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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 14(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ending December 31, 2001
Commission File Number 33 Act File No. -33-90524
VALRICO BANCORP, INC.
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(Exact name of registrant as specified in its Charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0553757
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(I.R.S. employer Identification No.)
1815 East State Road 60, Valrico, Florida 33594
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(Address of Principal executive offices and zip code)
(813) 689-1231
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(Registrant's telephone number, including area code)
Indicate by checkmark 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, 2001, there were 304,728 shares of common stock outstanding
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
Company shares. The Company's common stock, no par value, authorized 1,000,000
shares, had 304,728 shares outstanding as of December 31, 2001.
The Company derives substantially all of its income from dividends and a lease
from the bank. The Bank and 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 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.
As of December 31, 2001, the Bank has been in operation for twelve 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.
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BRANCH BANKING AND LOCATIONS OF OFFICES
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'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.
Brandon Office
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.
Plant City Office
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.
Jim Redman Office
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.
North Riverview Office
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.
SERVICES
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. The depository services are further complemented by
direct deposit programs, night depository services, and bank by mail also
provided by the Bank.
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
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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.
HOURS
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 own four automatic
teller machines (ATM) at the Jim Redman Parkway, Main, Brandon 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 machines which are members of the Southeast Switch, which includes
HONOR Network (Florida and other southeastern states) and CIRRUS (a worldwide
network).
OPERATIONS
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.
PHILOSOPHY
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.
LOANS
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, 2001, commercial and consumer
loans accounted for approximately 63.2%and 10.8%, 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, 2001, residential real estate
mortgage loans accounted for approximately 8.0% 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, 2001, 18.0% of the total loan portfolio
was comprised of agricultural loans. All loans are made in compliance with
applicable Federal and state regulations.
DEPOSITS
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
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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.
As of December 31, 2001, total deposits of the Bank were distributed among
demand deposits (15.0%), savings and time deposits (55.1%) and NOW and money
market deposits (29.9%). 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, 2001, approximately 23.8% of the Bank's total
deposits were from businesses and 76.2% 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.
NEW BUSINESS DEVELOPMENT
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.
COMPETITION
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, 2001, there were 17 commercial banks (including the Company's
subsidiary bank) with 42 offices and 1 savings and loan association with 3
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 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, 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 of the institutions are actually owned by banks with
headquarters in Georgia, Alabama, North Carolina, Ohio, and New Jersey.
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
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community-oriented operating philosophy and personalized banking services are
competitive factors in which it has strength.
REGULATION
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.
PATENTS, TRADEMARKS AND OTHER INTANGIBLE ASSETS
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.
BUSINESS DEVELOPMENT
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 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.
EMPLOYEES
As of December 31, 2001, the Bank employed 46 full-time employees, of which two
were executive officers, and 18 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.
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
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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.
MAIN OFFICE
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.
BRANDON OFFICE
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.
PLANT CITY OFFICE
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.
JIM REDMAN OFFICE
The Bank leases its Jim Redman Parkway branch office space pursuant to an
agreement dated December 31, 1996 (the "Walmart Lease").
NORTH RIVERVIEW OFFICE
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.
OTHER PROPERTIES
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.
During 1999, the Bank purchased three parcels of land adjacent to the main
office facility.
LEASE EXPENSE
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,
2001.
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.
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 2001
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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 7 sale
transactions that occurred during fiscal year 2001 at prices ranging from $20.00
to $25.00 per share, exclusive of commissions. The Bank is also 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. As of December 31, 2001, there
were 491 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 and 2001, the Company 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, 1997, December 31, 1998, December 31, 1999, December 31, 2000 and
December 31, 2001. 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, 1999, 2000 and 2001,
and related notes thereto included elsewhere herein.
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
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2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
INCOME STATEMENT DATA (in Thousands, except Per Share Data)
Interest income $ 7,203 $ 7,255 $ 6,267 $ 5,543 $ 4,711
Interest expense -3,208 -2880 -2,522 -2,199 -1,887
-------- -------- -------- -------- --------
Net interest income 3,995 4,375 3,745 3,344 2,824
Provision for loan losses -120 -250 -101 -210 -300
-------- -------- -------- -------- --------
Net interest income after
provision for loan losses 3,875 4,125 3,644 3,134 2,524
Non-interest income 1,008 940 838 657 516
Non-interest expense -3,768 -3,693 -3,519 -2,912 -2,616
-------- -------- -------- -------- --------
Income before income taxes 1,115 1,372 963 879 424
Income taxes -371 -438 -324 -318 -100
-------- -------- -------- -------- --------
Net income $ 744 $ 934 $ 639 $ 561 $ 324
======== ======== ======== ======== ========
PER SHARE DATA
Net income $ 2.44 $ 3.09 $ 2.09 $ 1.88 $ 1.09
Cash dividends 0.14 0.14 0.12 0.12 0.10
Book value 23.41 20.71 17.42 16.00 14.17
Number of shares used in net
Income-per-share
calculations (1) 304,531 302,138 305,565 299,221 297,026
BALANCE SHEET DATA
Total assets $105,600 $ 95,883 $ 84,366 $ 80,685 $ 63,802
Total investment securities 21,946 8,852 9,134 8,832 7,942
Total net loans (2) 66,798 66,826 62,385 55,694 47,873
Total deposits 93,169 83,925 73,733 70,505 55,047
Shareholders' equity 7,134 6,312 5,251 4,924 4,237
(1) Based on average shares outstanding during the period.
(2) Net loans means total loans net of allowance for possible future loan
losses.
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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 2001, 2000, and 1999. 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 $744,000, $934,000 and $639,000
during the years 2001, 2000, and 1999. This corresponds to per share amounts of
$2.44, $3.09 and $2.09 during those three years respectively.
NET INTEREST INCOME
The bank had a decrease of net interest income between the years 2001 and 2000
of $380,000 or 8.69%, this decrease can be linked to the low demand of loans and
a large increase in deposits during the recessionary period, forcing the bank to
turn to lower yielding assets such as federal fund or investment securities. The
bank had increases of 16.82% and 11.99% during the years 2000 and 1999
respectively. The net interest margin for the three years respectfully was
$3,995,000, $4,375,000 and $3,745,000. The net interest margin is a major
component of the Bank's earning capacity and is the difference or spread between
interest income and interest expense. The spread is considered positive when the
Interest income exceeds the Interest expense and negative when the expense
exceeds the income, At the year ending December 31, 2001, the Bank had a
positive spread of 4.06% as compared to 4.45% and 4.56% for 2000 and 1999
respectively. The Net Interest yield is calculated by taking the net interest
income and dividing it by the average earning assets. During 2001, the Bank had
a Net Interest Yield of 4.32% as compared to 2000 and 1999 yields of 5.13% and
5.00%. To the extent possible, the bank follows a strategy 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.
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. This relationship is expressed in Table I of this
report. In 2001, the net interest income was $3,995,000, which is a decrease of
$380,000 from the previous year end of $4,375,000. The net interest income
increase $630,000 over the 1999 year end amount of $3,745,000.
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The recent decrease is mostly due to the low demand on loans during the 2001
year, coupled with a strong growth in deposits moving the bank to invest in more
liquid, but lower earning assets. Management, at this time, does not feel that
this will be a continued decrease, and is stepping up plans to improve loan
production during the 2002 year.
INTEREST INCOME
Interest income is derived from certain interest earning assets, commonly
referred to as "earning assets", and primarily consist of loans, federal funds
sold, and investment securities. Federal funds sold are overnight funds, lent to
other financial institutions through our correspondent bank, Independent Bankers
Bank. The tables below references these earning assets and their respective
interest income for the year ending December 31, 2001 and 2000.
Interest Income Break Down
For Year Ending 2001
(All Dollars in Thousands)
Pct. of Total
Category (Average for Year) Amount Income Rate Earning Assets
- ----------------------------------------------- --------- -------- ----- --------------
Loans (Before Reserve for Loan Losses) $ 67,291 $ 5,932 8.82% 72.76%
Federal Funds Sold 9,795 441 4.50% 10.59%
Investment Securities 15,399 830 5.39% 16.65%
- ----------------------------------------------- --------- -------- ----- --------
Total Earning Assets $ 92,485 $ 7,203 7.79% 100.00%
Interest Income Break Down
For Year Ending 2000
(All Dollars in Thousands)
Pct. of Total
Category (Average for Year) Amount Income Rate Earning Assets
- ----------------------------------------------- --------- -------- ----- --------------
Loans (Before Reserve for Loan Losses) $ 64,725 $ 6,206 9.59% 79.29%
Federal Funds Sold 8,005 514 6.42% 9.81%
Investment Securities 8,897 535 6.01% 10.90%
- ----------------------------------------------- --------- -------- ----- -------
Total Earning Assets $ 81,627 $ 7,255 8.89% 100.00%
As can be seen by the Tables, there was a marked change in both rate and volume
of Earning Assets between the years 2000 and 2001. This is a significant reason
for why earnings are down in comparison to last year.
Loan Interest decreased from $5,932,000 in 2001, down $274,000 or 4.42% from the
$6,206,000 in 2000. That was an increase of $922,000 or 17.45% from the
$5,284,000 at year end 1999. Federal Funds Sold decreased $73,000 or 14.20% from
the year end amount of $441,000 in 2001, the year ending 2000 saw an increased
$37,000 or 7.76% from the $477,000 at year end 1999. Investment securities
realized an increase of $295,000 with earnings of $830,000 at year end 2001.
This increase was 55.14% higher than the $535,000 earned at year end 2000. The
$535,000 at year end 2000 was $29,000 or 5.73% higher than the $506,000 earned
for year end 1999.
INTEREST EXPENSE
Interest expense is derived from the interest bearing liabilities, which
consists of Checking accounts, Now accounts, Savings Accounts, Money Market
accounts, and Certificates of Deposits ("CDs"), Federal Funds Sold, Repurchase
accounts and other borrowings. During the year 2001, Interest expense totaled
$3,208,000, an increase of $328,000 or 11.38% from the 2000 year end total of
$2,880,000. This was in increase of 358,000 or 14.20% from the 1999 year end
total of $2,522,000. The tables below provides a break out of the two years
ending 2001 and 2000 respectively.
10
Interest Expense Break Down
For Year Ending 2001
(All Dollars in Thousands)
Pct. of Total
Costing
Category (Avg for Year) Amount Expense Rate Liabilities
- ----------------------------------------------- --------- -------- ----- -------------
Transaction Accounts $ 19,643 $ 306 1.56% 24.13%
Savings Accounts 17,356 410 2.36% 21.32%
Certificates of Deposit 39,853 2,221 5.57% 48.96%
Federal Funds Purchased 505 12 2.38% .62%
Other Borrowings 4,044 259 6.40% 4.97%
- ----------------------------------------------- -------- ------- ----- -------
Total Costing Liabilities $ 81,401 $ 3,208 3.94% 100.00%
Interest Expense Break Down
For Year Ending 2000
(All Dollars in Thousands)
Pct. of Total
Costing
Category (Avg for Year) Amount Expense Rate Liabilities
- ----------------------------------------------- --------- -------- ----- -------------
Transaction Accounts $ 16,638 $ 292 1.76% 23.61%
Savings Accounts 16,718 418 2.50% 23.72%
Certificates of Deposit 32,540 1,853 5.69% 46.18%
Federal Funds Purchased 466 17 3.65% .66%
Other Borrowings 4,108 300 7.30% 5.83%
- ----------------------------------------------- -------- ------- ----- -------
Total Costing Liabilities $ 70,470 $ 2,880 4.09% 100.00%
NON INTEREST EXPENSE
The Bank's non-interest expenses for the fiscal year 2001 were $3,768,000 or
approximately $314,000 average per month as compared to $3,693,000 or
approximately $308,000 average per month for 2000. Non-interest expense for 1999
was $3,519,000 or approximately $293,000 average per month. The amount of
$3,768,000 for 2001 consisted primarily of $2,102,000 in salaries and benefits,
$361,000 of occupancy expense for all its offices, equipment expenses of
$316,000 and $989,000 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.
NON INTEREST INCOME
The Bank's non-interest income for fiscal year 2001 was $1,008,000. The sources
reflected in non-interest income were from service charges on deposit accounts
of $896,000 and non-deposit income of $112,000. This is an increase of $68,000
compared to the $940,000 of non-interest income reported for the twelve month
period ended December 31, 2000.
INCOME TAXES
For 2001, net income before taxes was $1,115,000 and after taxes of $371,000,
the net income was $744,000. See Note N of Notes to Consolidated Financial
Statements. The Bank has adopted FAS109 for the accounting of Income Taxes
(Please see Adopted Financial Standards for an explanation).
DEPOSITS
The bank experienced deposit growth during 2001, resulting in a net increase for
the fiscal year of 11.0%, as compared to the previous two years of growth of
13.8% in 1999 and 4.0% in 1998. 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 2001, the Bank's total
deposits were $93,169,000, a $9,244,000 increase. Approximately 85.0% 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 $21,145,000, only
a small percentage maintains a sufficient minimum balance to earn interest.
Non-Interest-bearing accounts made up 15.0% and NOW and Money Market Accounts
were 29.9% of total deposits compared to 17.4% and 28.9% in the previous year
respectively. In time deposits, the Bank held 55.1% in time
11
deposits, which comprise savings accounts and Certificates of Deposits. This was
a decrease from the approximately 50.3% the year before.
FHLB
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.
LOANS
Loans comprise the major asset of the Bank, as of December 31, 2001 the bank had
$67,860,000 in Total Loans, the Table below breaks out the categories the bank
tracks.
DECEMBER 31,
2001 2000
-------------------------- --------------------------
(in Thousands)
Amount Percent Amount Percent
--------- ------- --------- -------
Commercial and Industrial $ 42,907 63.23% $ 41,217 60.75%
Agricultural 12,170 17.93% 12,713 18.74%
Real estate 5,420 7.99% 4,336 6.39%
Installment and other loans 7,363 10.85% 9,579 14.12%
--------- ------- --------- -------
Total loans $ 67,860 100.00% $ 67,845 100.00%
Residential Real Estate
At the conclusion of the fiscal year 2001, residential (1-4 family) real estate
loans totaled $5,420,000, an increase from the previous year amount of
$4,336,000, but this is a decrease from the total residential real estate loans
at the end of the fiscal year 1999, which was $4,651,000. The $5,420,000 at
year-end represents approximately 8.0% of the total loans outstanding, a slight
decrease from the 6.4% for the year ending 2000, and a slight increase from the
7.4% for the year ending 1999. These real estate loans consist primarily of
intermediate term loans secured by real estate and payable in periodic
installments.
Consumer
Consumer loans consist of loans made to individuals and business for consumer
purposes. These loans represented $7,363,000 or 10.9% of the total loan
portfolio. In 2000 and 1999, these loans represented $9,579,000 and $9,073,000
or 14.1% and 13.4% of the total loan portfolio respectively.
Commercial and Industrial
The commercial and industrial loans comprised $42,907,000 $41,217,000 and
$36,259,000 as of December 31, 2001, 2000, and 1999 respectively. The commercial
and industrial purpose loans include commercial real estate loans that are
secured by anything other that farmland or farm equipment. The $42,907,000 at
year-end represents approximately 63.2% of the total loans outstanding, a slight
increase from the 60.75% for the year ending 2000, and a slight increase from
the 57.3% for the year ending 1999.
Agricultural
The commercial loans that have a purpose of agriculture or are secured by any
farmland or equipment are classified as Agricultural. The agricultural loans for
the same periods were $12,170,000, $12,713,000 and $12,780,000. The $12,170,000
at year-end represents approximately 17.9% of the total loans outstanding, a
slight increase from the 18.7% for the year ending 2000, and a slight decrease
from the 20.2% for the year ending 1999.
ALLOWANCE FOR LOAN LOSSES
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
12
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 $120,000 for provision for loan losses in 2001
and $250,000 and $101,000, respectively, for 2000 and 1999. The amount of
$120,000 was added to the beginning balance of $943,000 for the period ended
December 31, 2000 for a total accumulated provision before net charge-offs for
the period ended December 31, 2001 of $1,063,000. The Bank charged off loans
during the fiscal year 2001 in the amount of $116,000 and reflected recoveries
of $31,000 leaving a net balance in the allowance for loan losses for the period
ended December 31, 2001 of $978,000, which was 1.44% of total loans outstanding
of $67,860,000.
NON ACCRUAL LOANS
Loans on which the accrual of interest has been discontinued are designated as
non-accrual 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 non-accrual
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, 2001 and December 31, 2000, the Bank's
loans designated as non-accrual totaled $530,000 and $638,000, respectively. The
Bank has adopted FASB 114 (please see Adopted Financial Accounting Standards for
an explanation).
IMPAIRED LOANS
At December 31, 2001 and December 31, 2000, loans totaling $240,000 and
$253,000, respectively, had been classified as impaired. The bank has adopted
FAS114 for its accounting procedures dealing with Impaired Loans (please see
Adopted Financial Accounting Standards for an explanation).
INVESTMENT SECURITIES
The Bank's investment portfolio at December 31, 2001 of $21,946,000(based on
securities held available for sale marked to approximate fair market value)
comprised approximately 23.5% of the Bank's total earning assets, as compared to
10.4% at December 31, 2000. The investment securities are primarily concentrated
in U. S. Treasury securities, obligations of other U. S.
13
Government agencies, municipals and corporations. As of December 31, 2000, the
Bank's investment portfolio had 14.8% adjustable rate securities.
As of December 31, 2001, 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 $42,000.
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.
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.
The Bank adopted FASB 115 and FAS 130 for accounting of Investments (please see
Adopted Financial Accounting Standards for an explanation).
EARNING ASSETS
When calculating total earning assets, the amount of $1,066,000 and $1,023,000
as of December 31, 2001 and 2000 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 EARNING ASSETS
Non-interest earning assets accounted for approximately 11.5% of the Company's
total assets at December 31, 2000, a decrease from the approximately 10.8% 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
$12,145,000 of non-interest earning assets, cash and non-interest bearing
deposits totaled $6,417,000. Other significant non-interest earning assets
consisted of fixed assets and interest receivable.
CAPITAL
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, 2001,
the Bank's Tier 1 capital position was 6.98% ($7,462,000 shareholders' equity
divided by total assets of $106,973,000) and the Bank's Tier 2 capital was 7.87%
determined by adding loan loss reserves of $943,000 to shareholders' equity of
$7,462,000 and dividing by total assets of $106,973,000). Total Tier 1 capital
to total risk-weighted assets as of December 31, 2001 was 9.34% and total
capital (Tier 2) to total risk-weighted assets was 10.57% compared to 9.15% and
10.41%, respectively, in 2000.
INTEREST RATE RISK
Interest rate sensitivity is a function of the re-pricing characteristics of the
Bank's portfolio of assets and liabilities. These re-pricing 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, re-pricing 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 re-price during time periods of
changes in market interest rates. Effective management is to ensure that 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
re-price and the time bands within which the re-pricing occurs. Through such
14
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, 2001, indicated a net interest sensitive liability gap of 133.5%
when projecting out one year. In the near term, defined as 90 days, the Bank had
a net interest sensitivity asset gap of 142.6%. This information represents a
general indication of re-pricing 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
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, 2001, the Bank's liquidity ratio was 34.12% derived by
dividing net cash, short-term, and marketable assets of $31.7 million by net
deposits of $92.9 million. The Bank's dependency ratio as of December 31, 2000
was 9.26%. This ratio is determined by taking the Bank's volatile liabilities
(primarily Jumbo certificates) of $13.0 million less short-term investments of
$4.9 million divided by adjusted total earning assets of $87.5 million. In 1999
and 1998, 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.
REGULATORY MATTERS
On June 19, 2001, the Bank and the FDIC entered into a Memorandum of
Understanding under which the Bank would institute a corrective action program
to eliminate compliance problems at the Bank. Management believes that the Bank
is in substantial compliance with the Memorandum.
ADOPTED FINANCIAL ACCOUNTING STANDARDS
FAS 109
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.
FASB 114
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
15
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.
FASB 115
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.
FAS 119
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).
FAS 121
FAS 121, which was effective for the first quarter of 1996, did not have any
significant effect on the Company.
FAS 130
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.
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)
16
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)
17
TABLE I
AVERAGE BALANCES, INTEREST, AND YIELD/RATE
(Dollars in Thousands)
2001 2000 1999
Assets: Average Income/ Average Average Income/ Average Average Income/ Average
Earning Assets: Balance Expense Rate Balance Expense Rate Balance Expense Rate
Loans, Net of
unearned income $ 67,511 $5,932 8.79% $68,060 $ 6,206 9.12% $56,521 $5,284 9.35%
Investment Securities
Taxable 12,745 671 5.26% 6,291 415 6.60% 6,267 385 6.14%
Tax exempt 3,443 159 4.62% 2,504 120 4.80% 2,521 121 4.80%
-------- ------ ----- ------- ------- ----- ------- ------ -----
Total Investments 16,188 830 5.13% 8,795 535 6.08% 8,788 499 5.76%
Federal Funds Sold 10,976 441 4.02% 8,405 514 6.12% 9,537 477 5.00%
-------- ------ ----- ------- ------- ----- ------- ------ -----
Total Earning Assets 94,675 7,203 7.61% 85,260 7,255 8.51% 74,846 6,267 8.37%
Allowance for loan losses (991) (932) (776)
Cash and Due From 6,636 5,542 4,901
Other Assets 6,277 6,071 5,237
-------- ------- -------
Total Assets $106,597 $95,941 $84,208
======== ======= =======
Liabilities and Shareholders Equity
Interest Bearing Liabilities
Deposits
NOW Accounts $ 20,383 $ 306 1.50% $17,605 $ 291 1.65% $14,733 $ 259 1.76%
Money Market Accounts 6,764 167 2.47% 6,769 182 2.69% 5,390 139 2.58%
Savings Accounts 10,881 243 2.23% 9,280 236 2.54% 9,510 228 2.40%
Time $100,000 and over 12,935 751 5.81% 11,129 563 5.06% 8,821 472 5.35%
Other Time Deposits 27,270 1,470 5.39% 24,497 1,290 5.27% 22,299 1,131 5.07%
-------- ------ ----- ------- ------- ----- ------- ------ -----
Total interest bearing deposits 78,233 2,937 3.75% 69,280 2,562 3.70% 60,753 2,229 3.67%
Securities sold under agreement
to repurchase, Federal funds
purchased and other borrowings 4,524 271 5.99% 4,568 318 6.96% 4,330 292 6.74%
-------- ------ ----- ------- ------- ----- ------- ------ -----
Total interest bearing
liabilities 82,757 3,208 3.75% 73,848 2,880 3.90% 65,083 ,521 3.87%
Demand Deposits (non interest-bearing) 15,591 14,312 13,295
Accrued expenses and other liabilities 1,355 1,721 740
Shareholders' equity 6,894 6,060 5,090
-------- ------- -------
Total liabilities and shareholders'
equity $106,597 $95,941 $84,208
======== ======= =======
Net interest income/net interest
spread 3,995 3.75% 4,375 4.56% 3,746 4.45%
Net yield on earning assets 4.22% 5.13% 5.00%
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.
18
TABLE I CONTINUED
December 31, 2001 2000
Volume Rate Total Volume Rate Total
Interest Income
Loans $(50) $(224) $(274) $1,055 $(133) $922
Investment Securities 450 (155) 295 -- 29 29
Other Earning Assets 157 (230) (73) (61) 98 37
---- ----- ----- ------ ----- ----
Total 557 (609) (52) 994 (6) 988
Interest Expense
Deposits 335 40 375 316 18 334
Borrowings (3) (44) (47) 15 9 24
---- ----- ----- ------ ----- ----
Total 332 (4) 328 331 27 358
---- ----- ----- ------ ----- ----
Net Change $225 $(605) $(380) $ 663 $ (33) $630
==== ===== ===== ====== ===== ====
Interest Rate Sensitivity
(Dollars in Thousands)
After One After Three
After Three Year but Years but
Within Months but Within Within After
Three Within One Three Five Five
Months Year Years Years Years
------- ------- --------- ----------- ------
December 31, 2001
Assets
Loans $23,773 $ 5,198 $20,905 $14,411 $3,489
Short term investments 3,645 0 0 0 0
Securities 2,350 4,137 2,915 60,53 6,381
------- ------- ------- ------- ------
Total interest sensitive assets (ISA) 29,768 9,335 23,820 20,464 9870
Liabilities
Interest bearing deposits 18,558 31,315 16,249 13,057 0
Federal funds purchased 0 0 0 0 0
Long term borrowings 1,040 0 0 0 2,000
Short term borrowings 1,278 0 0 0 0
------- ------- ------- ------- ------
Total interest sensitive liabilities (ISL) $20,876 $31,315 $16,249 $13,057 $2,000
Net position os ISA minus ISL 8,892 -21,980 7,571 7,407 7,870
Cumulative net position of ISA minus ISL 8,940 -13,088 -5,517 1,890 9,760
Cumulative net position as a percent
of total assets 10.54% -15.51% -6.54% 2.24% 11.57%
19
TABLE II
Investment Portfolio
(amortized cost, in thousands)
December 31, 2001 2000 1999
Securities to be held-to-maturity
1. U.S. Treasury Securities $ 0 $ 0 $ 0
2. U.S. Government Agencies 0 0 0
3. Mortgage-backed securities 294 1,286 0
4. Municipal 1,288 438 554
5. Other 0 0 1,285
------- ------ ------
Subtotal 1,582 1,724 1,839
Securities available-for-sale
1. U.S. Treasury Securities $ 0 $ 0 $ 0
2. U.S. Government Agencies 6,002 988 997
3. Mortgage-backed securities 7,855 1,265 0
4. Municipal 3,027 3,567 3,837
5. Other 3,369 1,349 2,630
-------- ------- -------
Subtotal 20,253 7,169 7,464
-------- ------- -------
Total investment securities $21,835 $8,893 $9,303
======== ======= =======
Investment Securities Maturity Schedule
(Dollars in Thousands)
Maturity Schedule
In 2001 In 2000 In 1999
Amount Yield Amount Yield Amount Yield
Security Type Within One Year
1. U.S. Treasury Securities $ 0 0.00% $0 0.00% $0 0.00%
2. U.S. Government Agencies 500 6.05% 0 0.00% 0 0.00%
3. Mortgage-backed securities 0 5.51% 0 0.00% 0 0.00%
4. Municipal 275 4.60% 7 6.91% 6 4.82%
5. Other 455 6.47% 0 0.00% 0 0.00%
------ -- --
Totals $1,230 $7 $6
====== == ==
20
TABLE II CONTINUED
In 2001 In 2000 In 1999
Amount Yield Amount Yield Amount Yield
Security Type After One Year but Within Five Years
1. U.S. Treasury Securities $ 0 0.00% $ 0 0.00% $ 0 0.00%
2. U.S. Government Agencies 5,000 5.40% 1,000 6.05% 500 6.05%
3. Mortgage-backed securities 127 6.19% 275 4.60% 0 0.00%
4. Municipal 270 5.51% 214 6.11% 346 6.31%
5. Other 1,538 6.03% 950 6.17% 1225 5.82%
------ ------ ------
Totals $6,935 $2,439 $2,071
====== ====== ======
In 2001 In 2000 In 1999
Amount Yield Amount Yield Amount Yield
Security Type After Five Years but Within Ten Years
1. U.S. Treasury Securities $ 0 0.00% $ 0 0.00% $ 0 0.00%
2. U.S. Government Agencies 502 4.00% 0 0.00% 500 6.21%
3. Mortgage-backed securities 3,300 4.40% 1,535 4.75% 0 5.87%
4. Municipal 3,526 4.75% 1,367 5.88% 1401
5. Other 1,010 6.52% 0 0.00% 1,521 5.15%
------ ------ ------
Totals $8,338 $2,902 $3,422
====== ====== ======
In 2001 In 2000 In 1999
Amount Yield Amount Yield Amount Yield
Security Type After 10 Years
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. Mortgage-backed securities 4,722 4.96% 750 4.79% 0 6.44%
4. Municipal 244 5.50% 2,422 6.39% 2584
5. Other 366 0.00% 45 7.79% 1,157 6.38%
------ ------ ------
Totals $5,332 $3,217 $3,741
====== ====== ======
21
TABLE III
LOAN PORTFOLIO
(Dollars in Thousands)
December 31, 2001 2000 1999
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
Loan Type
1. Commercial $55,077 81.2% $53,930 79.5% $49,039 77.5%
2. Real Estate (1.4 family) 5,420 8.0% 4,336 6.4% 4,651 7.4%
3. Installment and other 7,363 10.8% 9,579 14.1% 9,549 15.1%
------- ----- ------- ----- ------- -----
Total Loans 67,860 100.0% 63,239 100.0% 67,845 100.0%
===== ===== =====
Less: Unearned Income (84) (76) (76)
Less: Allowance for loan losses (978) (943) (778)
------ ------ ------
Total loans less allowance
and unearned income $66,798 $66,826 $62,385
======= ======= =======
Selected Loan Maturity and Interest Rate Sensitivity Schedules
(Dollars in Thousands)
December 31, 2001 2000 1999
Within One Year
1. Commercial $15,016 $16,312 $16,846
2. Real Estate (1.4 family) 907 1,755 1,672
3. Installment and other 1,615 1,559 1,795
------- ------- -------
Total $17,538 $19,626 $20,313
======= ======= =======
After One Year but Within Five Years
1. Commercial $35,965 $33,438 $28,614
2. Real Estate (1.4 family) 4,045 1,205 2,510
3. Installment and other 5,082 7,601 6,959
------- ------- -------
Total $45,092 $42,244 $38,083
======= ======= =======
After Five Years
1. Commercial $4,098 $4,180 $3,579
2. Real Estate (1.4 family) 468 1,376 469
3. Installment and other 664 419 795
------ ------ ------
Total $5,230 $5,975 $4,843
====== ====== ======
22
Table III Continued
Rate Structure for Loans Maturing Over One Year
(Dollars in thousands)
With With With
With Pre- Floating With Pre- Floating With Pre- Floating
Deter-mined or Determined or Determined or
Interest Adjustable Interest Adjustable Interest Adjustable
Rate Rate Rate Rate Rate Rate
Amount Amount Amount Amount Amount Amount
1. Commercial $31,437 $8,625 $32,026 $5,592 $22,376 $9,817
2. Real Estate (1.4 family) 4,513 0 2,581 0 2,979 0
3. Installment and other 5,747 0 8,020 0 7,754 0
------- ------ ------- ------ ------- ------
Total $41,697 $8,625 $42,627 $5,592 $33,109 $9,817
======= ====== ======= ====== ======= ======
(Remainder of this page intentionally left blank)
23
TABLE IV
SUMMARY OF LOAN LOSS EXPERIENCE
Year Ended December 31, 2001 2000 1999
Balance at beginning of Period $942,884 $777,712 $776,382
Charge-offs:
Commercial Loans 0 75,308 56,772
Commercial Mortgages Loans 0 0 0
Construction Loans 0 0 0
Residential Mortgage Loans 0 0 16,341
Consumer Loans 115,515 98,124 29,138
-------- -------- --------
Total Charge-offs 115,515 173,432 102,251
Recoveries
Commercial Loans 19,171 49,349 1,826
Commercial Mortgages Loans 0 0 0
Construction Loans 0 0 0
Residential Mortgage Loans 11,535 0 755
Consumer Loans 0 39,255 0
-------- -------- --------
Total Recoveries 30,706 88,604 2,581
-------- -------- --------
Net Charge-offs less recoveries 84,809 84,828 99,670
Additions charged to operations 120,000 250,000 101,000
-------- -------- --------
Balance at end of period $978,075 $942,884 $777,712
======== ======== ========
Allocation of the allowance for loan losses
2001 2000 1999
Percent Percent Percent
of Loans in of Loans in of Loans in
in Each in Each in Each
Category Category Category
To Total To Total To Total
Amount Loans Amount Loans Amount Loans
Balance at end of period applicable to:
Commercial and agricultural $793,832 81.2% $749,499 79.5% $603,081 77.5%
Real estate 78,119 8.0% 60,260 6.4% 57,198 7.4%
Installment and Others 106,124 10.9% 133,125 14.1% 117,433 15.1%
-------- ----- -------- ----- -------- -----
$978,075 100.0% $942,884 100.0% $777,712 100.0%
======== ===== ======== ===== ======== =====
24
TABLE V
Deposits
(Dollars in Thousands)
Year Ended December 31, 2001 2000 1999
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE
Deposits:
Non-interest
Demand deposits $15,591 0.00% $14,276 0.00% $13,295 0.00%
Interest Bearing Deposits
NOW accounts 20,383 1.50% 17,605 1.65% 14,733 1.76%
Money market accounts 6,764 2.47% 6,769 2.69% 5,390 2.58%
Savings accounts 10,881 2.23% 9,280 2.54% 9,510 2.40%
Time, $100,000 and over 12,935 5.81% 11.129 5.27% 8,821 5.35%
Other time Deposits 27,270 5.39% 24,497 5.06% 22,299 5.07%
------- ---- ------- ---- ------- ----
Total Interest
bearing deposits 78,233 3.75% 69,280 3.70% 60,753 3.67%
------- ---- ------- ---- ------- ----
Total Deposits $93,824 $83,556 $74,048
======= ======= =======
MATURITIES OF TIME DEPOSITS OVER $100,000
(DOLLARS IN THOUSANDS)
December 31, 2001 2000 1999
OTHER OTHER OTHER
CERTIFICATES TIME CERTIFICATES TIME CERTIFICATES TIME
OF DEPOSITS DEPOSITS OF DEPOSITS DEPOSITS OF DEPOSITS DEPOSITS
Three months or less $3,396 0 $3,415 0 $2,544 0
Three through six months 1,224 0 1,646 0 1,984 0
Six through twelve months 1,574 0 1,753 0 2,074 0
Over twelve Months 936 0 696 0 2,251 0
------ -- ------ -- ------ --
Total $7,130 0 $8,853 0 $7,861 0
====== == ====== == ====== ==
25
TABLE VI
RETURN ON EQUITY AND ASSETS
December 31, 2001 2000 1999
Return on average assets 0.70% 1.00% 0.76%
Return on average common Equity 10.79% 15.95% 12.55%
Common dividend payout ratio 6.03% 4.53% 5.82%
Average equity to average assets ratio 6.47% 6.26% 6.04%
LEVERAGE RATIO CALCULATIONS
December 31, 2001 2000 1999
Total average assets 106,597 93,535 84,208
Less intangibles 0 0 0
Total tangible average assets 106,597 93,535 84,208
Total common shareholders' equity 7,134 6,312 5,251
Less intangibles 0 0 0
Total tangible period-end common
shareholders' equity 7,134 6,312 5,251
Leverage ratio 6.69% 6.75% 6.24%
RISK-BASED CAPITAL RATIO
(Bank Only)
Tier I capital ratio 6.98 7.10% 7.06%
Total risk-based capital ratio 10.57 9.15% 10.41%
26
CONTENTS PAGE
INDEPENDENT AUDITORS' REPORT 28
FINANCIAL STATEMENTS
Consolidated Balance Sheets 29
Consolidated Statements of Income 30
Consolidated Statements of Changes in Stockholders' Equity 31
Consolidated Statements of Cash Flows 32-33
Notes to Consolidated Financial Statements 34-50
27
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, 2001 and 2000, 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, 2001. 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
Rex Meighen & Company, LLP
Certified Public Accountants
Tampa, Florida
January 18, 2002
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
--------------------------
2001 2000
-------- --------
(in thousands)
ASSETS
Cash and non-interest bearing deposits $ 6,417 $ 5,764
Federal funds sold 3,645 8,808
Securities available-for-sale 20,364 7,128
Securities to be held-to-maturity 1,582 1,724
Loans, net 66,798 66,826
Facilities, net 3,231 3,384
Other real estate 1,079 --
Accrued interest receivable 632 604
Other assets 1,852 1,645
-------- --------
Total assets $105,600 $ 95,883
======== ========
LIABILITIES
Deposits:
Demand deposits $ 13,990 $ 14,621
NOW accounts 21,145 17,887
Money market accounts 6,698 6,381
Savings accounts 11,396 9,193
Time deposits, $100,000 and over 12,372 11,482
Other time deposits 27,568 24,361
-------- --------
Total deposits 93,169 83,925
Securities sold under agreements to repurchase 308 598
Accounts payable and accrued liabilities 979 970
Advances under line-of-credit 970 970
Notes payable 3,040 3,108
-------- --------
Total liabilities 98,466 89,571
Commitments and contingencies (Notes O and P)
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized 1,000,000
shares, issued and outstanding 304,728 shares for 2001;
304,324 for 2000 305 304
Capital surplus 2,526 2,515
Retained earnings 4,236 3,535
Accumulated other comprehensive income 67 (42)
-------- --------
Total stockholders' equity 7,134 6,312
-------- --------
Total liabilities and Stockholders' Equity $105,600 $ 95,883
======== ========
See Accompanying notes to Consolidated Financial Statements
29
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
-----------------------------------------------
2001 2000 1999
--------- --------- ----------
(in thousands, except per share data)
INTEREST INCOME
Interest and fees on loans $ 5,932 $ 6,206 $ 5,284
Interest on investment securities:
U. S. Treasury -- -- 19
U. S. Government agencies 483 324 293
State and municipal securities 159 120 121
Other 188 91 73
Income on Federal funds sold 441 514 477
-------- --------- ---------
Total interest income 7,203 7,255 6,267
-------- --------- ---------
INTEREST EXPENSE
Interest on deposits 2,937 2,563 2,229
Interest on short-term borrowings 72 108 82
Interest on long-term debt 199 209 211
-------- --------- ---------
Total interest expense 3,208 2,880 2,522
-------- --------- ---------
Net interest income 3,995 4,375 3,745
PROVISION FOR LOAN LOSSES 120 250 101
-------- --------- ---------
Net interest income after provision
for loan losses 3,875 4,125 3,644
-------- --------- ---------
OTHER INCOME
Service charges on deposit accounts 896 834 729
Miscellaneous income 112 106 109
-------- --------- ---------
Total other income 1,008 940 838
-------- --------- ---------
OTHER EXPENSES
Salaries and employee benefits 2,102 2,111 1,843
Occupancy expense 361 324 363
Equipment expense 316 291 321
Stationery, printing and supplies 131 130 139
Miscellaneous expenses 858 837 853
-------- --------- ---------
Total other expenses 3,768 3,693 3,519
-------- --------- ---------
INCOME BEFORE INCOME TAXES 1,115 1,372 963
INCOME TAXES 371 438 324
-------- --------- ---------
NET INCOME 744 934 639
OTHER COMPREHENSIVE INCOME
Unrealized gains (losses) on Securities 109 102 (153)
-------- -------- ---------
COMPREHENSIVE INCOME $ 853 $ 1,036 $ 486
======== ========= =========
PER SHARE DATA
Average shares outstanding 304,531 302,138 305,565
Basic EPS $ 2.44 $ 3.09 $ 2.09
======== ========= =========
See Accompanying notes to Consolidated Financial Statements
30
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
ACCUMULATED
OTHER TOTAL
COMMON CAPITAL RETAINED COMPREHENSIVE STOCKHOLDERS'
STOCK SURPLUS EARNINGS INCOME EQUITY
------ ------- ------- ----------- ------------
(in thousands)
Balance, December 31, 1998 $ 308 $ 2,566 $ 2,041 $ 9 $ 4,924
Net income for 1999 -- -- 639 -- 639
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
Net income for 2000 -- -- 934 -- 934
Other comprehensive income, net of tax:
Net change in net
unrealized holding
gains 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
Net income for 2001 744 -- 744
Other comprehensive income, net of tax:
Net change in net
unrealized holding
gains on securities -- -- -- 109 109
Stock issuance 1 11 -- -- 12
Cash dividends -- -- (43) -- (43)
------ ------- ------- ----------- ------------
Balance, December 31, 2001 $ 305 $ 2,526 $ 4,236 $ 67 $ 7,134
====== ======= ======= =========== ============
See Accompanying notes to Consolidated Financial Statements
31
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
--------------------------------------------
2001 2000 1999
--------- ----------- --------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 744 $ 934 $ 639
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for loan losses 120 250 101
Depreciation and amortization 258 265 284
Net amortization (accretion) of investment 28 8 1
security premiums and discounts
Deferred income taxes (304) (135) (44)
(Increase) in assets: (28) (24) (101)
Accrued interest receivable
Other assets 97 (45) (69)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 9 398 (315)
-------- -------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 924 1,651 496
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available-for-sale:
Purchase of securities (15,999) -- (1,956)
Proceeds from maturities of securities 339 281 1,290
Proceeds from sale of securities 2,505 -- --
Securities to be held to maturity:
Proceeds from maturities of securities 142 120 215
Decrease (increase) in Federal funds sold 5,163 (8,299) 5,847
Net increase in loans (1,171) (4,716) (6,797)
Purchase of facilities (105) (145) (373)
Proceeds from sale of other real estate -- 1 101
-------- -------- -------
NET CASH USED IN INVESTING ACTIVITIES (9,126) (12,758) (1,673)
-------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Deposits 9,244 10,192 3,228
Net increase (decrease) in securities sold under
agreements to repurchase (290) (74) 26
Proceeds from issuance of long-term debt -- -- --
Principal payments on long-term debt (68) (59) (55)
Proceeds from issuance of common stock 12 67 78
Cash dividends paid (43) (42) (37)
Redemption of common stock -- -- (200)
Net borrowings on line-of-credit -- -- 470
NET CASH PROVIDED BY FINANCING ACTIVITIES 8,855 10,084 3,510
-------- -------- -------
NET INCREASE (DECREASE) IN CASH 653 (1,023) 2,333
CASH, BEGINNING OF YEAR 5,764 6,787 4,454
-------- -------- -------
CASH, END OF YEAR $ 6,417 $ 5,764 $ 6,787
======== ======== =======
See Accompanying notes to Consolidated Financial Statements
32
VALRICO BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW 2001 2000 1999
--------- -------- -------
Cash paid during the year for interest $ 3,111 $ 2,739 $ 2,202
Cash paid during the year for income taxes $ 381 $ 516 $ 307
NON-CASH TRANSACTIONS:
Transfers from loans to other real estate $ 1,079 $ - $ -
See Accompanying notes to Consolidated Financial Statements
33
VALRICO BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001
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.
34
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
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.
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.
35
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
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.
Comprehensive Income:
The Company accounts for comprehensive income in accordance with FAS 130,
Reporting Comprehensive Income. FAS 130 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.
36
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
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, 2001, are as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ----------- --------
(in thousands)
SECURITIES AVAILABLE-FOR-SALE:
U. S. Government agencies $ 6,002 $ 72 $ $ 6,074
State and municipal 3,027 -- 43 2,984
Mortgage-backed securities 7,855 60 -- 7,915
Other 3,369 22 -- 3,391
--------- ------ ------- -------
$ 20,253 $ 154 $ 43 $20,364
========= ====== ======= =======
SECURITIES TO BE HELD-TO-MATURITY:
Mortgage-backed securities $ 294 $ 10 $ -- $ 304
State and municipal 1,288 44 -- 1,332
--------- ------ ------- -------
$ 1,582 $ 54 $ -- $ 1,636
========= ====== ======= =======
37
NOTE B - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated fair value of investments in securities at
December 31, 2000, are as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------- --------- -------- --------
(in thousands)
SECURITIES AVAILABLE-FOR-SALE:
U. S. Treasury $ 998 $ 5 $ - $ 1,003
U. S. Government agencies 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:
Mortgage-backed securities $ 438 $ 3 $ - $ 441
State and municipal 1,286 49 - 1,335
--------------- -------- -------- --------
$ 1,724 $ 52 $ - $ 1,776
=============== ======== ======== ========
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 $678,000 and $765,000, and market values of
approximately $706,000 and $773,000 were pledged to secure repurchase agreements
and deposit accounts at December 31, 2001 and 2000, respectively.
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
$1,852 at December 31, 2001.
The cost and estimated fair value of debt securities at December 31, 2001, 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.
38
NOTE B - INVESTMENT SECURITIES (CONTINUED)
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 $ 952 $ 966 $ 278 $ 281
Due from one to five years 6,652 6,782 281 296
Due from five to ten years 8,075 8,014 498 516
Due after ten years 4,574 4,602 525 543
-------------- -------- ------- -------
$ 20,253 $ 20,364 $ 1,582 $ 1,636
============== ======== ======= =======
NOTE C - LOANS
The loan portfolio is classified as follows:
DECEMBER 31,
------------------------
2001 2000
------- --------
(in thousands)
Commercial and agricultural $55,077 $ 53,930
Real estate 5,420 4,336
Installment and other loans 7,363 9,579
------- --------
Total loans 67,860 67,845
Less, unearned income (84) (76)
Less, allowance for loan losses (978) (943)
------- --------
$66,798 $ 66,826
======= ========
The following is a summary of the transactions in the allowance for loan losses:
YEAR ENDED DECEMBER 31,
---------------------------------------------------
2001 2000 1999
--------------- -------------- ----------------
(in thousands)
Balance, beginning of year $ 943 $ 778 $ 776
Provision charged to operating expenses 120 250 101
Loans charged-off (116) (174) (102)
Recoveries 31 89 3
--------------- -------------- ----------------
$ 978 $ 943 $ 778
=============== ============== ================
Loans on which interest was not being accrued totaled $530,000 at December 31,
2001, and $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 $31,800 and $38,000 for 2001
and 2000, respectively.
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, 2001 and 2000, the Bank had classified loans in the amounts of
$240,400 and $252,500 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.
39
NOTE D - FACILITIES
Facilities are summarized as follows:
ACCUMULATED
DEPRECIATION ESTIMATED
COST & NET BOOK USEFUL
AMORTIZATION VALUE LIVES
---------- --------------- ----------- -------------
DECEMBER 31, 2001 (in thousands)
Land $ 1,087 $ - $ 1,087 N/A
Building 1,831 262 1,568 39 1/2 years
Leasehold improvements 617 376 241 3 - 15 years
Furniture, fixtures and equipment 1,926 1,592 335 2 - 15 years
---------- --------------- -----------
$ 5,461 $ 2,230 $ 3,231
========== =============== ===========
COST ACCUMULATED
DEPRECIATION ESTIMATED
& NET BOOK USEFUL
AMORTIZATION VALUE LIVES
DECEMBER 31, 2000 (in thousands)
Land $ 1,087 $ - $ 1,087 N/A
Building 1,830 203 1,627 39 1/2 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
========== ============= ===========
Other expenses for the years ended December 31, 2001, 2000, and 1999, included
depreciation and amortization of facilities of $258,000, $265,000, and $274,000,
respectively.
NOTE E - TIME DEPOSITS
At December 31, 2001, scheduled maturities (in thousands) of time deposits are
as follows:
2002 $ 33,690
2003 3,197
2004 1,272
2005 1,040
2006 and thereafter 741
-------------------
$ 39,940
===================
40
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, 2001, the outstanding balance was $969,950. Interest expense was
$60,000, $92,000 and $68,000 for the years ended December 31, 2001, 2000 and
1999, respectively.
NOTE G - NOTES PAYABLE
Long-term debt consists of the following:
DECEMBER 31,
--------------------------------------
2001 2000
------------------ -----------------
(in thousands)
Note payable to Independent Banker's Bank of Florida, principal and 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. $ 1,040 $ 1,108
Note payable to the Federal Home Loan Bank of Atlanta, interest payable
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. 2,000 2,000
------------------ ----------------
3,040 3,108
Less: current portion (69) (63)
------------------ ----------------
$ 2,971 $ 3,045
================== ================
Estimated maturities (in thousands) on long-term debt are as follows:
2003 $ 75
2004 81
2005 89
2006 96
Thereafter 2,630
---------------
$ 2,971
===============
Interest expense was $198,890, $209,012 and $210,721 for the years ended
December 31, 2001, 2000 and 1999, respectively.
41
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, 2001, 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 $37,100 for 2001,
$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 $15,284 in 2001, $14,120 in 2000, and
$11,551 in 1999.
42
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, 2001, 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, 2001:
Totalrisk-based capital (To
risk-weighted assets) $8,440 10.57% $6,391 8.00% $7,998 10.00%
Tier I capital (To risk-weighted
assets) $7,462 9.34% $3,195 4.00% $4,793 6.00%
Tier I capital (To adjusted
total assets) $7,462 6.98% $4,279 4.00% $5,349 5.00%
AS OF DECEMBER 31, 2000:
Total risk-based capital (To
risk-weighted assets) $7,571 10.41% $5,821 8.00% $7,276 10.00%
Tier I capital (To risk-weighted
assets) $6,661 9.15% $2,950 4.00% $4,366 6.00%
Tier I capital (To adjusted
total assets) $6,661 7.13% $3,739 4.00% $4,674 5.00%
On June 19, 2001, the Bank and the FDIC entered into a Memorandum of
Understanding under which the Bank would institute a corrective action program
to eliminate compliance problems at the Bank. Management believes that the Bank
is in substantial compliance with the Memorandum.
43
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,
$67,000, and $67,000 for each of the years ended December 31, 2001, 2000, and
1999.
These leases are accounted for as operating leases.
The future minimum rental commitment for said leases are as follows:
2002 $ 54,500
2003 10,500
2004 --
2005 --
2006 --
----------
$ 65,000
==========
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 2001, 2000, and 1999 were $36,318, $40,931, and
$28,819, respectively.
NOTE M - OTHER EXPENSES
Miscellaneous expenses were as follows:
YEAR ENDED DECEMBER 31,
----------------------------------------
2001 2000 1999
(in thousands)
Advertising and public relations $ 73 $ 97 $ 99
Professional fees 74 104 77
Postage 90 80 75
Taxes 49 21 108
Insurance 65 91 93
Other 507 444 401
-------- -------- --------
$ 858 $ 837 $ 853
======== ======== ========
44
NOTE N - INCOME TAXES
The provision for income taxes is summarized as follows:
YEAR ENDED DECEMBER 31,
------------------------------------------
2001 2000 1999
-------- -------- --------
(in thousands)
Current income taxes:
Federal $ 338 $ 514 $ 331
State 58 59 37
-------- -------- --------
Total current income taxes 396 573 368
Deferred income taxes (credit) (25) (135) (44)
-------- -------- --------
Income tax provision $ 371 $ 438 $ 324
======== ======== ========
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,
------------------------------------------
2001 2000 1999
-------- -------- --------
(in thousands)
Tax computed at statutory rate $ 379 $ 466 $ 327
Increase (decrease) resulting from: (18) (16) (32)
Tax exempt income
State income tax, net of Federal tax benefit 38 31 32
Other (28) (43) (3)
-------- -------- --------
Income tax provision $ 371 $ 438 $ 324
======== ======== ========
The components of the deferred income tax asset included in other assets are as
follows:
DECEMBER 31,
-------------------------
2001 2000
-------- --------
(in thousands)
Deferred tax liability:
Federal $ (49) $ (28)
State (8) (5)
-------- --------
(57) (33)
-------- --------
Deferred tax asset:
Federal 381 399
State 65 66
-------- --------
446 465
-------- --------
Net deferred tax asset (liability) $ 389 $ 432
======== ========
45
NOTE N - INCOME TAXES (CONTINUED)
The tax effects of each type of significant item that gave rise to deferred
taxes are:
DECEMBER 31,
-------------------------
2001 2000
-------- --------
(in thousands)
Accumulated other comprehensive income $ (43) $ 13
Accretion income (14) (22)
Depreciation 54 35
Cash to accrual adjustment -- (11)
Deferred loan fees 28 28
Allowance for loan losses 316 301
Deferred compensation 48 36
Other item -- 52
-------- --------
Net deferred tax asset $ 389 $ 432
======== ========
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,
---------------------------
2001 2000
--------- ---------
(in thousands)
Commitments to extend credit $ 5,614 $ 5,451
Standby letters of credit $ 381 $ 555
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 $7,000,000 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.
46
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, 2001, the Bank had $2,825,325 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, 2001, was
$3,151,000. Total loans to such persons and their affiliates amounted to
$4,416,000, and $3,747,000 at December 31, 2001 and 2000, respectively. During
2001, originations of related party loans totaled $4,167,000 and payments on
related party loans totaled $3,498,000.
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.
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.
47
NOTE R - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
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,
2001, are as follows:
CARRYING FAIR
AMOUNT VALUE
-------- --------
(in thousands)
FINANCIAL ASSETS
Cash and short-term investments $ 10,062 $ 10,062
Investment securities 21,946 22,000
Loans 66,798 69,049
-------- --------
$ 98,806 $101,111
======== ========
FINANCIAL LIABILITIES
Deposits $ 93,169 $ 93,976
Short-term borrowings 970 970
Long-term debt 3,040 3,070
-------- --------
$ 97,179 $ 98,016
======== ========
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:
2001 2000
-------- --------
(in thousands)
ASSETS
Cash $ 24 $ 37
Investment in subsidiary bank, net 7,492 6,692
Facilities, net 1,563 1,591
Other assets 68 73
-------- --------
Total assets $ 9,147 $ 8,393
======== ========
48
NOTE S - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
Liabilities:
Accrued liabilities $ 3 $ 3
Line-of-credit 970 970
Note payable 1,040 1,108
---------- ----------
Total liabilities 2,013 2,081
Stockholders' equity 7,134 6,312
---------- ----------
Total liabilities and stockholders' equity $ 9,147 $ 8,393
========== ==========
CONDENSED STATEMENTS OF OPERATIONS AND STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31:
2001 2000
-------- --------
(in thousands)
Equity in net income of subsidiary bank:
Undistributed $ 691 $ 903
Distributed 44 89
Rent income 204 204
Interest expense (147) (187)
Other expenses (48) (75)
-------- --------
Net income 744 934
STOCKHOLDERS= EQUITY
Beginning of year 6,312 5,251
Dividends paid (43) (42)
Stock issuance 12 67
Net change in unrealized holding losses
on securities in subsidiary bank 109 102
-------- --------
End of year $ 7,134 $ 6,312
======== ========
49
NOTE S - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31:
2001 2000
-------- --------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 744 $ 934
Adjustment to reconcile net income to net
cash provided by operating activities:
Equity in undistributed earnings of subsidiary (691) (903)
Depreciation 28 29
Decrease (increase) in other assets 5 (30)
Increase in accounts payable and accrued liabilities -- 3
-------- --------
Net cash used in operating activities 86 33
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 12 67
Cash dividend on common stock (43) (42)
Principal payments on long-term debt (68) (59)
Net cash used in financing activities (99) (34)
-------- --------
NET DECREASE IN CASH (13) (1)
CASH AT BEGINNING OF YEAR 37 38
-------- --------
CASH AT END OF YEAR $ 24 $ 37
======== ========
50
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 2002 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, 2001.
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, 65, 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, 49, 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, 59, 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 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.
51
GLENN J. CHASTEEN, 50, 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 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).
CAROL TODD JOHNSON, 70, 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.
SUSAN L. RADFORD, 44, 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, 62, is currently serving as a Vice President - Loan
Officer/Branch Coordinator . 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, 44, is currently serving as a commercial loan officer of our
Plant City locations as a Vice President - 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.
MICHAEL A. GOTTESMAN, 53, is currently serving as Vice President in commercial
loans of our main office. He has been serving in that capacity since joining
the bank in March of 2001. Prior to joining the bank Mr. Gottesman spent 13
years as Vice President and branch manager with Barnett Banks, and has been in
banking for 26 years. Mr. Gottesman is a Graduate of National Commercial
lending School in Norman Oklahoma and has taken numerous courses in banking.
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 2002
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, 2001.
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, 304,728
shares of which were outstanding as of December 31, 2001. 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.
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.
52
AMOUNT AND NATURE
NAME OF BENEFICIAL OF BENEFICIAL
OWNER OWNERSHIP PERCENT OF CLASS
- ------------------ ----------------- ----------------
LeVaughn Amerson 33,703(1) 11.06
Jerry L. Ball 8,000(8) 2.63
C. Dennis Carlton 30,878(2) 10.13
H. Leroy English 8,825(1) 2.90
Gregory L. Henderson 15,203(3) 4.99
Douglas A. Holmberg 34,010(4) 11.16
Charles E. Jennings, Jr 12,469(5) 4.09
J. E. "Bob" McLean, III 13,959(6) 4.58
J. "Bill" Noriega, Jr 12,229(7) 4.01
Donald M. Weaver 6,300(9) 2.07
------- -----
All directors and principal 175,576 57.62
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 450 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.
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.
53
SCHEDULE II
LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY
HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
Year ended December 31, 2001
Balance Balance
beginning Reductions end of
Name of of period Amounts Amounts Period
Borrower 01/01/01 additions collected charged-off 12/31/01
LeVaughn Amerson(10) $ 30,000 $ 135,000 $ 70,000 $ 0 $ 95,000
C. Dennis Carlton(1) 90,000 0 0 0 90,000
C. Dennis Carlton(3) 179,998 0 60,000 0 119,998
C. Dennis Carlton 8,319 0 8,319 0 0
C. Dennis Carlton(6) 8,007 0 3,830 0 4,176
C. Dennis Carlton 4,391 0 4,391 0 0
C. Dennis Carlton(14) 13,035 0 6,835 0 6,200
C. Dennis Carlton(16) 13,865 0 6,336 0 7,529
C. Dennis Carlton(17) 24,208 0 7,764 0 16,444
C. Dennis Carlton(2) 25,311 0 3,905 0 21,406
C. Dennis Carlton 36,000 0 36,000 0 0
C. Dennis Carlton 95,216 0 95,216 0 0
C. Dennis Carlton 40,000 62,000 102,000 0 0
C. Dennis Carlton(4) 45,004 0 3,695 0 41,309
C. Dennis Carlton(5) 0 732,575 279,769 0 452,806
C. Dennis Carlton(7) 0 36,000 0 0 36,000
C. Dennis Carlton(9) 0 80,400 30,000 0 50,400
C. Dennis Carlton(8) 0 35,643 31,371 0 4,272
C. Dennis Carlton(15) 0 75,254 0 0 75,254
C. Dennis Carlton 80,400 0 80,400 0 0
Douglas A. Holmberg(20) 0 300,000 0 0 300,000
Douglas A. Holmberg(13) 41,477 0 18,057 0 23,420
Douglas A. Holmberg(12) 250,000 315,071 315,071 0 250,000
Douglas A. Holmberg(11) 400,000 740,000 860,000 0 280,000
Douglas A. Holmberg(19) 151,615 0 29,078 0 122,536
Douglas A. Holmberg(21) 0 18,209 3,360 0 14,849
Douglas A. Holmberg(18) 0 52,000 8,800 0 43,200
5 Directors & Officers 2,210,168 1,585,048 1,434,248 0 2,360,969
---------- ---------- ---------- ---------- ----------
$3,747,012 $4,167,200 $3,498,443 $ 0 $4,415,769
========== ========== ========== ========== ==========
(Remainder of this page intentionally left blank)
54
NOTES
(1) C. Dennis Carlton (2) C. Dennis Carlton
Original date: February 18, 1999 Original date: June 28, 1995
Maturity: February 19, 2003 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, 2007
Rate: Prime + 1 Rate: Prime plus 1
Terms: Interest Monthly Terms: Principal & Interest
semi-annually
Collateral: Real Estate Collateral: First Mortgage
(5) C. Dennis Carlton (6) C. Dennis Carlton
Original date: January 2, 2001 Original date: June 28, 1999
Maturity: January 2, 2003 Maturity: December 28, 2002
Rate: Prime + 1/2 Rate: 9.5%
Terms: Interest Monthly Terms: Principle & Interest
Principle at Maturity Monthly
Collateral: Real Estate Collateral: Automobile
(7) C. Dennis Carlton (8) C. Dennis Carlton
Original date: February 18, 2001 Original date: September 10, 2001
Maturity: February 18, 2002 Maturity: February 10, 2002
Rate: Prime + 1/2 Rate: Prime + 1/2
Terms: Interest Quarterly Terms: Principle and Interest
Principle at Maturity Monthly
Collateral: Real Estate Collateral: Accounts Receivable/
Inventory
(9) C. Dennis Carlton (10) LeVaughn Amerson
Original date: August 22, 2001 Original date: February 20, 1992
Maturity: August 22, 2002 Maturity: February 19, 2002
Rate: Prime + 1/2 Rate: Prime + .50%
Terms: Interest Monthly Terms: Interest Monthly
Principle at Maturity
Collateral: Unsecured Collateral: Accounts Receivable/
Inventory
(11) Holmberg Farms (12) Holmberg Farms
Original date: December 30, 1997 Original date: September 10, 1998
Maturity: December 28, 2002 Maturity: September 10, 2002
Rate: Prime + 1% Rate: Prime + 1%
Terms: Interest monthly Terms: Principal annually
Interest monthly
Collateral: Agriculture equipment Collateral: Unsecured
55
(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
(15) C. Dennis Carlton (16) C. Dennis Carlton
Original date: September 5, 2001 Original date: January 6, 2000
Maturity: September 5, 2007 Maturity: January 10, 2003
Rate: Prime +1/2 Rate: 9.75%
Terms: Interest Monthly Terms: Principle & Interest Monthly
Principle at Maturity
Collateral: Unsecured Collateral: Automobile
(17) C. Dennis Carlton (18) Douglas Holmberg
Original date: October 27, 2000 Original date: January 16, 2001
Maturity: October 27, 2003 Maturity: July 16, 2005
Rate: 10.75% Rate: 10.50%
Terms: Principle & Interest monthly Terms: Principle & Interest Monthly
Collateral: Automobile Collateral: Equipment
(19) Douglas Holmberg (20) Douglas Holmberg
Original date: October 25, 2000 Original date: December 17, 2001
Maturity: April 25, 2005 Maturity: June 17, 2002
Rate: 10.5% Rate: Prime + 1/2
Terms: Principle & Interest Monthly Terms: Interest Monthly
Principle at Maturity
Collateral: Unsecured Collateral: Real Estate
(21) Douglas Holmberg
Original date: December 22, 2000
Maturity: June 22, 2005
Rate: 10.50%
Terms: Principle & Interest Monthly
Collateral: Automobile
56
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 $ 100,000 $ 0 $ 10,000 $ 0 $ 90,000
C. Dennis Carlton 28,321 0 3,010 0 25,311
C. Dennis Carlton 240,000 0 60,002 0 179,998
Carlton, Sr 52,394 0 7,390 0 45,004
Carlton & Carlton 12,641 0 4,322 0 8,319
C. Dennis Carlton 11,750 0 3,743 0 8,007
C. Dennis Carlton 13,318 0 8,928 0 4,390
C. Dennis Carlton 178,085 0 82,869 0 95,216
C. Dennis Carlton 46,000 0 10,000 0 36,000
LeVaughn Amerson 0 60,000 30,000 0 30,000
Douglas Holmberg 365,000 775,000 740,000 0 400,000
Douglas Holmberg 250,000 500,000 500,000 0 250,000
Douglas Holmberg 61,243 0 19,766 0 41,477
C. Dennis Carlton 19,184 0 6,149 0 13,035
C. Dennis Carlton 19,624 90000 69,624 0 40,000
C. Dennis Carlton 0 19,125 5,260 0 13,865
C. Dennis Carlton 0 25,424 1,216 0 24,208
C. Dennis Carlton 0 80,400 0 0 80,400
Douglas Holmberg 0 156,162 4,547 0 151,615
5 Directors &
Officers 2,001,240 1,502,119 1,293,191 0 2,210,168
---------- ---------- ---------- ---------- ----------
$3,398,800 $3,208,230 $2,860,017 $ 0 $3,747,013
========== ========== ========== ========== ==========
57
SCHEDULE II
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
========== ========== ========== ========== ==========
58
SCHEDULE III
LOANS AND LEASE FINANCING RECEIVABLES
(Dollars in Thousands)
Year ended December 31, 2001 2000 1999
1. Loans secured by real estate:
a. Construction and land development $ 4,897 $ 7,195 $ 6,761
b. Secured by farmland (including farm residential and
other Improvements) 8,443 4,491 4,582
c. Secured by 1-4 family residential properties
(1) Revolving, open-ended loans secured by 1-4 family
residential
Properties and extended uner lines of credit 0 0 0
(2) All other loans secured by 1-4 family residential
properties:
(a) Secured by first liens 9,766 7,649 7,733
(b) Secured by junior liens 605 756 369
d. Secured by multifamily (5 or more) residential
Properties 324 1,515 381
e. Secured by non-farm nonresidential properties 33,101 22,729 20,222
2. Loans to depository institutions 0 0 0
3. Loans to finance agricultural production and other loans to farmers 2,251 8,715 8,198
4. Commercial and industrial 3,931 8,595 7,373
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) 403 504 543
b. Other (Includes singl payment, installment, and all
student loans) 4,139 5,553 6,710
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) 0 142 368
9. Lease financing receivables (net of unearned income) 0 0 0
10. Less: any unearned income on loans reflected in items
1-8 above 84 76 77
------- ------- -------
11. Total loans and leases, net of unearned income (sum of
items 1-9 minus item 10) $67,776 $67,768 $63,163
======= ======= =======
59
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
60
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 2001.
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
61
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 28, 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 28, 2001.
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
62