasing was interest income
derived from investment securities and federal funds sold, which are normally
lower yielding instruments, the interest income from these assets increased from
5.7% in 1999 from $741,000 to $983,000 and continued to increase 6.7% to
$1,049,000 in 2000. During the same period of time, the interest expense has
also increased from $2,199,000 in 1998 to $2,522,000 in 1999 to $2,880,000 in
2000. This represents a cumulative increase from 1998 to 2000 of 31.0%, which is
primarily due to overall growth in the deposit base of the Bank.
Interest income on loans, which is normally higher than interest yields
on investments and federal funds sold, was favorable to the Bank's profit. In
2000, loan related interest income was $6,206,000, including loan fees which are
normally an adjustment to loan yield, was earned on an average net loans of
$68,060,000 or an average interest yield of 9.12%, as compared to 9.35% and
9.26% in 1999 and 1998 respectively. The interest income on investments of
$1,049,000 earned an average yield of 6.10% on $17,200,000 in earning assets, as
compared to 5.36% and 5.79% in 1999 and 1998 respectively. The cost of funds
(interest expense) of $2,880,000 was paid on the Bank's and Company's average
interest-bearing deposits and other borrowings of approximately $88,160,000 for
2000 was 3.27% compared to 3.87% for the previous year with interest expense of
$2,522,000 and an average interest-bearing deposits and loans of $65,083,000.
While there is a high concentration of certificates of deposits, the Bank does
not anticipate the maturity of such certificates to affect the Bank's liquidity,
as management believes that such high concentration is primarily due to customer
relations and the higher than market rates typically offered by such
certificates. The Bank is not in the practice of paying above market rates on
deposits.
9
The net interest spread measures the difference between the average
yield on earning assets and the average rate paid on interest-bearing sources of
funds. The net interest spread increased during 2000 moving from 4.45% in 1999
to 4.56%, which had declined from the 4.53% in 1998.The net interest yield is
calculated by taking the net interest income and dividing it by the average
earning assets. During 2000, the Net interest yield was 5.13% up from 1999 and
1998 which were 5.00% and 5.08% respectively. To the extent possible, the Bank
follows a strategy intended to insulate the Bank's interest rate spread from
adverse changes in interest rates by maintaining spreads through the
adjustability of its earning assets and interest-bearing liabilities.
The Bank's non-interest expenses for the fiscal year 2000 were
$3,693,000 or approximately $308,000 average per month as compared to $3,519,000
or approximately $293,000 average per month for 1999. Non-interest expense for
1998 was $2,912,000 or approximately $243,000 average per month. The amount of
$3,693,000 for 2000 consisted primarily of $2,111,000 in salaries and benefits,
$324,000 of occupancy expense for all its offices, equipment expenses of
$291,000 and $1,027,000 of other operating expenses. Other operating expenses
primarily consisted of marketing expense, taxes (intangible and sales),
insurance (FDIC, blanket bond and property), state assessments, professional
fees (accounting, audit and legal), office supplies, postage and delivery,
service fees and amortization of capitalized expenses.
The Bank's non-interest income for fiscal year 2000 was $940,000. The
sources reflected in non-interest income were from service charges on deposit
accounts of $834,000 and non-deposit income of $106,000. This is an increase of
$102,000 compared to the $838,000 of non-interest income reported for the twelve
month period ended December 31, 1999.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes," which
uses the asset and liability method of accounting for income taxes. Provisions
for income taxes are based on amounts reported in the statements of operations,
after exclusion of nontaxable income, such as interest on state and municipal
securities, tax-exempt loans, and includes deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes. Deferred taxes are computed on the liability method pursuant
in FAS 109, Accounting for Income Taxes. For 2000, net income before taxes was
$1,372,000 and after taxes of $438,000, the net income was $934,000. See Note N
of Notes to Consolidated Financial Statements.
The bank experienced deposit growth during 2000, resulting in a net
increase for the fiscal year of 13.8%, as compared to the previous two years of
growth of 4.0% in 1999 and 28.1% in 1998. This drop, from 1998 growth, is not a
dramatic a decrease as it might at first seem, the large 1998 growth can be, in
part, attributed to the Barnett - Nationsbank merger. Also, in part was the
controlling of growth to allow the Bank's capital position and loan to deposit
ratios to rebuild after they dropped due to the rapid growth that occurred
during the aforementioned merger. Being the primary source for the funding of
investment and financing activities, thus the breakdown of deposits is of vital
importance to the Bank and Management. As of the end of 2000, the Bank's total
deposits were $83,925,000, a $10,192,000 increase. Approximately 82.6% of the
Bank's deposits are in interest-bearing accounts at the end of the current
fiscal year, which is typical in the Bank's market area. Also note that included
in interest-bearing accounts are the Bank's now accounts, which are the only
type of personal checking account offered by the Bank. Of this $17,887,000, only
a small percentage maintains a sufficient minimum balance to earn interest.
Non-Interest-bearing accounts made up 17.4% and NOW and Money Market Accounts
were 28.9% of total deposits compared to 28.5% and 18.0% in the previous year
respectively. In time deposits, the Bank held 50.3% in time deposits, which
comprise savings accounts and Certificates of Deposits. This was a decrease from
the approximately 54.2% the year before.
Effective August 15, 1995, the Federal Housing Finance Board approved
Valrico State Bank's membership to the Federal Home Loan Bank of Atlanta. Being
a member offers alternative funding sources for the Bank.
At the conclusion of the fiscal year 2000, residential (1-4 family)
real estate loans totaled $4,336,000, a decrease from the previous year amount
of $4,651,000, but this is an increase from the total residential real estate
loans at the end of the fiscal year 1998, which was $3,757,000. The $4,336,000
at year end represents approximately 6.4% of the total loans outstanding, a
slight decrease from the 7.4% for the year ending 1999, and a slight decrease
from the 6.6% for the year ending 1998. These real estate loans consist
primarily of intermediate term loans secured by real estate and payable in
periodic installments. Consumer loans consist of loans made to individuals and
business for consumer purposes. These loans represented $9,073,000 or 13.4% of
the total loan portfolio. In 1999 and 1998, these loans represented $9,007,000
and $8,139,000 or 14.5% and 14.3% of the total loan portfolio respectively.
The Bank splits its commercial loan into two categories, those loans
that are used for commercial and industrial purposes and those used for
agricultural purposes. The commercial and industrial purpose loans includes
commercial real estate loans that are secured by anything other that farmland or
farm equipment. These latter loans are included in the agricultural loans. At
the end of the fiscal year 2000, the commercial loan portfolio totaled
$53,930,000, this is an
10
increase from the $49,093,000 in 1999 and the $44,640,000 in 1998. These totals
represent in each of the respective years 2000, 1999, and 1998, 79.5%, 77.5%,
and 80.0% of the total loan portfolio. The commercial and industrial loans
comprised 41,217,000 $36,259,000 and $28,764,000 for the three years ending
2000, 1999, and 1998 respectively. The agricultural loans for the same periods
were $12,713,000, $12,780,000 and $15,876,000. At the end of the fiscal year
2000, the commercial loans consisted of 60.8% of the total loan portfolio while
the agricultural loans comprised 18.7%.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the allowance for loan
losses when management of the Bank believes that the collectibility of the
principal on such loans is unlikely. The allowance is an amount that management
of the Bank believes will be adequate to absorb losses inherent in existing
loans and commitments to extend credit, based on evaluations of the
collectibility of outstanding loans and prior loan loss experience relating to
loans and commitments to extend credit. The evaluations take into consideration
such factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions that may affect the borrowers' ability to pay. Subsequent recoveries,
if any, on loans charged against the allowance will be credited to the
allowance.
The Bank derives its loan loss reserve based on several methods. One is
to review the Bank's historical loss percentages calculated by dividing
year-to-date charge-offs by the amount of reservable loans. Secondly, a review
of classified loans based on a specific reserve allocation method, a percentage
method, and a blended reserve based on specific and percentage methods. The
reserve allocation is based on the overall assessment of all the methods to
determine the appropriate amount to charge to the provision for loan losses.
Additionally, the Bank's loan portfolio is periodically reviewed by
Federal and State regulators as a normal part of their examination process.
Governmental examination procedures require individual judgments about a
borrower's ability to repay loans, sufficiency of collateral values and the
effects of changing economic circumstances. These procedures are similar to
those employed by the Bank in determining the adequacy of the allowance for loan
losses and in classifying loans.
As a result of their examinations, regulators may propose adjustments
to the allowance for loan losses or in the loan classifications. As a practical
matter, management and Board of Directors of the Bank promptly consider and
implement those proposed adjustments.
The Bank charged to operations $250,000 for provision for loan losses
in 2000 and $101,000 and $210,000, respectively, for 1999 and 1998. The amount
of $250,000 was added to the beginning balance of $778,000 for the period ended
December 31, 1999 for a total accumulated provision less net charge-offs for the
period ended December 31, 2000 of $1,028,000. The Bank charged off loans during
the fiscal year 2000 in the amount of $174,000 and reflected recoveries of
$89,000 leaving a net balance in the allowance for loan losses for the period
ended December 31, 2000 of $943,000, which was 1.39% of total loans outstanding
of $67,845,000.
Loans on which the accrual of interest has been discontinued are
designated as nonaccrual loans. Accrual of interest on loans is discontinued
either when reasonable doubt exists as to the full and timely collection of
interest or principal or both, or when a loan becomes contractually past due by
90 days or more with respect to interest or principal. When a loan is placed on
nonaccrual status, all interest previously accrued but not collected is reversed
against current period interest income. Income on such loans is then recognized
only to the extent that cash is received and where the future collection of
principal is probable. Interest accruals are resumed on such loans only when
they are brought fully current with respect to interest and principal and when,
in the judgement of management, the loans are estimated to be fully collectible
as to both principal and interest. At December 31, 2000 and December 31, 1999,
the Bank's loans designated as nonaccrual totaled $638,000 and $0, respectively.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 114 ("FASB 114"), Accounting by Creditors
for Impairment of a Loan, which sets the standard for recognition of loan
impairment and the measurement methods for certain impaired loans and loans
whose terms are modified in troubled debt restructurings.
Under FASB 114, a loan is impaired when it is probable that a creditor
will be unable to collect the full amount of principal and interest due
according to the contractual terms of the loan agreement. When a loan is
impaired, a creditor has a choice of ways to measure the impairment. The
measurement of impairment may be based on (1) the present value of the expected
future cash flows of the impaired loan discounted at the loan's original
effective interest rate, (2) the observable market price of the impaired loan,
or (3) the fair value of the collateral of a collateral-dependent loan.
Creditors may select the measurement method on a loan-by-loan basis, except that
collateral-dependent loans for which foreclosure is probable must be measured at
the fair value of the collateral. A creditor in a troubled debt restructuring
involving a restructured loan should measure impairment by discounting the total
expected future cash
11
flows at the loan's original effective rate of interest. At December 31, 2000
and December 31, 1999, loans totaling $253,000 and $270,000, respectively, had
been classified as impaired.
The Bank's investment portfolio at December 31, 2000 of $8,852,000
(based on securities held available for sale marked to approximate fair market
value) comprised approximately 10.4% of the Bank's total earning assets, as
compared to 12.7% at December 31, 1999. The investment securities are primarily
concentrated in U. S. Treasury securities, obligations of other U. S. Government
agencies, municipals and corporations. As of December 31, 2000, the Bank's
investment portfolio had 25.6% adjustable rate securities.
The FASB 115 rule regarding "Accounting For Certain Investments in Debt
and Equity Securities" was implemented the first quarter of 1994. The new rule
required financial institutions to segregate their investment portfolio into
three categories; 1) securities held-to-maturity (HTM), 2) securities available
for sale (AFS), and 3) trading securities. Securities available for sale are to
be marked to a fair market value. Unrealized holding gains and losses for AFS
securities are excluded from earnings and reported as a net amount in a separate
component of shareholders' equity until realized. Unrealized holding gains and
losses for trading securities are included in earnings. As of December 31, 2000,
the Bank's investment portfolio, consisted of $7,128,000 in AFS and $1,724,000,
in HTM. The net effect to stockholders' equity as of December 31, 2000 was a net
loss in reserve for securities of $51,000.
Reclassifying of securities as to available for sale and
held-to-maturity took place at December 1995, based upon a regulatory change
which allowed a window of opportunity to reclassify the investment portfolio.
FAS 121, which was effective for the first quarter of 1996, did not
have any significant effect on the Company. The Bank does not have any financial
instruments which would be affected by Financial Accounting Standard Boards
Statement No. 119 ("FAS 119"). FAS 119 requires new qualitative disclosures
regarding derivative financial instruments (e.g. futures, forwards, swaps and
options). In June 1997, the Financial Accounting Standards Board issued
Statement No., 130 ("FAS130"), Reporting Comprehensive Income, establishes
standards for reporting comprehensive income in financial statements. It
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. Some of the items included in comprehensive income are unrealized
gains or losses on securities available-for-sale, underfunded pension
obligations and employee stock options. FAS 130 is effective for periods
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. Implementation of
FAS 130 will require additional disclosures in the financial statements but will
not have an impact on the Company's balance sheet or Statement of Income.
The market value of securities fluctuates during the investment period
and is determined on the basis of market quotations. The Bank reprices its
securities on a monthly basis. The Bank invests in securities for interest
income and liquidity.
When calculating total earning assets, the amount of $1,023,000 and
$979,000 as of December 31, 2000 and 1999 were added to total earning assets.
This amount represents the cash surrender value of whole life insurance policies
purchased primarily to fund a deferred benefit pension plan implemented in 1993
for officers of the Bank who qualified for the program.
Non-interest earning assets accounted for approximately 10.8% of the
Company's total assets at December 31, 2000, a decrease from the approximately
13.5% at December 31, 1999. The total non-interest earning assets primarily
consisted of cash and funds placed on deposit in accounts with other banks. Of
the total $10,374,000 of non-interest earning assets, cash and non-interest
bearing deposits totaled $5,764,000. Other significant non-interest earning
assets consisted of fixed assets and interest receivable.
A good capital position, which is vital to the continued profitability
of the Company, also promotes depositor and shareholder confidence and provides
a solid foundation for the future growth of the Bank. The Bank has provided for
its capital requirements through the retention of earnings. At December 31,
2000, the Bank's Tier 1 capital position was 7.10% ($6,693,000 shareholders'
equity divided by total assets of $94,256,000) and the Bank's Tier 2 capital was
8.10% determined by adding loan loss reserves of $943,000 to shareholders'
equity of $6,693,000 and dividing by total assets of $94,256,000 Total Tier 1
capital to total risk-weighted assets as of December 31, 2000 was 9.20% and
total capital (Tier 2) to total risk-weighted assets was 10.49% compared to
8.62% and 9.77%, respectively, in 1999.
Interest rate sensitivity is a function of the repricing
characteristics of the Bank's portfolio of assets and liabilities. These
repricing characteristics are the time frames within which the interest-bearing
assets and liabilities are subject to change in interest rates. The change in
interest rates can be either at replacement, repricing or maturity during the
life of the assets or liabilities. Interest rate sensitivity management is to
concentrate on the maturities of assets and liabilities as they reprice during
time periods of changes in market interest rates. Effective management is to
ensure that
12
both assets and liabilities respond to changes in interest rates within an
acceptable time frame while minimizing the effect of interest rate changes on
net interest income.
The major elements used to manage interest rate risk include the mix of
fixed and variable rate assets and liabilities and the maturity pattern of
assets and liabilities. The Bank performs a monthly review of assets and
liabilities that reprice and the time bands within which the repricing occurs.
Through such analysis, the Bank monitors and manages its interest sensitivity
gap to minimize the effects of changing interest rates.
The interest rate sensitivity structure within the Bank's balance sheet
at December 31, 2000, indicated a net interest sensitive liability gap of 119.6%
when projecting out one year. In the near term, defined as 90 days, the Bank had
a net interest sensitivity asset gap of 197.5%. This information represents a
general indication of repricing characteristics over time; however, the
sensitivity of certain deposit products may vary during extreme swings in
interest rates. Since all interest rates and yields do not adjust at the same
velocity, the interest rate sensitivity gap is only a general indicator of the
potential effects of interest rate changes on net interest income.
Liquidity is the ability of the Bank to meet present and future
financial obligations either through the sale or maturity of existing assets or
by the acquisition of funds through asset and liability management. Management
of the Bank continually evaluates its liquidity position and seeks to achieve
its desired liquidity objectives from both assets and liabilities. Asset
liquidity is achieved through the continuous maturing of earning assets and by
investing in short-term marketable assets. Liability liquidity is available
through continued deposit growth, maturity structure and accessibility to market
sources of funds.
As of December 31, 2000, the Bank's liquidity ratio was 27.91% derived
by dividing net cash, short-term, and marketable assets of $23.4 million by net
deposits of $83.9 million. The Bank's dependency ratio as of December 31, 2000
was 3.20%. This ratio is determined by taking the Bank's volatile liabilities
(primarily Jumbo certificates) of $11.5 million less short-term investments of
$8.8 million divided by adjusted total earning assets of $84.5 million. In 2000
and 1989, the Bank had maintained a liquidity ratio on an average of 20% to 35%.
As noted in "Funding Sources" above, management of the Bank believes that the
high concentration of time deposits is primarily due to customer relationships
and not the attraction of the higher than market rates typically offered by
certificates of deposits.
FORWARD LOOKING STATEMENTS
This filing contains forward-looking statements that involve risks and
uncertainties, and there are certain important factors that could cause actual
results to differ materially from those anticipated. These important factors
include, but are not limited to, economic conditions (both generally and more
specifically in the Bank's market), competition for customers from other
providers of financial services, government legislation and regulation which
changes from time to time and over which the Company and the Bank have no
control, changes in interest rates, the impact of the Bank's growth, and other
risks detailed in the Annual Report on Form 10-K and in the Company's other
filings with the Securities and Exchange Commission, all of which are difficult
to predict and many of which are beyond the control of the Company.
(Remainder of this page intentionally left blank)
13
TABLES TO ITEM 7.
The following tables attached to this Form 10-K in response to Item 7 are
intended to be supplementary information to be read in conjunction with
management's discussion and analysis of financial condition and result of
operations.
TABLE I - Distribution of Assets, Liabilities, and Stockholder's Equity;
Interest Rates and Interest Differentials
TABLE II - Investment Portfolio
TABLE III - Loan Portfolio
TABLE IV - Summary of Loan Loss Experience
TABLE V - Deposits
TABLE VI - Return on Equity and Assets
TABLE VII - Short-Term Borrowings
(Remainder of this page intentionally left blank)
14
TABLE I
AVERAGE BALANCES, INTEREST, AND YIELD/RATE
(DOLLARS IN THOUSANDS)
2000 1999 1998
AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE AVERAGE INCOME/ AVERAGE
BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ------- ------- ------- ------- ------- ------- -------
ASSETS:
Earning Assets:
Loans, Net of unearned income 68,060 6,206 9.12% 56,521 5,284 9.35% 50,349 4,660 9.26%
Investment Securities
Taxable 6,291 415 6.60% 6,267 385 6.14% 6,447 392 6.08%
Tax exempt 2,504 120 4.80% 2,521 121 4.80% 1,421 81 5.70%
------- ------ ------- ------- ----- ------- ------- ----- -------
Total Investments 8,795 535 6.08% 8,788 499 5.76% 7,868 473 6.01%
Federal Funds Sold 8,405 514 6.12% 9,537 477 5.00% 4,881 265 5.43%
------- ------ ------- ------- ----- ------- ------- ----- -------
Total Earning Assets 85,260 7,255 8.51% 74,846 6,267 8.37% 63,098 5,398 8.55%
Allowance for loan losses (932) (776) (671)
Cash and Due From 5,542 4,901 3,792
Other Assets 6,071 5,237 4,607
------- ------- -------
Total Assets 95,941 84,208 70,826
======= ======= =======
LIABILITIES AND SHAREHOLDERS EQUITY
Interest Bearing Liabilities
Deposits
NOW Accounts 17,605 291 1.65% 14,733 259 1.76% 12,497 220 1.76%
Money Market Accounts 6,769 182 2.69% 5,390 139 2.58% 4,265 103 2.42%
Savings Accounts 9,280 236 2.54% 9,510 228 2.40% 7,568 179 2.37%
Time $100,000 and over 11,129 563 5.06% 8,821 472 5.35% 6,397 360 5.63%
Other Time Deposits 24,497 1,290 5.27% 22,299 1,131 5.07% 19,958 1,070 5.36%
------- ------ ------- ------- ----- ------- ------- ----- -------
Total interest bearing deposits 69,280 2,562 3.70% 60,753 2,229 3.67% 50,685 1,932 3.81%
Securities sold under agreement
to repurchase, Federal funds
purchased and other borrowings 4,568 318 6.96% 4,330 292 6.74% 4,241 259 6.11%
------- ------ ------- ------- ----- ------- ------- ----- -------
Total interest bearing liabilities 73,848 2,880 3.90% 65,083 2,521 3.87% 54,926 2,191 3.99%
Demand Deposits (non interest-bearing) 14,312 13,295 10,634
Accrued expenses and other liabilities 1,721 740 675
Shareholders' equity 6,060 5,090 4,591
------- ------- -------
Total liabilities and shareholders' equity 95,941 84,208 70,826
======= ======= =======
Net interest income/net interest spread 4,375 3,746 4.45% 3,207 4.53%
4.56%
Net yield on earning assets 5.13% 5.00% 5.08%
The following table sets forth the extent to which changes in volume and rates
of earning assets and interest-bearing liabilities affected the change in
interest income or interest expense in the indicated time periods. For each
major balance sheet category, information is provided relating to 1) changes in
volume (changes in average balance multiplied by the prior year's average
interest rate), 2) changes in rate (changes in average interest rate multiplied
by the prior year's average balance), and 3) the total change in interest
income/expenses. Changes attributable jointly to volume and rate have been
allocated proportionately.
15
TABLE I CONTINUED
DECEMBER 31, 2000 1999
VOLUME RATE TOTAL VOLUME RATE TOTAL
------ ---- ----- ------ ---- -----
Interest Income
Loans 1,055 (133) 922 571 53 624
Investment Securities -- 29 29 55 (22) 33
Other Earning Assets (61) 98 37 253 (41) 212
------ ---- ---- ---- ---- ----
Total 994 (6) 988 879 (10) 869
Interest Expense
Deposits 316 18 334 384 (87) 297
Borrowings 15 9 24 5 28 33
------ ---- ---- ---- ---- ----
Total 331 27 358 389 (59) 330
------ ---- ---- ---- ---- ----
Net Change 663 (33) 630 490 49 539
====== ==== ==== ==== ==== ====
INTEREST RATE SENSITIVITY
(DOLLARS IN THOUSANDS)
After Three After One After Three
Within Months but Year but Years but After
Three Within One Within Three Within Five Five
Months Year Years Years but Years
------ ----------- ------------ ----------- ------
December 31, 1999
Assets
Loans 17,148 7,981 22,868 15,962 3,809
Short term investments 8,808 0 0 0 0
Securities 1,641 1,416 1,197 854 3,799
------ ------ ------ ------ ------
Total interest sensitive assets (ISA) 27,597 9,397 24,065 16,816 7,608
Liabilities
Interest bearing deposits 13378 30,284 14,354 11,289 0
Federal funds purchased 598 0 0 0 0
Long term borrowings 1,108 0 0 0 2000
Short term borrowings 970 0 0 0 0
------ ------ ------ ------ ------
Total interest sensitive liabilities (ISL) 16,054 30,284 14,354 11,289 2000
Net position os ISA minus ISL 11,543 -20,887 9,711 5,527 5,608
Cumulative net position of ISA minus ISL 11,543 -9,344 367 5,894 11,502
Cumulative net position as a percent
of total assets 12.0% -9.7% 0.4% 6.1% 12.0%
(Remainder of this page intentionally left blank)
16
TABLE II
INVESTMENT PORTFOLIO
(AMORTIZED COST)
(IN THOUSANDS)
DECEMBER 31, 2000 1999 1998
Securities to be held-to-maturity
1. U.S. Treasury Securities 0 0 0
2. U.S. Government Agencies 0 0 0
3. State and Political Subdivisions 1,286 0 0
4. Mortgage-backed securities 438 554 765
5. Other 0 1,285 1,284
----- ----- -----
Subtotal 1,724 1,839 2,049
Securities available-for-sale
1. U.S. Treasury Securities 0 0 502
2. U.S. Government Agencies 988 997 500
3. State and Political Subdivisions 1,265 0 0
4. Mortgage-backed securities 3,567 3,837 3,504
5. Other 1,349 2,630 2,248
----- ----- -----
Subtotal 7,179 7,464 6,754
----- ----- -----
Total investment securities 8,903 9,303 8,803
===== ===== ======
INVESTMENT SECURITIES MATURITY SCHEDULE
(DOLLARS IN THOUSANDS)
MATURITY SCHEDULE
IN 2000 IN 1999 IN 1998
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
WITHIN ONE YEAR
Security Type
1. U.S. Treasury Securities 0 0.00% 0 0.00% 502 6.23%
2. U.S. Government Agencies 0 0.00% 0 0.00% 0 0.00%
3. State and Political Subdivisions 0 0.00% 0 0.00% 0 0.00%
4. Mortgage-backed securities 7 6.91% 6 4.82% 0 0.00%
5. Other 0 0.00% 0 0.00% 0 0.00%
--- ---- --- ---- --- ----
Totals 7 6 502
=== === ===
IN 1999 IN 1998 IN 1997
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
AFTER ONE YEARS BUT WITHIN FIVE YEARS
Security Type
1. U.S. Treasury Securities 0 0.00% 0 0.00% 0 0.00%
2. U.S. Government Agencies 1,000 6.05% 500 6.05% 0 0.00%
3. State and Political Subdivisions 275 4.60% 0 0.00% 0 0.00%
4. Mortgage-backed securities 214 6.11% 346 6.31% 817 6.39%
5. Other 950 6.17% 1225 5.82% 719 5.44%
----- ----- -----
Totals 2,439 2,071 1,536
===== ===== =====
17
TABLE II CONTINUED
IN 1999 IN 1998 IN 1997
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
AFTER FIVE YEARS BUT WITHIN TEN YEARS
Security Type
1. U.S. Treasury Securities 0 0.00% 0 0.00% 0 0.00%
2. U.S. Government Agencies 0 0.00% 500 6.05% 500 6.05%
3. State and Political Subdivisions 1,535 4.75% 0 0.00% 0 0.00%
4. Mortgage-backed securities 1,367 5.88% 1401 6.57% 1601 4.94%
5. Other 0 0.00% 1521 5.03% 2415 5.04%
----- ----- -----
Totals 2,902 3,422 4,516
===== ===== =====
IN 2000 IN 1999 IN 1998
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
AFTER 10 YEARS
Security Type
1. U.S. Treasury Securities 0 0.00% 0 0.00% 0 0.00%
2. U.S. Government Agencies 0 0.00% 0 0.00% 0 0.00%
3. State and Political Subdivisions 750 4.79% 0 0.00% 0 0.00%
4. Mortgage-backed securities 2,422 6.39% 2584 6.21% 1955 6.05%
5. Other 45 7.79% 1,157 5.02% 243 5.50%
----- ----- -----
Totals 3,217 3,741 2,198
===== ===== =====
(Remainder of this page intentionally left blank)
18
TABLE III
LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
December 31, 2000 1999 1998
PERCENT PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
Loan Type
1. Commercial 53,930 79.5% 49,039 77.5% 44,640 79.0%
2. Real Estate (1.4 family) 4,336 6.4% 4,651 7.4% 3,759 6.6%
3. Installment and other 9,579 14.1% 9,549 15.1% 8,139 14.4%
------ ----- ------ ----- ------ -----
Total Loans 67,845 100.0% 63,239 100.0% 56,538 100.0%
===== ===== =====
Less: Unearned Income (76) (76) (65)
Less: Allowance for loan losses (943) (778) (776)
------ ------ ------
Total loans less allowance
and unearned income 66,826 62,385 55,697
====== ===== ======
SELECTED LOAN MATURITY AND INTEREST RATE SENSITIVITY SCHEDULES
(DOLLARS IN THOUSANDS)
December 31, 2000 1999 1998
WITHIN ONE YEAR
1. Commercial 16,312 16,846 28,488
2. Real Estate (1.4 family) 1,755 1,672 4,779
3. Installment and other 1,559 1,795 4,608
------ ------ ------
Total 19,626 20,313 37,875
====== ====== ======
AFTER ONE YEAR BUT WITHIN FIVE YEARS
1. Commercial 33,438 28,614 28,488
2. Real Estate (1.4 family) 1,205 2,510 4,779
3. Installment and other 7,601 6,959 4,608
------ ------ ------
Total 42,244 38,083 37,875
====== ====== ======
AFTER FIVE YEARS
1. Commercial 4,180 3,579 2,221
2. Real Estate (1.4 family) 1,376 469 769
3. Installment and other 419 795 541
------ ------ ------
Total 5,975 4,843 3,531
====== ====== ======
19
TABLE III CONTINUED
RATE STRUCTURE FOR LOANS MATURING OVER ONE YEAR
(DOLLARS IN THOUSANDS)
WITH PRE- WITH WITH PRE- WITH WITH PRE- WITH
DETERMINED FLOATING DETERMINED FLOATING DETERMINED FLOATING
INTEREST OR INTEREST OR INTEREST OR
RATE ADJUSTABLE RATE ADJUSTABLE RATE ADJUSTABLE
RATE RATE RATE
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
1. Commercial 32,026 5,592 22,376 9,817 29,155 1,554
2. Real Estate (1.4 family) 2,581 0 2,979 0 5,548 0
3. Installment and other 8,020 0 7,754 0 5,149 0
------ ----- ------ ----- ------ -----
Total 42,627 5,592 33,109 9,817 39,852 1,554
====== ===== ====== ===== ====== =====
(Remainder of this page intentionally left blank)
20
TABLE IV
SUMMARY OF LOAN LOSS EXPERIENCE
YEAR ENDED DECEMBER 31, 2000 1999 1998
Balance at beginning of Period 777,712 776,382 576,347
Charge-offs:
Commercial Loans 75,308 56,772 0
Commercial Mortgages Loans 0 0 0
Construction Loans 0 0 0
Residential Mortgage Loans 0 16,341 0
Consumer Loans 98,124 29,138 23,672
-------- -------- --------
Total Charge-offs 173,432 102,251 23,672
Recoveries
Commercial Loans 49,349 1,826 4,962
Commercial Mortgages Loans 0 0 0
Construction Loans 0 0 0
Residential Mortgage Loans 0 755 0
Consumer Loans 39,255 0 8,745
-------- -------- --------
Total Recoveries 88,604 2,581 13,707
-------- -------- --------
Net Charge-offs less recoveries 84,828 99,670 9,965
Additions charged to operations 250,000 101,000 210,000
-------- -------- --------
Balance at end of period 942,884 777,712 776,382
======== ======== ========
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
2000 1999 1998
PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN
EACH EACH EACH
CATEGORY TO CATEGORY TO CATEGORY TO
AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
Balance at end of period applicable to:
Commercial and agricultural 749,593 79.5% 603,081 77.5% 579,415 74.6%
Real estate 60,345 6.4% 57,198 7.4% 100,727 13.0%
Installment and Others 132,946 14.1% 117,433 15.1% 96,240 12.4%
------- ----- ------- ----- ------- -----
942,884 100.0% 777,712 100.0% 776,382 100.0%
======= ===== ======= ===== ======= =====
21
TABLE V
DEPOSITS
(DOLLARS IN THOUSANDS)
Year Ended December 31, 2000 1999 1998
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
Deposits:
Non-interest demand
deposits 14,276 0.00% 13,295 0.00% 10,634 0.00%
Interest Bearing Deposits
NOW accounts 17,605 1.65% 14,733 1.76% 12,497 1.76%
Money market accounts 6,769 2.69% 5,390 2.58% 4,265 2.43%
Savings accounts 9,280 2.54% 9,510 2.40% 7,568 2.36%
Time, $100,000 and over 11.129 5.27% 8,821 5.35% 6,397 5.62%
Other time Deposits 24,497 5.06% 22,299 5.07% 19,958 5.36%
------ ---- ------ ---- ------
Total Interest bearing deposits 69,280 3.70% 60,753 3.67% 50,685 3.81%
------ ---- ------ ---- ------
Total Deposits 83,556 74,048 61,319
====== ====== ======
MATURITIES OF TIME DEPOSITS OVER $100,000
(DOLLARS IN THOUSANDS)
December 31, 2000 1999 1998
OTHER OTHER OTHER
CERTIFICATES TIME CERTIFICATES TIME CERTIFICATES TIME
OF DEPOSITS DEPOSITS OF DEPOSITS DEPOSITS OF DEPOSITS DEPOSITS
Three months or less 3,415 0 2,544 0 1,464 0
Over three through six months 1,646 0 1,984 0 1,697 0
Over six through twelve months 1,753 0 2,074 0 2,186 0
Over twelve Months 696 0 2,251 0 2,514 0
------- --- ------- --- ------- ---
Total 7,510 0 8,853 0 7,861 0
======= === ======= === ======= ===
22
TABLE VI
RETURN ON EQUITY AND ASSETS
December 31, 2000 1999 1998
Return on average assets 1.00% 0.76% 0.70%
Return on average common Equity 15.95% 12.55% 11.40%
Common dividend payout ratio 4.53% 5.82% 6.38%
Average equity to average assets ratio 6.26% 6.04% 6.48%
LEVERAGE RATIO CALCULATIONS
December 31, 2000 1999 1998
Total average assets 93,535 84,208 70,826
Less intangibles 0 0 0
Total tangible average assets 93,535 84,208 70,826
Total common shareholders' equity 6312 5,251 4,924
Less intangibles 0 0 0
Total tangible period-end common
shareholders' equity 6312 5,251 4,924
Leverage ratio 6.75% 6.24% 6.95%
RISK-BASED CAPITAL RATIO
(Bank Only)
Tier I capital ratio 7.06% 6.12%
Total risk-based capital ratio 10.41% 9.14%
TABLE VII
SHORT TERM BORROWINGS
(DOLLARS IN THOUSANDS)
Year ended December 31, 2000 1999 1998
SECURITIES SECURITIES SECURITIES
FEDERAL SOLD UNDER FEDERAL SOLD UNDER FEDERAL SOLD UNDER
FUNDS AGREEMENTS FUNDS AGREEMENTS FUNDS AGREEMENTS
SOLD TO REPURCHASE SOLD TO REPURCHASE SOLD TO REPURCHASE
Maximum outstanding at any month-end 11,426 1,219 2,970 675 2,400 900
Average Balance 8,005 466 2,889 401 575 449
Ending balance 8,808 598 2,970 672 500 646
Average interest rate 6.42% 3.63% 6.16% 3.48% 8.60% 4.54%
Average interest rate at year-end 6.12% 3.68 6.00% 2.08% 9.89% 3.15%
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statement of the Company and the related notes thereto required by
Subpart F have been included immediately following Item 13 of this Annual
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants, nor were there any disagreements with
accountants on accounting and financial disclosure.
ITEM 10. DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
DIRECTORS OF THE COMPANY
The information required by Item 10 pertaining to directors of the Company is
incorporated herein by reference to the sections entitled "Election of
Directors" in the Company's definitive proxy statement for its 2001 Annual
Meeting of Shareholders, which will be filed with the Securities and Exchange
within 120 days of the end of the Company's fiscal year ended December 31, 2000.
PRINCIPAL OFFICERS OF THE COMPANY AND ITS SUBSIDIARY BANK
All principal officers of the Company are elected by the Board of Directors and
serve at the pleasure of the Board. There are no arrangements or understanding
between the Company and any principal officer pursuant to which any such person
was elected as a principal officer of the Company.
J. E. "BOB" MCLEAN, III, 64, is Chairman of the Bank and Company and was elected
President and CEO in May 1997 of the Company. Mr. McLean is the owner and
President of J. E. McLean & Sons, a family business he took over in 1967. He is
a citrus grower who also harvests and ships fruit. Prior to that, Mr. McLean was
a banker at Marine Bank of Tampa and was employed with Tampa Electric for three
and a half years. He is a third generation of Valrico, attending Brandon High
School and the University of Florida for a couple of years. Mr. McLean served in
the Army. He has served as Chairman of the Board of the Bank since its inception
in 1989 and has served as Chairman of the Board for the Company since May 1995.
JERRY L. BALL, 48, The President and CEO of the Bank is also the Executive Vice
President of the Company. In May 1997, Mr. Ball was promoted to his current
position. In 1995, Mr. Ball was promoted to Executive Vice President. From 1989
to May 1995, Mr. Ball served in the position of Senior Vice President and
Cashier. From 1980 to April 1989, Mr. Ball was an Assistant Vice President and
Branch Manager for First Union National Bank of Florida. Mr. Ball attended King
College and received a B.A. degree in Business and Economics. He is a graduate
of the School of Banking at the University of Florida. Mr. Ball has over 23
years of banking experience.
DONALD WEAVER, 58, joined the Company and Bank in November 1995. He was hired as
Senior Vice President of Commercial Loans of the Bank. In May 1997, he was
promoted to Executive Vice President and Director of Commercial Loans and was
elected to the position of Secretary to the Company. He has over 35 years in
commercial banking, all within the Hillsborough County area. He came to our Bank
from Peoples Bank of Lakeland where he served as Vice President and Commercial
Loan Manager since 1990. He attended Hillsborough Community College and has
attended a number of banking schools. He has been a resident of the Brandon area
for over 25 years.
Set forth below are the names and ages of the other principal officers of the
Company's subsidiary bank, giving their principal occupation and business
experience of each such principal officer during the past six years. All of such
information has been furnished by each such person.
GLENN J. CHASTEEN, 49, is currently serving as Senior Vice President-Consumer
Loans. He has been the Bank?s installment lender since June 1989. From January
1987 to October 1988, Mr. Chasteen served as
24
Senior Vice President of San Antonio Citizens Federal Credit Union. From
February 1980 to January 1987, Mr. Chasteen served as Vice President-Consumer
Lending with Sun Bank of Tampa Bay (formerly known as Brandon State Bank).
ROY SCHRETT, 63, has served as Senior Vice President-Commercial Loans since his
employment April 1997. Mr. Schrett was with South Hillsborough Community Bank, a
local independent bank, serving in the capacity of Senior Vice President and
Senior Lending Officer. Prior employment has been with Southtrust Bank of West
Florida, Nazareth National Bank, and Marine Midland Bank, N.A. Mr. Schrett has
over 39 years of banking experience. Mr. Schrett graduated Summa Cum Laude, B.A.
degree from Allentown College of St. Frances de Sales, University of Buffalo,
A.A.S. degree, Graduate Lending School, University of Oklahoma and has taken
several banking courses.
CAROL TODD JOHNSON, 69, has served as Vice President and Business Development
Officer of the Bank since June 1991. Mrs. Johnson serves in this position on a
part-time basis and was promoted in 1995 to Vice President-Business Development.
From 1972 to May 1991, Mrs. Johnson was Vice President of Business and Community
Development Officer at the Brandon office of Barnett Bank.
ROBERT M. (MYKE) MORRIS, ARA, 47, is currently serving as a Vice President -
Commercial Loans. He has been serving in that position since September 1, 1999.
He is an Accredited Rural Appraiser and State Certified General Appraiser.
Before joining the bank, he was an agricultural investment portfolio manager.
SUSAN L. RADFORD, 43, is currently serving as a Vice President -
Cashier/Compliance Officer. She was promoted to this position in July 1999. Ms.
Radford has 24 years of banking experience, 15 years in bank operations.
GLENDA C. PEACOCK, 61, is currently serving as a Vice President - Branch Manager
of the Bank's Main office. She has been serving in this capacity since August 1,
1999. Prior to this, she served as a branch manager of our Brandon location
since March 1994. Mrs. Peacock was hired by the Bank in August 1993 where she
served as an AVP - Loan Officer.
MELISSA B. OVERTON, 43, is currently serving as a branch manager of our Brandon
location as a Vice President - Branch Manager/Commercial Loan Officer. She has
been serving in this capacity since August 1999. Mrs. Overton was hired by the
bank as a commercial lender in March 1999. Prior to being hired by us, Mrs.
Overton has worked for Suntrust and Barnett Banks as a commercial lender and
also for a small community bank in southern Florida as a commercial
lender/Branch manager. Also during 1997-1998, Mrs. Overton worked as a Human
Resource Coordinator for a restaurant chain in southern Florida.
ITEM 11. MANAGEMENT COMPENSATION AND TRANSACTIONS
The information required by Item 11 pertaining to management compensation and
transactions with management of the Company is incorporated herein by reference
to the sections entitled "Executive Compensation and Other Information" and
"Certain Transactions" in the Company's definitive proxy statement for its 2001
Annual Meeting of Shareholders, which will be filed with the Federal Deposit
Insurance Corporation within 120 days of the end of the Company's fiscal year
ended December 31, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The only class of voting securities of the Company is its Common Stock, 304,324
shares of which were outstanding as of December 31, 2000. To the best knowledge
of the Company, other than Messrs. Carlton, Holmberg and Amerson (whose
shareholdings are listed in "Security Ownership of Management" below), there are
no other persons who own beneficially more than five percent (5%) of the
Company's Common Stock.
25
SECURITY OWNERSHIP OF MANAGEMENT
The information set forth below as to the beneficial ownership of shares of
Common Stock of the Company by each director of the Company, and by all
directors and principal officers of the Company as a group, as of December 31,
2000 has been furnished by the respective persons.
AMOUNT AND NATURE
NAME OF BENEFICIAL OF BENEFICIAL
OWNER OWNERSHIP PERCENT OF CLASS
- ------------------ ------------------ ----------------
LeVaughn Amerson 33,703 (1) 10.91
Jerry L. Ball 8,000 (8) 2.57
C. Dennis Carlton 30,878 (2) 10.00
H. Leroy English 8,825 (1) 2.86
Gregory L. Henderson 15,203 (3) 4.92
Douglas A. Holmberg 34,010 (4) 11.01
Charles E. Jennings, Jr 12,469 (5) 4.04
J. E. "Bob" McLean, III 13,959 (6) 4.52
J. "Bill" Noriega, Jr 12,229 (7) 3.92
Donald M. Weaver 6,300 (9) 2.03
-------- ------
All directors and principal 175,376 49.02
officers as a group (10 persons)
1. All of these shares are owned as joint tenant with this individual's
spouse. Includes 4703 shares subject to options which are presently
exercisable.
2. Includes 26,025 shares which Mr. Carlton owns individually and 50
shares each owned in trust for Mr. Carlton's three children ( a total
of 150 shares) of which Mr. Carlton is sole trustee. Includes 4703
shares subject to options which are presently exercisable.
3. Includes 10,000 shares which Dr. Henderson owns as joint tenant with
Kathy Henderson, his wife, and 125 shares each owned by a trust set up
for Dr. Henderson's four (4) children (a total of 500 shares) of which
Kathy Henderson is sole trustee and as to which Dr. Henderson disclaims
beneficial ownership. Includes 4703 shares subject to options which are
presently exercisable.
4. Includes 29,207 shares which Mr. Holmberg owns individually. Also
includes 100 shares which are owned by Mr. Holmberg's wife, as to which
shares Mr. Holmberg disclaims beneficial ownership. Includes 4703
shares subject to options which are presently exercisable.
5. Includes 5,000 shares held in a Valrico State Bank Self-Directed Ira
for the sole benefit of Mr. Jennings; 2,466 shares of which Mr.
Jennings owns individually and 200 shares which Mr. Jennings owns as
joint tenant with his wife. Also, includes 100 shares which Mr.
Jennings' wife owns as to which shares Mr. Jennings disclaims
beneficial ownership. Includes 4703 shares subject to options which are
presently exercisable.
6. Includes 4,200 shares Mr. McLean owns as joint tenant with his wife and
daughter and 1,170 shares owned by Mr. McLean in trust for his
grandchildren for which Mr. McLean is sole trustee. Also includes 1,100
shares owned by Mr. McLean's daughter, son-in-law, and wife as to which
shares Mr. McLean disclaims beneficial ownership. Includes 7,489 shares
subject to options which are presently exercisable.
7. Includes 7,226 shares which Mr. Noriega owns individually and 100
shares each owned joint with three of Mr. Noriega's children (a total
of 300 shares). Includes 4703 shares subject to options which are
presently exercisable.
8. Includes 500 shares which Mr. Ball owns jointly with his spouse.
Includes 7500 shares subject to options which are presently
exercisable.
9. Includes 100 shares which Mr. Weaver owns individually and 200 shares
owned in joint with Mr. Weavers spouse. Includes 6000 shares subject to
options which are presently exercisable.
26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain officers, directors, security holders with more than five percent
ownership, and corporations and individuals related to such persons have
indebtedness in the form of loans. These loans to such persons are made in the
ordinary course of business. The loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and do not involve more than the
normal risk of collectibility, nor do they present other unfavorable features.
27
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS:
(1) Independent Auditors' ..................................................................................28
(2) Consolidated Balance Sheets as of December 31, 2000 and 1999............................................29
(3) Consolidated Statements of Income for Each of the Three Years
in the Period Ended December 31, 2000...................................................................30
(4) Consolidated Statements of Changes in Stockholders' Equity for Each
of the Three Years in the Period Ended December 31, 2000................................................31
(5) Consolidated Statements of Cash Flows for Each of the Three Years
in the Period Ended December 31, 2000...................................................................32
(6) Notes to Consolidated Financial Statements...........................................................33-46
(2) FINANCIAL STATEMENT SCHEDULES:
The following financial statement schedules have been omitted since the required
information is not applicable or has been included in the Notes to Consolidated
Financial Statements:
Schedule I - U. S. Treasury Securities, Obligations of Other U. S. Government
Agencies and Corporations, Obligations of States and Political Subdivisions, and
Other Bonds, Notes and Debentures
Schedule IV - Company Premises and Equipment
Schedule V - Investment In, Income From Dividends, And Equity In Earnings Or
Losses Of Subsidiaries And Associated Companies
Schedule VI - Allowance For Possible Loan Losses
The following financial statement schedules are attached to this 10-K in
response to Item 14:
Report of Independent Auditors on Supplementary Schedules
Schedule II - Loans to Officers, Directors, Principal Security Holders, and any
Associates of the Foregoing Persons
Schedule III - Loans and Lease Financing Receivables
28
VALRICO BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
29
CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT............................................................................. 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets............................................................................ 2
Consolidated Statements of Income...................................................................... 3
Consolidated Statements of Changes in Stockholders' Equity............................................. 4
Consolidated Statements of Cash Flows.................................................................. 5
Notes to Consolidated Financial Statements............................................................. 6-19
30
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
Valrico Bancorp, Inc. and Subsidiary
Valrico, Florida
We have audited the accompanying consolidated balance sheets of Valrico Bancorp,
Inc. and Subsidiary as of December 31, 2000 and 1999, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Valrico Bancorp,
Inc. and Subsidiary at December 31, 2000 and December 31, 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with generally
accepted accounting principles.
Rex Meighen & Company, LLP
Certified Public Accountants
Tampa, Florida
February 15, 2001
31
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-------------------------------
2000 1999
--------- ---------
(in thousands)
ASSETS
Cash and non-interest bearing deposits $ 5,764 $ 6,787
Federal funds sold 8,808 509
Securities available-for-sale 7,128 7,295
Securities to be held-to-maturity 1,724 1,839
Loans, net 66,826 62,385
Facilities, net 3,384 3,504
Other real estate -- 1
Accrued interest receivable 604 580
Other assets 1,645 1,466
--------- ---------
Total assets $ 95,883 $ 84,366
========= =========
LIABILITIES
Deposits:
Demand deposits $ 14,621 $ 13,080
NOW accounts 17,887 15,110
Money market accounts 6,381 5,780
Savings accounts 9,193 9,894
Time deposits, $100,000 and over 11,482 8,850
Other time deposits 24,361 21,019
--------- ---------
Total deposits 83,925 73,733
Securities sold under agreements to repurchase 598 672
Accounts payable and accrued liabilities 970 572
Advances under line-of-credit 970 970
Notes payable 3,108 3,168
--------- ---------
Total liabilities 89,571 79,115
--------- ---------
Commitments and contingencies (Notes O and P)
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized 1,000,000
shares, issued and outstanding 304,324 shares for 2000;
301,509 for 1999 304 302
Capital surplus 2,515 2,450
Retained earnings 3,535 2,643
Accumulated other comprehensive income (42) (144)
--------- ---------
Total stockholders' equity 6,312 5,251
--------- ---------
Total liabilities and stockholders' equity $ 95,883 $ 84,366
========= =========
32
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
----------------------------------------
2000 1999 1998
-------- -------- --------
(in thousands, except per share data)
INTEREST INCOME
Interest and fees on loans $ 6,206 $ 5,284 $ 4,802
Interest on investment securities:
U. S. Treasury -- 19 46
U. S. Government agencies and corporations 415 414 314
Other 120 73 116
Income on Federal funds sold 514 477 265
-------- -------- --------
Total interest income 7,255 6,267 5,543
-------- -------- --------
INTEREST EXPENSE
Interest on deposits 2,563 2,229 1,940
Interest on short-term borrowings 108 82 70
Interest on long-term debt 209 211 189
-------- -------- --------
Total interest expense 2,880 2,522 2,199
-------- -------- --------
Net interest income 4,375 3,745 3,344
PROVISION FOR LOAN LOSSES 250 101 210
-------- -------- --------
Net interest income after provision
for loan losses 4,125 3,644 3,134
-------- -------- --------
OTHER INCOME
Service charges on deposit accounts 834 729 563
Miscellaneous income 106 109 94
-------- -------- --------
Total other income 940 838 657
-------- -------- --------
OTHER EXPENSES
Salaries and employee benefits 2,111 1,843 1,487
Occupancy expense 324 363 282
Equipment expense 291 321 298
Stationery, printing and supplies 130 139 103
Miscellaneous expenses 837 853 742
-------- -------- --------
Total other expenses 3,693 3,519 2,912
-------- -------- --------
1,372 963 879
INCOME BEFORE INCOME TAXES
33
438 324 318
INCOME TAXES
-------- -------- --------
NET INCOME 934 639 561
OTHER COMPREHENSIVE INCOME
Unrealized gains (losses) on securities 102 (153) 18
-------- -------- --------
COMPREHENSIVE INCOME $ 1,036 $ 486 $ 579
======== ======== ========
302,138 305,565
PER SHARE DATA
Average shares outstanding 299,221
-------- -------- --------
Basic EPS $ 3.09 $ 2.09 $ 1.88
======== ======== ========
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
COMMON CAPITAL RETAINED ACCUMULATED TOTAL
STOCK SURPLUS EARNINGS OTHER STOCKHOLDERS'
COMPREHENSIVE EQUITY
INCOME
------ -------- -------- ------------- -----------
(in thousands)
Balance, December 31, 1997 $ 299 $ 2,431 $ 1,516 $ (9) $ 4,237
Net income for 1998 -- -- 561 -- 561
Other comprehensive income, net of tax:
Net change in net
unrealized holding
losses on securities -- -- -- 18 18
Stock issuance 15 213 -- -- 228
Cash dividends -- -- (36) -- (36)
Stock redemption (6) (78) -- -- (84)
----- ------- ------- ----- -------
Balance, December 31, 1998 308 2,566 2,041 9 4,924
-- -- 639 -- 639
Net income for 1999
Other comprehensive
income, net of tax:
Net change in net
unrealized holding
losses on securities -- -- -- (153) (153)
Stock issuance 4 74 -- -- 78
Cash dividends -- -- (37) -- (37)
Stock redemption (10) (190) -- -- (200)
----- ------- ------- ----- -------
Balance, December 31, 1999 302 2,450 2,643 (144) 5,251
934 934
Net income for 2000 -- -- --
Other comprehensive
income, net of tax:
Net change in net
unrealized holding
losses on securities -- -- -- 102 102
Stock issuance 2 65 -- -- 67
Cash dividends -- -- (42) -- (42)
----- ------- ------- ----- -------
Balance, December 31, 2000 $ 304 $ 2,515 $ 3,535 $ (42) $ 6,312
===== ======= ======= ===== =======
See Accompanying Notes to Consolidated Financial Statements
34
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
------------------------------------------
2000 1999 1998
-------- -------- --------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 934 $ 639 $ 561
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 250 101 210
Depreciation and amortization 265 284 287
Net amortization (accretion) of investment 8 1 (11)
security premiums and discounts
Deferred income taxes (135) (44) (128)
(Increase) in assets: (24) (101) (10)
Accrued interest receivable
Other assets (45) (69) (107)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 398 (315) 412
-------- -------- --------
Net cash provided by operating 1,651 496 1,214
activities
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available-for-sale:
Purchase of securities -- (1,956) (3,635)
Proceeds from maturities of securities 281 1,290 2,400
Securities to be held to maturity:
Proceeds from maturities of securities 120 215 385
Decrease (increase) in Federal funds sold (8,299) 5,847 (6,356)
Net increase in loans (4,716) (6,797) (8,133)
Purchase of facilities (145) (373) (829)
Proceeds from sale of other real estate 1 101 --
-------- -------- --------
Net cash used in investing activities (12,758) (1,673) (16,168)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES 10,192 3,228 15,459
Net increase in deposits
Increase (decrease) in Federal funds purchased -- -- (1,872)
Net increase (decrease) in securities sold under
agreements to repurchase (74) 26 147
Proceeds from issuance of long-term debt -- -- 2,000
Principal payments on long-term debt (59) (55) (50)
Proceeds from issuance of common stock 67 78 228
Cash dividends paid (42) (37) (36)
Redemption of common stock -- (200) (84)
Net borrowings on line-of-credit -- 470 100
-------- -------- --------
Net cash provided by financing 10,084 3,510 15,892
activities
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (1,023) 2,333 938
CASH, BEGINNING OF YEAR 6,787 4,454 3,516
-------- -------- --------
CASH, END OF YEAR $ 5,764 $ 6,787 $ 4,454
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 2,739 $ 2,202 $ 2,271
Cash paid during the year for income taxes $ 516 $ 307 $ 101
See Accompanying Notes to Consolidated Financial Statements
35
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
General:
The consolidated financial statements include the accounts and
transactions of Valrico Bancorp, Inc. (Company) and its wholly-owned
subsidiary, Valrico State Bank (Bank). All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Bank provides a wide range of banking services to individual and
corporate customers primarily in Hillsborough County, Florida.
The Company and the Bank are subject to regulations issued by certain
regulatory agencies and undergo periodic examinations by those
agencies.
Basis of Financial Statement Presentation:
The accounting and reporting policies of the Company conform with
generally accepted accounting principles and with general practices
within the banking industry. In preparing the consolidated financial
statements, management is required to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ significantly from
those estimates.
Material estimates that are particularly susceptible to significant
change relate to the determination of the allowance for loan losses and
the valuation of foreclosed assets. Additionally, management has made
extensive estimates in determining fair values of financial
instruments.
Management believes that the allowance for losses on loans is adequate.
While management uses available information to recognize losses on
loans, including independent appraisals for significant properties,
future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the
allowance for losses on loans. Such agencies may require the Company to
recognize additions to the allowance based on their judgments about
information available to them at the time of their examination.
Investments:
Statement of Financial Accounting Standards No. 115 ("FAS 115"),
Accounting for Certain Investments in Debt and Equity Securities, sets
the standard for classification of and accounting for investments in
equity securities that have readily determinable fair values, and all
investments in debt securities which are to be classified as
held-to-maturity securities, available-for-sale securities, or trading
securities.
Debt securities that an enterprise has the positive intent and ability
to hold to maturity are classified as held-to-maturity securities and
reported at amortized cost. Debt and equity securities that are bought
and held principally for the purpose of selling them in the near term
are classified as trading securities and reported at fair value, with
unrealized gains and losses included in net income. Debt and equity
securities not classified as either held-to-maturity securities or
trading securities are classified as available-for-sale securities and
reported at fair value, with unrealized gains and losses included as
accumulated other comprehensive income in a separate component of
stockholders~ equity.
The Bank classifies its investments at the purchase date in accordance
with the above-described guidelines. Premiums or discounts on
securities at the date of purchase are being amortized or accreted,
respectively, over the estimated life of the security using a method
which approximates the level yield method. Gains and losses realized on
the disposition of securities are based on the specific identification
method and are reflected in other income.
See Accompanying Notes to Consolidated Financial Statements
36
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
Loans:
Loans receivable are stated at unpaid principal balance, less the
allowance for loan losses and net deferred loan origination fees and
costs.
Interest on loans is accounted for on the accrual basis. Generally, the
Company's policy is to discontinue the accrual of interest on loans
delinquent over ninety days unless fully secured and in the process of
collection. The accrued and unpaid interest is reversed from current
income and thereafter interest is recognized only to the extent
payments are received. A non-accrual loan may be restored to accrual
basis when interest and principal payments are current and prospects
for future recovery are no longer in doubt.
Statement of Financial Accounting Standards No. 114 ("FAS 114"),
Accounting by Creditors for Impairment of a Loan, sets the standard for
recognition of loan impairment and the measurement methods for certain
impaired loans and loans whose terms are modified in troubled debt
restructurings.
Under FAS 114, a loan is impaired when it is probable that a creditor
will be unable to collect the full amount of principal and interest due
according to the contractual terms of the loan agreement. When a loan
is impaired, a creditor has a choice of ways to measure the impairment.
The measurement of impairment may be based on (1) the present value of
the expected future cash flows of the impaired loan discounted at the
loan's original effective interest rate, (2) the observable market
price of the impaired loan, or (3) the fair value of the collateral of
a collateral-dependent loan. Creditors may select the measurement
method on a loan-by-loan basis, except that collateral-dependent loans
for which foreclosure is probable must be measured at the fair value of
the collateral. A creditor in a troubled debt restructuring involving a
restructured loan should measure impairment by discounting the total
expected future cash flows at the loan's original effective rate of
interest.
Facilities:
Facilities are stated at cost, less accumulated depreciation and
amortization. Charges to income for depreciation and amortization are
computed on the straight-line method over the assets' estimated useful
lives.
When properties are sold or otherwise disposed of, the gain or loss
resulting from the disposition is credited or charged to income.
Expenditures for maintenance and repairs are charged against income and
renewals and betterments are capitalized.
Allowance for Loan Losses:
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged-off against the
allowance when management believes that the collectibility of principal
is unlikely. Recoveries of amounts previously charged-off are credited
to the allowance. The allowance for loan losses is based on
management's evaluation of various factors including prevailing and
anticipated economic conditions, diversification and size of the loan
portfolio, current financial status and credit standing of the
borrower, the status and level of non-performing assets, past and
expected loan loss experience, adequacy of collateral, specific
impaired loans and economic conditions. Allowances for impaired loans
are generally determined based on collateral values or the present
value of estimated cash flows.
Off Balance Sheet Financial Instruments:
In the ordinary course of business, the Bank has entered into off
balance sheet financial instruments consisting of commitments to extend
credit and standby letters of credit. Such financial instruments are
recorded in the financial statements when they become payable.
Income Taxes:
The Bank accounts for income taxes under the asset and liability method
as prescribed in FAS No. 109, Accounting for Income Taxes. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
See Accompanying Notes to Consolidated Financial Statements
37
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
Comprehensive Income:
In June 1997, the Financial Accounting Standards Board issued FAS 130,
Reporting Comprehensive Income. The statement establishes standards for
reporting and display of comprehensive income and its components in a
full set of general purpose financial statements. It requires an
enterprise to classify items of other comprehensive income by their
nature and to display the accumulated balance of other comprehensive
income separately in the equity section of a statement of financial
position.
This statement is effective for fiscal years beginning after December
15, 1998. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
The effect of FAS 130 was not significant to the Company? financial
statements.
Earnings:
Basic EPS is computed by dividing net income by the weighted average
shares of common stock outstanding during the year.
Statement of Cash Flows:
For purposes of reporting cash flows, cash includes cash on hand and
amounts on deposit in non-interest bearing accounts with other
commercial banks.
Reclassification of Accounts:
Certain items in the consolidated financial statements for prior years
have been reclassified to conform to classifications used in the
current year.
NOTE B - INVESTMENT SECURITIES
The amortized cost and estimated fair value of investments in securities at
December 31, 2000, are as follows:
AMORTIZED GROSS GROSS FAIR
COST UNREALIZED UNREALIZED VALUE
GAINS LOSSES
--------- ---------- ---------- -------
(in thousands)
Securities available-for-sale:
U. S. Government agencies $ 998 $ 5 $ -- $ 1,003
State and municipal 1,265 -- 20 1,245
Mortgage-backed securities 3,567 -- 30 3,537
Other 1,349 -- 6 1,343
------- ----- ----- -------
$ 7,179 $ 5 $ 56 $ 7,128
======= ===== ===== =======
Securities to be held-to-maturity: 438 3 -- 441
Mortgage-backed securities --
State and municipal 1,286 49 -- 1,335
------- ----- ----- -------
$ 1,724 $ 52 $ -- $ 1,776
======= ===== ===== =======
38
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE B - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated fair value of investments in securities at
December 31, 1999, are as follows:
AMORTIZED GROSS GROSS FAIR
COST UNREALIZED UNREALIZED VALUE
GAINS LOSSES
--------- ---------- ---------- -------
(in thousands)
Securities available-for-sale:
U. S. Treasury $ 997 $ -- $ 23 $974
U. S. Government agencies 1,260 -- -- 1,260
Mortgage-backed securities 3,837 -- 52 3,785
Other 1,370 -- 94 1,276
------- ----- ----- -------
$ 7,464 $- $ 169 $ 7,295
======= ===== ===== =======
Securities to be held-to-maturity: $ 554 $ 14 $ -- $ 568
Mortgage-backed securities
State and municipal 1,285 5 -- 1,290
------- ----- ----- -------
$ 1,839 $ 19 $- $ 1,858
======= ===== ===== =======
The fair value of securities fluctuates during the investment period. No
provision for loss has been made in connection with the decline of fair value
below book value, because the securities are purchased for investment purposes
and the decline is not deemed to be other than temporary. The estimated fair
value of securities is determined on the basis of market quotations. Securities
with amortized cost of approximately $765,000 and $818,000 and market values of
approximately $773,000 and $804,000 were pledged to secure repurchase agreements
and deposit accounts at December 31, 2000 and 1999, respectively.
There were no security sales during 2000.
At December 31, 1995, securities with an amortized cost of approximately
$1,646,000 were transferred to held-to-maturity from available-for-sale due to a
one-time opportunity to reassess security classifications in accordance with
guidelines issued by the FASB. These securities had a net unrealized loss of
$5,000 at December 31, 2000.
The cost and estimated fair value of debt securities at December 31, 2000, by
contractual maturities, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
39
SECURITIES SECURITIES TO BE
AVAILABLE-FOR-SALE HELD-TO-MATURITY
----------------------- ------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
--------- ------- --------- -------
(in thousands)
Due in one year or less $ 5 $ 5 $ 2 $ 2
Due from one to five years 2,133 2,132 311 319
Due from five to ten years 2,469 2,434 768 801
Due after ten years 2,572 2,557 643 654
------- ------- ------- -------
$ 7,179 $ 7,128 $ 1,724 $ 1,776
======= ======= ======= =======
40
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE C - LOANS
The loan portfolio is classified as follows:
DECEMBER 31,
-----------------------------
2000 1999
-------- --------
(in thousands)
Commercial and agricultural $ 53,930 $ 49,039
Real estate 4,336 4,651
Installment and other loans 9,579 9,549
-------- --------
Total loans 67,845 63,239
Less, unearned income (76) (76)
Less, allowance for loan losses (943) (778)
-------- --------
$ 66,826 $ 62,385
======== ========
The following is a summary of the transactions in the allowance for loan
losses:
YEAR ENDED DECEMBER 31,
-----------------------------------------
2000 1999 1998
----- ----- -----
(in thousands)
Balance, beginning of year $ 778 $ 776 $ 576
Provision charged to operating expenses 250 101 210
Loans charged-off (174) (102) (24)
Recoveries 89 3 14
----- ----- -----
$ 943 $ 778 $ 776
===== ===== =====
Loans on which interest was not being accrued totaled $638,000 at December 31,
2000. Had interest been accrued on these non-accrual loans at originally
contracted rates, interest income (before income taxes) would have been
increased by approximately $38,000 for 2000. During 1999 there were no loans on
which interest was not being accrued.
A loan is considered impaired when it is probable that the Bank will be unable
to collect all amounts due according to the contractual terms of the agreement.
At December 31, 2000 and 1999, the Bank has classified loans in the amounts of
$252,500 and $270,000 as impaired loans, respectively. The allowance for loan
losses includes amounts applicable to impaired loans. These allowances are not
significant to the Bank's financial statements.
See Accompanying Notes to Consolidated Financial Statements
41
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE D - FACILITIES
Facilities are summarized as follows:
ACCUMULATED ESTIMATED
DEPRECIATION & NET BOOK USEFUL
COST AMORTIZATION VALUE LIVES
------ -------------- ------- ---------
(in thousands)
DECEMBER 31, 2000
Land $1,087 -- $1,087 N/A
Building 1,830 203 1,627 39 [ ] years
Leasehold improvements 602 332 270 3 - 15 years
Furniture, fixtures and equipment 1,836 1,436 400 2 - 15 years
------ ------ ------
$5,355 $1,971 $3,384
====== ====== ======
See Accompanying Notes to Consolidated Financial Statements
42
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE D - FACILITIES (CONTINUED)
ACCUMULATED ESTIMATED
DEPRECIATION & NET BOOK USEFUL
COST AMORTIZATION VALUE LIVES
------ -------------- ------- ---------
(in thousands)
DECEMBER 31, 1999
Land $1,060 $ -- $1,060 N/A
Building 1,828 144 1,684 39 1/2 years
Leasehold improvements 602 284 318 3 - 15 years
Furniture, fixtures and equipment 1,721 1,279 442 2 - 15 years
------ ------ ------
$5,211 $1,707 $3,504
====== ====== ======
Other expenses for the years ended December 31, 2000, 1999, and 1998, included
depreciation and amortization of facilities of $265,000, $274,000, and
$277,000, respectively.
NOTE E - TIME DEPOSITS
At December 31, 2000, scheduled maturities (in thousands) of time deposits are
as follows:
2001 $30,189
2002 2,437
2003 1,720
2004 362
2005 and thereafter 1,135
-------
$35,843
=======
NOTE F - ADVANCES UNDER LINE-OF-CREDIT
The Company entered into an open end loan agreement with Independent Banker's
Bank of Florida which provides for maximum borrowings of $1,000,000 at the
prime interest rate. The security for the loan agreement consists of the Bank's
common stock and a security interest in other Company assets.
At December 31, 2000, the outstanding balance was $969,950. Interest expense
was $91,955, $68,000 and $34,032 for the years ended December 31, 2000, 1999
and 1998, respectively.
See Accompanying Notes to Consolidated Financial Statements
43
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE G - NOTES PAYABLE
Long-term debt consists of the following: :
DECEMBER 31,
----------------
2000 1999
------ ------
(in thousands)
Note payable to Independent Banker? Bank of Florida, principal and $1,108 $1,168
interest of $13,000, payable monthly at 8.5% for the first year and
adjustable each year based on the U. S. Treasury Note three-year
index; due on January 14, 2012. Secured by real estate.
Note payable to the Federal Home Loan Bank of Atlanta, interest payable 2,000 2,000
quarterly at 5.51%, principal due March 26, 2008. The loan is callable
as of March 26, 2003 and may be prepaid. Collateralized by mortgage
loans and Federal Home Loan Bank stock.
------ ------
3,108 3,168
Less: current portion (63) (58)
------ ------
$3,045 $3,110
====== ======
Estimated maturities (in thousands) on long-term debt are as follows:
2002 $ 69
2003 75
2004 81
2005 89
2006 96
Thereafter 2,635
------
$3,045
======
Interest expense was $209,012, $210,721 and $189,608 for the years ended
December 31, 2000, 1999 and 1998, respectfully.
NOTE H - STOCK OPTION PLAN
The Company adopted the 1998 Stock Option Plan on December 15, 1998, replacing
its previous stock option plan. All options under the old plan have been
terminated. Under the new plan, 65,000 shares of the Company's common stock have
been reserved to grant to officers, directors and other key personnel of the
Bank. Option prices per share are set by a committee of the Board of Directors
at the time of the grant, but the price cannot be less than the fair market
value of the stock at the date of the grant. The options are generally
non-transferable and expire following termination of employment with the Bank,
except in the event of death or disability.
At December 31, 1998 options for 59,910 shares had been granted with an
exercise price of $16 per share. All such options expire December 14, 2008. At
December 31, 2000, options on 5,090 shares remain available for grant.
The Company accounts for these options based upon APB Opinion No. 25.
Accordingly, no compensation cost has been recognized for its stock options.
Had the compensation cost been determined based upon FAS Opinion No. 123, the
Company's net income would have been reduced approximately $40,720 for 2000 and
$38,000 for 1999.
NOTE I - EMPLOYEE BENEFIT PLANS
The Bank has an Employee Stock Ownership Plan containing Internal Revenue Code
Section 401(k) provisions. The Plan became effective January 1, 1997, and is
for the benefit of employees who have completed six months of service and
attained age 18. The Plan provides for three types of Company contributions:
(1) Basic contributions - discretionary contribution made for all
non-highly compensated participants in order to satisfy the
non-discrimination requirements of the Internal Revenue Code.
(2) Matching contribution - the Bank matches 25% of salary
reduction contributions up to 6% of compensation.
(3) Optional contributions - additional discretionary
contribution made by the Bank allocated to the accounts of
participants on the basis of total relative compensation.
Bank contributions to the Plan were $14,120 in 2000, $11,551 in 1999 and $7,980
in 1998.
See Accompanying Notes to Consolidated Financial Statements
44
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE J - REGULATORY CAPITAL MATTERS
The Federal Reserve Board and other bank regulatory agencies have adopted
risk-based capital guidelines for banks and bank holding companies. The main
objectives of the risk-based capital framework are to provide a more consistent
system for comparing capital positions of banking organizations and to take
into account the different risks among banking organizations' assets,
liabilities and off-balance sheet items. Bank regulatory agencies have
supplemented the risk-based capital standard with a leverage ratio for Tier I
capital to total reported assets.
Failure to meet the capital adequacy guidelines and the framework for prompt
corrective actions could initiate actions by the regulatory agencies which
could have a material effect on the financial statements.
As of December 31, 2000, the most recent notification from the FDIC, the Bank
was categorized as well capitalized under the regulatory framework for prompt
corrective action. To remain categorized as well capitalized, it will have to
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage
ratios as disclosed in the table below. There are no conditions or events since
the most recent notification that management believes have changed the prompt
corrective action category.
TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------------------- -------------------------- ---------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- --------- ------------ --------- ------------- ---------
(dollars in thousands)
As of December 31, 2000: $7,571 10.41% $5,821 8.00% $7,276 10.00%
Total risk-based capital
(To risk-weighted assets)
Tier I capital $6,661 9.15% $2,950 4.00% $4,366 6.00%
(To risk-weighted assets)
Tier I capital $6,661 7.13% $3,739 4.00% $4,674 5.00%
(To adjusted total assets)
As of December 31, 1999:
Total risk-based capital
(To risk-weighted assets) $6,608 9.77% $5,426 8.00% $6,783 10.00%
Tier I capital
(To risk-weighted assets) $5,830 8.62% $2,713 4.00% $4,070 6.00%
Tier I capital
(To adjusted total assets) $5,830 6.82% $3,418 4.00% $4,272 5.00%
NOTE K - OPERATING LEASES
The Bank leases two branch locations. One branch is leased from a director of
the Bank. This lease expires March 31, 2003, and provides for annual rents of
$42,000. The Bank has the option to renew the lease for three additional
three-year terms at rents to be negotiated at the time of the renewal. The
second branch is located in Wal-Mart. This lease provides for a monthly rental
of $2,083 for five years. The Bank has the option to renew the lease for two
additional five-year terms with annual rents of $31,250 and $39,062
respectively. Rental expense under said leases was approximately $67,000 for
each of the years ended December 31, 2000, 1999, and 1998.
See Accompanying Notes to Consolidated Financial Statements
45
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE K - OPERATING LEASES (CONTINUED)
These leases are accounted for as operating leases.
The future minimum rental commitment for said leases are as follows:
2001 $ 67,000
2002 54,500
2003 10,500
2004 --
2005 --
--------
$132,000
========
NOTE L - DEFERRED COMPENSATION AGREEMENTS
The Bank entered into deferred compensation agreements with certain executive
officers. The agreements provide for a flat annual retirement benefit at the
time the employee participates in the agreement. The benefit may be increased
by a cost of living adjustment annually and is to be paid for 15 years.
Provisions under these agreements for 2000, 1999, and 1998 were $40,931,
$28,819, and $4,741, respectively.
NOTE M - OTHER EXPENSES
Miscellaneous expenses were as follows:
YEAR ENDED DECEMBER 31,
2000 1999 1998
---- ---- ----
(in thousands)
Advertising and public relations $ 97 $ 99 $104
Professional fees 104 77 73
Postage 80 75 64
Taxes 21 108 87
Insurance 91 93 74
Other 444 401 340
---- ---- ----
$837 $853 $742
==== ==== ====
See Accompanying Notes to Consolidated Financial Statements
46
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
Note N - Income Taxes
The provision for income taxes is summarized as follows:
YEAR ENDED DECEMBER 31,
2000 1999 1998
----- ----- -----
(in thousands)
Current income taxes:
Federal $ 514 $ 331 $ 381
State 59 37 65
----- ----- -----
Total current income taxes 573 368 446
Deferred incomes taxes (credit) (135) (44) (128)
----- ----- -----
Income tax provision $ 438 $ 324 $ 318
===== ===== =====
A reconciliation of the income tax computed at the Federal statutory rate of
34% and the income tax provision shown on the statement of income follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------
2000 1999 1998
----- ----- -----
(in thousands)
Tax computed at statutory rate $ 466 $ 327 $ 299
Increase (decrease) resulting from: (16) (32) (15)
Tax exempt income
State income tax, net of Federal tax benefit 31 32 30
Other (43) (3) 4
----- ----- -----
Income tax provision $ 438 $ 324 $ 318
===== ===== =====
See Accompanying Notes to Consolidated Financial Statements
47
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE N - INCOME TAXES (CONTINUED)
The components of the deferred income tax asset included in other assets are as
follows:
DECEMBER 31,
---------------------------
2000 1999
----- -----
(in thousands)
Deferred tax liability:
Federal $ (28) $ (72)
State (5) (13)
----- -----
(33) (85)
----- -----
Deferred tax asset:
Federal 399 348
State 66 60
----- -----
465 408
----- -----
Net deferred tax asset (liability) $ 432 $ 323
===== =====
The tax effects of each type of significant item that gave rise to deferred
taxes are:
DECEMBER 31,
---------------------------
2000 1999
----- -----
(in thousands)
Accumulated other comprehensive income $ 13 $ 39
Accretion income (22) (23)
Depreciation 35 (5)
Cash to accrual adjustment (11) (21)
Deferred loan fees 28 28
Allowance for loan losses 301 234
Deferred compensation 36 19
Other item 52 52
----- -----
Net deferred tax asset $ 432 $ 323
===== =====
See Accompanying Notes to Consolidated Financial Statements
48
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE O - COMMITMENTS AND CONTINGENCIES
The financial statements do not reflect various commitments and contingent
liabilities which arise in the normal course of business and which involve
elements of credit risk, interest rate risk and liquidity risk. These
commitments and contingent liabilities are commitments to extend credit and
standby letters of credit. A summary of these commitments and contingent
liabilities follows:
DECEMBER 31,
--------------------------------
2000 1999
------ ------
(in thousands)
Commitments to extend credit $5,451 $9,350
Standby letters of credit $ 555 $ 551
The Bank uses the same credit policies in making commitments to extend credit
and in issuing standby letters-of-credit as it does for extensions of credit
shown on the balance sheets.
The Bank is party to litigation, outstanding commitments and other contingent
liabilities arising in the normal course of business. In the opinion of
management, the resolution of such matters will not have a material effect on
the financial statements.
The Bank has a $5,000,000 unused line-of-credit with Federal Home Loan Bank,
and a $1,500,000 unused line-of-credit with Independent Banker's Bank of Florida
for the purchase of Federal funds.
NOTE P - CONCENTRATIONS OF CREDIT
Substantially all of the Bank's loans, commitments and standby
letters-of-credit have been granted to customers in Hillsborough County,
Florida. The concentrations of credit by type of loan are set forth in Note C.
The distribution of commitments to extend credit approximates the distribution
of loans outstanding. Standby letters-of-credit were granted primarily to
commercial borrowers.
At December 31, 2000, the Bank had $532,800 in excess of FDIC deposit insurance
in non-interest bearing accounts with other financial institutions.
NOTE Q - RELATED PARTIES
Certain officers, directors, employees of the Bank, and certain corporations
and individuals related to such persons have deposits and indebtedness, in the
form of loans, as customers. The total of such deposits at December 31, 2000,
was $3,655,408. Total loans to such persons and their affiliates amounted to
$3,747,000 and $3,399,000 at December 31, 2000 and 1999, respectively. During
2000, originations of related party loans totaled $3,208,000 and payments on
related party loans totaled $2,860,000.
NOTE R - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and Short-term Investments:
For those short-term instruments, the carrying amount is a
reasonable estimate of fair value.
See Accompanying Notes to Consolidated Financial Statements
49
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE R - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Investment Securities:
For securities held as investments, fair value equals quoted
market price, if available. If a quoted market price is not
available, fair value is estimated using quoted market prices
for similar securities.
Loans Receivable:
For loans subject to repricing and loans intended for sale
within six months, fair value is estimated at the carrying
amount plus accrued interest.
The fair value of other types of loans is estimated by
discounting the future cash flows using the current rates at
which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.
Deposit Liabilities:
The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand
at the reporting date. The fair value of long-term fixed
maturity certificates of deposit is estimated using the rates
currently offered for deposits of similar remaining
maturities.
Short-term Debt:
For short-term debt, including accounts and demand notes
payable, the carrying amount is a reasonable estimate of fair
value.
Long-term Debt:
The fair value of long-term debt is estimated by discounting
the future cash flows using the current rates for similar
debt.
The estimated fair values of the Bank's financial instruments at December 31,
2000, are as follows:
CARRYING FAIR
AMOUNT VALUE
-------- -------
(in thousands)
FINANCIAL ASSETS $14,572 $14,572
Cash and short-term investments
Investment securities 8,852 8,904
Loans 66,826 68,086
------- -------
$90,250 $91,562
Total assets valued ======= =======
FINANCIAL LIABILITIES $83,925 $84,220
Deposits
Short-term borrowings 1,568 1,568
Long-term debt 3,108 3,094
------- -------
$88,601 $88,882
======= =======
See Accompanying Notes to Consolidated Financial Statements
50
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE S - PARENT COMPANY FINANCIAL INFORMATION
Presented below are condensed financial statements for
Valrico Bancorp, Inc. (parent only):
CONDENSED BALANCE SHEETS AS OF DECEMBER 31:
2000 1999
------ ------
(in thousands)
ASSETS
Cash $ 37 $ 38
Investment in subsidiary bank, net 6,692 5,687
Facilities, net 1,591 1,620
Other assets 73 43
------ ------
Total assets $8,393 $7,388
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued liabilities $ 3 $ --
Line-of-credit 970 970
Note payable 1,108 1,167
------ ------
Total liabilities 2,081 2,137
Stockholders~ equity 6,312 5,251
------ ------
Total liabilities and stockholders' equity $8,393 $7,388
====== ======
See Accompanying Notes to Consolidated Financial Statements
51
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE S - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS AND STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31:
2000 1999
------- -------
(in thousands)
Equity in net income of subsidiary bank:
Undistributed $ 903 $ 682
Distributed 89 --
Rent income 204 204
Other income -- 26
Interest expense (187) (168)
Other expenses (75) (105)
------- -------
Net income 934 639
STOCKHOLDERS' EQUITY
Beginning of year 5,251 4,924
Dividends paid (42) (37)
Stock issuance 67 78
Stock redemption -- (200)
Net change in unrealized holding losses
on securities in subsidiary bank 102 (153)
------- -------
End of year $ 6,312 $ 5,251
======= =======
See Accompanying Notes to Consolidated Financial Statements
52
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
NOTE S - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31:
2000 1999
----- -----
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 934 $ 639
Adjustment to reconcile net income to net
cash provided by operating activities:
Equity in undistributed earnings of subsidiary (903) (682)
Depreciation 29 29
Amortization -- 10
Decrease (increase) in other assets (30) (15)
Increase (decrease) in accounts payable and accrued liabilities 3 (10)
----- -----
Net cash used in operating activities 33 (29)
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Additional investment in subsidiary -- (299)
----- -----
Net cash provided by (used in) investing activities -- (299)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 67 78
Redemption of common stock -- (200)
Cash dividend on common stock (42) (37)
Principal payments on long-term debt (59) (55)
Net increase in short-term borrowings -- 470
----- -----
Net cash provided by (used in) by financing activities (34) 256
----- -----
NET DECREASE IN CASH (1) (72)
CASH AT BEGINNING OF YEAR 38 110
----- -----
CASH AT END OF YEAR $ 37 $ 38
===== =====
See Accompanying Notes to Consolidated Financial Statements
53
SCHEDULE II
LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY
HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
Year ended December 31, 2000
BALANCE REDUCTIONS BALANCE
BEGINNING ---------- END OF
NAME OF OF PERIOD AMOUNTS AMOUNTS PERIOD
BORROWER 1-01-2000 ADDITIONS COLLECTED CHARGED OFF 12-31-2000
- ------------------------------ ----------- ----------- ----------- ----------- -----------
C. Dennis Carlton(1) $ 100,000 $ 0 $ 10,000 $ 0 $ 90,000
C. Dennis Carlton(2) 28,321 0 3,010 0 25,311
C. Dennis Carlton(3) 240,000 0 60,002 0 179,998
Carlton, Sr.(4) 52,394 0 7,390 0 45,004
Carlton & Carlton(5) 12,641 0 4,322 0 8,319
C. Dennis Carlton(6) 11,750 0 3,743 0 8,007
C. Dennis Carlton(7) 13,318 0 8,928 0 4,390
C. Dennis Carlton(8) 178,085 0 82,869 0 95,216
C. Dennis Carlton(9) 46,000 0 10,000 0 36,000
LeVaughn Amerson(10) 0 60,000 30,000 0 30,000
Douglas Holmberg(11) 365,000 775,000 740,000 0 400,000
Douglas Holmberg(12) 250,000 500,000 500,000 0 250,000
Douglas Holmberg(13) 61,243 0 19,766 0 41,477
C. Dennis Carlton(14) 19,184 0 6,149 0 13,035
C. Dennis Carlton(15) 19,624 90000 69,624 0 40,000
C. Dennis Carlton(16) 0 19,125 5,260 0 13,865
C. Dennis Carlton(17) 0 25,424 1,216 0 24,208
C. Dennis Carlton(18) 0 80,400 0 0 80,400
Douglas Holmberg(19) 0 156,162 4,547 0 151,615
5 Directors & Officers 2001240 1502119 1293191 0 2,210,168
----------- ----------- ----------- ----- ----------
$ 3,398,800 $ 3,208,230 $ 2,860,017 $ 0 $3,747,013
=========== =========== =========== ===== ==========
(Remainder of this page intentionally left blank)
See Accompanying Notes to Consolidated Financial Statements
54
NOTES
(1)C. DENNIS CARLTON (2)C. DENNIS CARLTON
- -------------------- --------------------
Original date: February 18, 1999 Original date: June 28, 1995
Maturity: February 19, 2001 Maturity: June 28, 2006
Rate: Prime + 1 Rate: 9.5%
Terms: Interest Monthly Terms: Principal & Interest
Monthly.
Collateral: Unsecured Collateral: First Mortgage
(3)CARLTON & CARLTON (4)C. DENNIS CARLTON
- -------------------- --------------------
Original date: September 13, 1999 Original date: October 4, 1991
Maturity: October 15, 2003 Maturity: October 4, 2001
Rate: Prime + 1 Rate: Prime plus 1
Terms: Interest Monthly Terms: Principal & Interest
semi-annually
Collateral: Real Estate Collateral: First Mortgage
(5)CARLTON & CARLTON (6)C. DENNIS CARLTON
- -------------------- --------------------
Original date: July 25, 1997 Original date: June 28, 1999
Maturity: August 5, 2002 Maturity: December 28, 2002
Rate: 8.9% Rate: 9.5%
Terms: Principal & Interest Terms: Principle & Interest
monthly Monthly
Collateral: Automobile Collateral: Automobile
(7)C. DENNIS CARLTON (8)C. DENNIS CARLTON
- -------------------- --------------------
Original date: June 24, 1998 Original date: September 10, 1998
Maturity: June 24, 2001 Maturity: September 10, 2001
Rate: 8.25% Rate: Prime plus 1
Terms: Principal & Interest Terms: Principal & Interest
monthly monthly
Collateral: Automobile Collateral: Accounts Receivable / Inventory
(9)C. DENNIS CARLTON (10)LEVAUGHN AMERSON
- -------------------- --------------------
Original date: February 20, 1998 Original date: February 20, 1992
Maturity: February 18, 2001 Maturity: February 19, 2002
Rate: Prime + 1% Rate: Prime + .50%
Terms: Principal annually Terms: Interest Monthly
Interest quarterly
Collateral: Real Estate Collateral: Accounts Receivable / Inventory
(11)HOLMBERG FARMS (12)HOLMBERG FARMS
- ------------------ ------------------
Original date: December 30, 1997 Original date: September 10, 1998
Maturity: December 28, 2001 Maturity: September 10, 2001
Rate: Prime + 1% Rate: Prime + 1%
Terms: Interest monthly Terms: Principal annually
Interest monthly
Collateral: Agriculture equipment Collateral: Unsecured
(13)HOLMBERG FARMS (14)C. DENNIS CARLTON
- ------------------ ---------------------
Original date: May 20, 1998 Original date: September 27, 1999
Maturity: May 19, 2003 Maturity: October 5, 2002
Rate: 8.9% Rate: 9.75%
Terms: Principle &Interest monthly Terms: Principle & Interest
Monthly
Collateral: Automobile Collateral: Automobile
See Accompanying Notes to Consolidated Financial Statements
55
(15)C. DENNIS CARLTON (16)C. DENNIS CARLTON
- --------------------- ---------------------
Original date: October 1, 1999 Original date: January 6, 2000
Maturity: October 1, 2001 Maturity: January 10, 2003
Rate: Prime + 0.75% Rate: 9.75%
Terms: Interest Monthly Terms: Principle & Interest
Monthly
Collateral: Unsecured Collateral: Automobile
(17)C. DENNIS CARLTON (18)C. DENNIS CARLTON
- --------------------- ---------------------
Original date: October 27, 2000 Original date: September 22, 2000
Maturity: October 27, 2003 Maturity: September 22, 2001
Rate: 10.75% Rate: Prime + .50%
Terms: Principle &Interest monthly Terms: Interest Monthly
Collateral: Automobile Collateral: Unsecured
(19)DOUGLAS HOLMBERG
- --------------------
Original date: October 25, 2000
Maturity: April 25, 2005
Rate: 10.5%
Terms: Principle
Interest Monthly
Collateral: Unsecured
LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY
HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
Year ended December 31, 1999
BALANCE REDUCTIONS BALANCE
BEGINNING ---------- END OF
NAME OF OF PERIOD AMOUNTS AMOUNTS PERIOD
BORROWER 1-01-99 ADDITIONS COLLECTED CHARGED OFF 12-31-99
- ------------------------------ ----------- ----------- ----------- ----------- --------
LeVaughn Amerson $ 77,882 $ 90,882 $ 168,764 $ 0 $ 0
C. Dennis Carlton 83,786 0 83,786 0 0
Carlton & Carlton 482 0 482 0 0
C. Dennis Carlton 0 125,000 25,000 0 100,000
C. Dennis Carlton 30,831 0 2,510 0 28,321
C. Dennis Carlton 0 240,000 0 0 240,000
Carlton, Sr 96,089 3,695 47,390 0 52,394
Carlton & Carlton 17,496 0 4,855 0 12,641
C. Dennis Carlton 0 13,104 1,355 0 11,750
C. Dennis Carlton 20,275 0 6,957 0 13,318
C. Dennis Carlton 254,263 0 76,178 0 178,085
C. Dennis Carlton 80,000 0 34,000 0 46,000
Douglas Holmberg 316,126 1,300,000 1,251,126 0 365,000
Douglas Holmberg 76,131 0 14,488 0 61,643
Douglas Holmberg 250,000 700,000 700,000 0 250,000
C. Dennis Carlton 0 20,129 945 0 19,184
C. Dennis Carlton 0 20,000 376 0 19,624
5 Directors & Officers 2,277,810 1,824,142 2,001,109 0 2,000,843
----------- ----------- ----------- ----- ----------
$ 3,581,169 $ 4,336,952 $ 4,519,321 $ 0 $3,398,800
=========== =========== =========== ===== ==========
See Accompanying Notes to Consolidated Financial Statements
56
SCHEDULE II
LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY
HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
Year ended December 31, 1998
BALANCE REDUCTIONS BALANCE
BEGINNING ---------- END OF
NAME OF OF PERIOD AMOUNTS AMOUNTS PERIOD
BORROWER 1-01-98 ADDITIONS COLLECTED CHARGED OFF 12-31-98
- ------------------------------ ----------- ----------- ----------- ----------- --------
LeVaughn Amerson $ 60,882 $ 122,000 $ 105,000 $ 0 $ 77,882
C. Dennis Carlton 33,521 0 2,690 0 30,831
Carlton & Carlton 6,770 0 6,289 0 482
Carlton, Sr 103,481 0 7,392 0 96,089
Carlton & Carlton 18,930 0 18,930 0 0
Carlton & Carlton 21,802 0 4,305 0 17,496
C. Dennis Carlton 0 108,750 24,964 0 83,786
C. Dennis Carlton 0 23,850 3,576 0 20,275
C. Dennis Carlton 0 278,000 23,737 0 254,263
C. Dennis Carlton 0 80,000 0 0 80,000
Holmberg Farms 200,000 0 200,000 0 0
Holmberg Farms 1,698 654,906 340,478 0 316,126
Holmberg Farms 0 84,161 8,030 0 76,131
Holmberg Farms 0 250,000 0 0 250,000
5 Directors & Officers 1,943,899 2,224,162 1,890,674 0 2,277,386
----------- ----------- ----------- ----- ----------
Totals $ 2,390,983 $ 3,825,829 $ 2,636,065 $ 0 $3,581,169
=========== =========== =========== ===== ==========
See Accompanying Notes to Consolidated Financial Statements
57
SCHEDULE III
LOANS AND LEASE FINANCING RECEIVABLES
(IN THOUSANDS)
Year ended December 31, 2000 1999 1998
1. Loans secured by real estate:
a. Construction and land development 7,195 6,761 6,470
b. Secured by farmland (including farm residential and other
Improvements) 4,491 4,582 2,780
c. Secured by 1-4 family residential properties
(1) Revolving, open-ended loans secured by 1-4 family residential
Properties and extended under lines of credit 0 0 0
(2) All other loans secured by 1-4 family residential properties:
(a) Secured by first liens 7,649 7,733 6,724
(b) Secured by junior liens 756 369 550
d. Secured by multifamily (5 or more) residential Properties 1,515 381 346
e. Secured by non-farm nonresidential properties 22,729 20,222 15,226
2. Loans to depository institutions 0 0 0
3. Loans to finance agricultural production and other loans to farmers 8,715 8,198 9,406
4. Commercial and industrial 8,595 7,373 8,768
5. Acceptance of other banks 0 0 0
6. Loans to individuals for household, family, and other personal expenditures
(I.e., consumer loans)(includes purchase paper)
a. Credit cards and related plans (includes check credit and other
revolving credit plans) 504 543 402
b. Other (Includes single payment, installment, and all student loans) 5,553 6,710 5,535
7. Obligations (other than securities and leases) of states and political subdivisions
in the U.S. (includes non-rated industrial development obligations)
a. Taxable obligations 0 0 0
b. Tax-exempt obligations 0 0 0
8. All other loans (exclude consumer loans) 142 368 327
9. Lease financing receivables (net of unearned income) 0 0 0
10.Less: any unearned income on loans reflected in items 1-8 above 76 77 65
11.Total loans and leases, net of unearned income (sum of items 1-9 minus item 10) 67,768 63,163 56,469
SCHEDULE IV
BANK PREMISES AND EQUIPMENT
PLEASE REFERENCE NOTES TO FINANCIAL STATEMENTS
NOTE D - FACILITIES
SCHEDULE V
INVESTMENT IN, INCOME FROM DIVIDENDS, AND EQUITY IN
EARNINGS OR LOSSES, OF SUBSIDIARIES AND ASSOCIATED COMPANIES
NOT APPLICABLE
SCHEDULE VI
ALLOWANCE FOR POSSIBLE LOAN LOSSES
PLEASE REFERENCE NOTES TO FINANCIAL STATEMENTS
NOTE C - LOANS
See Accompanying Notes to Consolidated Financial Statements
58
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 2000.
EXHIBITS
(3)(i) Articles of Incorporation of the Company(a)
(3)(ii) Bylaws of the Company(a)
(10)(a) Lease - Valrico State Bank - Jim Redman Parkway Office(c)
(b) Lease - Valrico State Bank - Brandon Office(b)(c)
(c) Valrico State Bank Stock Option Plan(b)(c)
(d) Valrico Bancorp Inc, Stock Option Plan(d)
(21) Valrico State Bank(b)
(a) Incorporated by reference to the Company's Registration Statement
#33-90524 on Form S-4 for the registrant.
(b) Incorporated by reference to the Company's December 31, 1995 Form
10-K.
(c) Incorporated by reference to the Company's December 31, 1997 Form 10-K
(d) Incorporated by reference to the Company's December 31, 1998 Form 10-K
See Accompanying Notes to Consolidated Financial Statements
59
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 on March 30, 2001.
By: /s/ Bob McLean By: /s/ Jerry L. Ball
--------------------------- ---------------------------------------
Bob McLean, President & CEO Jerry L. Ball, Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant on March 24, 2000.
Signatures Titles
- ---------- ------
/s/ J. E. "Bob" McLean, III President and Chief Executive Officer
- ------------------------------------
J. E. "Bob" McLean, III
/s/ Jerry L. Ball Executive Vice President and Director
- ------------------------------------
Jerry L. Ball
/s/ C. Dennis Carlton Director
- ------------------------------------
C. Dennis Carlton
/s/ H. Leroy English Director
- ------------------------------------
H. Leroy English
/s/ Gregory L. Henderson Director
- ------------------------------------
Gregory L. Henderson
/s/ Douglas A. Holmberg Director
- ------------------------------------
Douglas A. Holmberg
/s/ Charles E. Jennings, Jr. Director
- ------------------------------------
Charles E. Jennings, Jr.
/s/ J. "Bill" Noriega, Jr. Director
- ------------------------------------
J. "Bill" Noriega, Jr.
/s/ LeVaughn Amerson Director
- ------------------------------------
LeVaughn Amerson
See Accompanying Notes to Consolidated Financial Statements