SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____
Commission File Number: 000-1170902
FLORIDA COMMUNITY BANKS, INC.
(Exact name of registrant as specified in its charter)
Florida 35-2164765
------- ----------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
1400 North 15th Street, Immokalee, Florida 34142-2202
------------------------------------------ ----------
(Address of Principal Executive Office) (Including Zip Code)
(239) 657-3171
(Issuer's Telephone Number, Including Area Code)
No Change
(Former name,former address and former fiscal year,if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 par value Outstanding at November 1, 2002: 2,602,764
INTRODUCTORY NOTE
Florida Community Banks, Inc. ("FCBI") was incorporated on February 20, 2002.
FCBI had no assets, liabilities, revenues or operations until April 15, 2002,
when FCBI acquired 100% of the outstanding shares of Florida Community Bank
("Bank") common stock pursuant to a Plan of Reorganization and Share Exchange.
Since April 15, 2002, FCBI's predominate activity has been acting as a one-bank
holding company for Florida Community Bank and the Bank has continued to conduct
its activities in substantially the same manner as it had before the
acquisition.
[The remainder of this page intentionally left blank.]
2
Form 10-Q
FLORIDA COMMUNITY BANKS, INC.
September 30, 2002
TABLE OF CONTENTS
Page No.
Part I - Financial Information
Item 1 - Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition as of September 30, 2002
and December 31, 2001....................................................................... 4
Consolidated Statements of Income For The Three Months Ended
September 30, 2002 and 2001................................................................. 5
Consolidated Statements of Income For The Nine Months Ended
September 30, 2002 and 2001................................................................. 6
Consolidated Statement of Shareholders' Equity For The Nine Months
Ended September 30, 2002.................................................................... 7
Consolidated Statements of Cash Flows For The Nine Months
Ended September 30, 2002 and 2001........................................................... 8
Notes to Consolidated Financial Statements..................................................... 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................................. 12
Item 3 - Quantitative and Qualitative Disclosures About Market Risk..................................... 20
Item 4 - Controls and Procedures........................................................................ 22
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K............................................................... 23
Signatures
Certification of Periodic Financial Reports
3
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2002 (Unaudited) and December 31, 2001
September 30,
2002 December 31,
(Unaudited) 2001
---------------- -----------------
Assets
Cash and due from banks...................................................... $ 11,984,326 $ 15,193,797
Interest-bearing deposits with banks......................................... 461,756 7,845,331
Federal funds sold........................................................... 3,750,000 --
---------------- -----------------
Cash and Cash Equivalents............................................. 16,196,082 23,039,128
Interest-bearing time deposits with banks.................................... -- 2,500,000
Securities available-for-sale................................................ 2,374,977 1,960,475
Securities held-to-maturity, fair value of $41,734,519 and $33,290,686....... 40,940,805 33,041,035
Loans, net of unearned income................................................ 390,768,491 318,665,591
Allowance for loan losses.................................................... (5,519,105) (3,802,836)
---------------- -----------------
Net Loans............................................................. 385,249,386 314,862,755
Premises and equipment, net.................................................. 9,519,556 7,938,850
Accrued interest............................................................. 2,974,557 2,688,165
Other assets................................................................. 2,266,755 2,030,264
---------------- -----------------
Total Assets.......................................................... $ 459,522,118 $ 388,060,672
================ =================
Liabilities and Shareholders' Equity
Liabilities
Deposits
Non-interest-bearing...................................................... $ 55,740,416 $ 60,160,766
Interest-bearing.......................................................... 317,794,911 257,700,574
---------------- -----------------
Total Deposits........................................................ 373,535,327 317,861,340
Short-term borrowings........................................................ -- 1,086,000
Long-term Federal Home Loan Bank advances.................................... 40,000,000 32,500,000
Subordinated capital note.................................................... -- 5,000,000
Other long-term debt......................................................... 53,311 79,761
Guaranteed preferred beneficial interests in the company's
subordinated debentures................................................... 10,000,000 --
Deferred compensation........................................................ 435,063 473,267
Accrued interest............................................................. 1,825,041 1,688,813
Other liabilities............................................................ 926,975 232,836
---------------- -----------------
Total Liabilities..................................................... 426,775,717 358,922,017
Shareholders' Equity
Common stock-par value $.01 per share, 10,000,000 shares
authorized, 2,602,764 shares issued and outstanding....................... 26,028 26,028
Paid-in capital.............................................................. 16,685,260 16,685,260
Retained earnings............................................................ 16,035,113 12,427,367
---------------- -----------------
Total Shareholders' Equity............................................ 32,746,401 29,138,655
---------------- -----------------
Total Liabilities and Shareholders' Equity................................... $ 459,522,118 $ 388,060,672
================ =================
See notes to consolidated financial statements
4
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months Ended September 30, 2002 and 2001
(Unaudited)
Three Months
Ended September 30,
-----------------------------------
2002 2001
---------------- -----------------
Interest Income
Interest and fees on loans................................................ $ 7,722,266 $ 6,148,876
Interest and dividends
Taxable securities...................................................... 554,528 594,397
Tax-exempt securities..................................................... 979 3,054
Interest on federal funds sold and other interest income.................. 26,391 104,898
---------------- -----------------
Total Interest Income................................................. 8,304,164 6,851,225
---------------- -----------------
Interest Expense
Interest on deposits...................................................... 2,500,246 2,673,305
Interest on borrowed funds................................................ 450,723 257,736
---------------- -----------------
Total Interest Expense................................................ 2,950,969 2,931,041
---------------- -----------------
Net Interest Income.......................................................... 5,353,195 3,920,184
Provision for loan losses.................................................... 1,100,000 150,000
---------------- -----------------
Net Interest Income After Provision for Loan Losses.......................... 4,253,195 3,770,184
Noninterest Income
Customer service fees..................................................... 293,400 234,361
Insurance commissions..................................................... 9,465 12,189
Other non-interest income................................................. 146,076 79,206
---------------- -----------------
Total Noninterest Income.............................................. 448,941 325,756
---------------- -----------------
Noninterest Expenses
Salaries and employee benefits............................................ 1,492,150 1,405,042
Occupancy and equipment expense........................................... 397,940 297,614
Other non-interest expenses............................................... 421,824 409,620
---------------- -----------------
Total Noninterest Expenses............................................ 2,311,914 2,112,276
---------------- -----------------
Income before income taxes................................................... 2,390,222 1,983,665
Provision for income tax expense............................................. 902,005 797,499
---------------- -----------------
Net Income................................................................... $ 1,488,217 $ 1,186,166
================ =================
Earnings Per Common Share
Basic..................................................................... $ 0.57 $ 0.46
Diluted................................................................... 0.57 0.46
Weighted Average Shares Outstanding
Basic..................................................................... 2,602,764 2,602,764
Diluted................................................................... 2,631,120 2,602,764
See notes to consolidated financial statements
5
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Nine months Ended September 30, 2002 and 2001
(Unaudited)
Nine Months
Ended September 30,
-----------------------------------
2002 2001
---------------- -----------------
Interest Income
Interest and fees on loans................................................ $ 21,240,816 $ 18,856,442
Interest and dividends
Taxable securities...................................................... 1,665,684 1,809,749
Tax-exempt securities................................................... 3,855 17,450
Interest on federal funds sold and other interest income.................. 202,864 537,402
---------------- -----------------
Total Interest Income................................................. 23,113,219 21,221,043
---------------- -----------------
Interest Expense
Interest on deposits...................................................... 7,463,671 8,457,449
Interest on borrowed funds................................................ 1,209,177 739,810
---------------- -----------------
Total Interest Expense................................................ 8,672,848 9,197,259
---------------- -----------------
Net Interest Income.......................................................... 14,440,371 12,023,784
Provision for loan losses.................................................... 1,710,000 450,000
---------------- -----------------
Net Interest Income After Provision for Loan Losses.......................... 12,730,371 11,573,784
Noninterest Income
Customer service fees..................................................... 894,584 756,286
Insurance commissions..................................................... 27,589 31,788
Other non-interest income................................................. 513,999 324,129
Security gains............................................................ 36,083 --
---------------- -----------------
Total Noninterest Income.............................................. 1,472,255 1,112,203
---------------- -----------------
Noninterest Expenses
Salaries and employee benefits............................................ 4,201,363 4,214,861
Occupancy and equipment expense........................................... 1,170,300 858,685
Other non-interest expenses............................................... 1,305,671 1,182,572
---------------- -----------------
Total Noninterest Expenses............................................ 6,677,334 6,256,118
---------------- -----------------
Income before income taxes................................................... 7,525,292 6,429,870
Provision for income tax expense............................................. 2,824,385 2,454,780
---------------- -----------------
Net Income................................................................... $ 4,700,907 $ 3,975,090
================ =================
Earnings Per Common Share
Basic..................................................................... $ 1.81 $ 1.53
Diluted................................................................... 1.80 1.53
Cash Dividends Declared
Cash dividends declared per common share.................................. $ 0.42 $ 0.42
Weighted Average Shares Outstanding
Basic..................................................................... 2,602,764 2,602,764
Diluted................................................................... 2,610,696 2,602,764
See notes to consolidated financial statements
6
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Nine months Ended September 30, 2002
(Unaudited)
Common Paid-in Retained
Stock Capital Earnings Total
------------ ------------ -------------- ----------------
Balance at December 31, 2001.............. $ 26,028 $ 16,685,260 $ 12,427,367 $ 29,138,655
Net income - Nine months ended
September 30, 2002..................... -- -- 4,700,907 4,700,907
Cash dividends - Nine months ended
September 30, 2002..................... -- -- (1,093,161) (1,093,161)
------------- ------------- -------------- ----------------
Balance at September 30, 2002............. $ 26,028 $ 16,685,260 $ 16,035,113 $ 32,746,401
============= ============= ============== ================
See notes to consolidated financial statements
7
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months Ended September 30, 2002 and 2001
(Unaudited)
Nine Months
Ended September 30,
-----------------------------------
2002 2001
---------------- -----------------
Operating Activities
Net Income................................................................ $ 4,700,907 $ 3,975,090
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses............................................. 1,710,000 450,000
Depreciation, amortization, and accretion, net........................ 509,535 353,619
(Increase) decrease in accrued interest receivable.................... (286,392) 835,518
Increase in accrued interest payable.................................. 136,228 587,396
Other, net............................................................ 354,110 (135,615)
---------------- -----------------
Net Cash Provided By Operating Activities............................. 7,124,388 6,068,008
---------------- -----------------
Investing Activities
Net (increase) decrease in held-to-maturity securities.................... (7,934,370) 2,284,089
Net increase in available-for-sale securities............................. (414,502) --
Net decrease in interest-bearing time-deposits at banks................... 2,500,000 --
Loans made to customers, net of repayments................................ (72,096,630) (46,788,669)
Purchase of fixed assets, net............................................. (2,040,096) (1,156,388)
Sale of branch premises................................................... -- 1,855,000
Net (increase) decrease in other real estate owned........................ 49,788 (16,295)
---------------- ------------------
Net Cash Used In Investing Activities................................. (79,935,810) (43,822,263)
---------------- -----------------
Financing Activities
Net decrease in noninterest-bearing deposits.............................. (4,420,350) (5,405,190)
Net increase in interest-bearing deposits................................. 60,094,337 21,663,266
Dividends paid............................................................ (1,093,161) (1,084,485)
Increase (decrease) in short-term borrowings.............................. (1,112,450) 12,588,000
Repayment of subordinated note............................................ (5,000,000) --
Net increase in Federal Home Loan Bank advances........................... 7,500,000 4,500,000
Issuance of subordinated floating rate deferrable interest debentures..... 10,000,000 --
---------------- -----------------
Net Cash Provided By Financing Activities............................. 65,968,376 32,261,591
---------------- -----------------
Net Increase in Cash and Cash Equivalents.................................... (6,843,046) (5,492,664)
Cash and Cash Equivalents at Beginning of Period............................. 23,039,128 16,846,983
---------------- -----------------
Cash and Cash Equivalents at End of Period................................... $ 16,196,082 $ 11,354,319
================ =================
Supplemental Disclosure of Non-cash Transactions
Issuance of common stock for a one-for-one 100% acquisition.................. $ 29,138,655 $ --
See notes to consolidated financial statements
8
FLORIDA COMMUNITY BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2002
(Unaudited)
Note A - Basis of Presentation
The consolidated financial statements include the accounts of Florida Community
Banks, Inc. ("FCBI") and its wholly-owned subsidiaries, Florida Community Bank
(the "Bank") and FCBI Capital Trust I ("the Trust"), collectively the "Company."
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
2002, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2002.
The statement of financial condition at December 31, 2001, has been derived from
the audited financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
The December 31, 2001 financial information contained in this Form 10-Q
represents solely the financial information of the Bank. On April 15, 2002, FCBI
acquired all the outstanding stock of the Bank through a 100%, one-for-one stock
exchange under a method of accounting similar to the pooling method. This method
is allowed under Statement of Financial Accounting Standards No. 141, Business
Combinations ("SFAS 141") as defined by Accounting Principles Board Opinion No.
16, "Business Combinations" ("APB 16") when the exchange of shares between
entities under common control result only in a change of the reporting entity
(see Note F). Certain reported amounts have been reclassified in prior periods
to conform to the most recent period presented.
Note B - Income Taxes
The effective tax rates of approximately 37.7% and 40.2% for the three months
ended September 30, 2002 and 2001 and 37.5% and 38.2% for the nine months ended
September 30, 2002 and 2001, respectively, are more than the federal statutory
tax rate for corporations principally because of the effect of state income
taxes, net of federal tax benefit.
Note C - Securities
The Company applies the accounting and reporting requirements of Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities ("SFAS 115"). This pronouncement requires that all
investments in debt securities be classified as either "held-to-maturity"
securities, which are reported at amortized cost; trading securities, which are
reported at fair value, with unrealized gains and losses included in earnings;
or "available-for-sale" securities, which are reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of shareholders' equity (net of deferred tax effect).
9
Note C - Securities - Continued
At September 30, 2002, the Company had no net unrealized gains/losses in
available-for-sale securities, which are reflected in the presented assets and
resulted in no change in shareholders' equity. There were no trading securities.
Note D - Shareholders' Equity
In June 2001, the Company declared a stock split and issued 1.2 shares for each
share outstanding of the Company's common stock. This effect of this stock split
has been retroactively reflected in the Company's consolidated financial
statements. All references to weighted average shares outstanding and per share
amounts included in the accompanying financial statements and notes reflect and
the stock split and its retroactive effect.
Note E - Segment Information
All of the Company's offices offer similar products and services, are located in
the same geographic region, and serve similar segments of the market. As a
result, management considers all units as one operating segment and therefore
feels that the basic financial statements and related footnotes provide details
related to segment reporting.
Note F - Business Combination
On April 11, 2002 a majority of the shareholders of the Bank approved a Plan of
Reorganization ("Plan") whereby the Bank would become the subsidiary of Florida
Community Banks, Inc., a Florida corporation and a registered bank holding
company. Under the Plan, each share of the Bank's common stock was converted
into one share of Florida Community Banks, Inc. common stock. The acquisition of
the Bank occurred on April 15, 2002. These financial statements reflect the
consolidated operations of the Bank and FCBI for all periods presented.
The Plan allowed dissenting shareholders to exercise the right to be paid for
their shares in cash. There were no dissenting shareholders.
Shareholders also approved a stock option plan covering certain key employees
under which these employees have been granted options to purchase a total of
46,000 shares of common stock at a price of $18.00 per share.
10
Note G - Guaranteed Preferred Beneficial Interests in the Company's Subordinated
Debentures
On June 21, 2002, FCBI Capital Trust I ("FCBI Trust"), a Delaware statutory
trust established by the Company, received $10,000,000 in proceeds in exchange
for $10,000,000 principal amount of FCBI Trust's floating rate cumulative trust
preferred securities (the "preferred securities") in a trust preferred private
placement. The proceeds of that transaction were then used by FCBI Trust to
purchase an equal amount of floating rate subordinated debentures (the
"subordinated debentures") of the Company. The Company has fully and
unconditionally guaranteed all obligations of FCBI Trust on a subordinated basis
with respect to the preferred securities. The Company accounts for the FCBI
Trust preferred securities as a minority interest. Subject to certain
limitations, the preferred securities qualify as Tier 1 capital and are
presented in the Consolidated Statements of Financial Condition as "Guaranteed
preferred beneficial interests in the Company's subordinated debentures." The
sole asset of FCBI Trust is the subordinated debentures issued by the Company.
Both the preferred securities of FCBI Trust and the subordinated debentures of
the Company each have approximately 30-year lives. However, both the Company and
FCBI Trust have a call option after five years, subject to regulatory capital
requirements.
Note H - Stock Options
On April 16, 2002, the Company issued statutory and non-statutory stock options
to certain key employees. The total options issued were 46,000 at an exercise
price of $18.00 per share (fair market value on the date of grant). Fair market
value was determined based upon an independent appraiser's valuation. These
options vest over a three and one-half year time period at 25% on October 25,
2002, and 25% on October 25 of each year thereafter until fully vested. The
options expire nine and one-half years from the grant date.
Note I - Term Loan Agreement
On June 13, 2002, the Company entered into a $5,000,000, 360-day term loan
agreement with The Bankers Bank, Atlanta, Georgia, at an interest rate of prime
less one-half (P-1/2%). The Company has pledged 51% of the outstanding shares of
Florida Community Bank, a 100% owned subsidiary of the Company, as collateral on
this note. At September 30, 2002, no portion of this loan had been funded.
Note J - Recently Passed Legislation
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002
("the Act"), which immediately impacts Securities and Exchange Commission
registrants, public accounting firms, lawyers and securities analysts. This
legislation is the most comprehensive since the passage of the Securities Acts
of 1933 and 1934. It has far reaching effects on the standards of integrity for
corporate management, board of directors, and executive management. Additional
disclosures, certifications and possibly procedures will be required of our
company. We do not expect any material adverse effect on our company as a result
of the passage of this legislation, however, the full scope of the Act has not
been determined. The Act provides for additional regulations and requirements of
publicly-traded companies which have yet to be issued.
11
FLORIDA COMMUNITY BANKS, INC.
September 30, 2002
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion is intended to assist an understanding of the Company's
financial condition and results of operations. This analysis should be read in
conjunction with the consolidated financial statements and related notes
appearing in Item 1 of the September 30, 2002, Form 10-Q, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
appearing in the Bank's Annual Report on Form 10-KSB for the year ended December
31, 2001.
Forward-Looking Information
Certain statements contained in this Quarterly Report on Form 10-Q, which are
not historical facts, are forward-looking in nature and relate to trends and
events that may affect the Company's future financial position and operating
results. In addition, the Company, through its senior management, from time to
time makes forward-looking public statements concerning its expected future
operations and performance and other developments. All forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The terms "expect," "anticipates,"
"intend" and "project" and similar words or expression are intended to identify
forward-looking statements. In addition to risks and uncertainties that may
affect operations, performance, growth projections and the results of the
Company's business, which include, but are not limited to, fluctuations in the
economy, the relative strength and weakness in the commercial and consumer
sector and in the real estate market, the actions taken by the Federal Reserve
Board for the purpose of managing the economy, interest rate movements, the
impact of competitive products, services and pricing, timely development by the
Company of technology enhancements for its products and operating systems,
legislation and similar matters, the Company's future operations, performance,
growth projections and results will depend on its ability to respond to the
challenges associated with a weakening economy, particularly in the real estate
development sector, which is prominent in the Company's primary market. Although
management of the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be correct. Prospective investors are cautioned that
any such forward-looking statements are not guaranties of future performance,
involve risks and uncertainties, and that actual results may differ materially
from those contemplated by such forward-looking statements. The Company makes no
commitment to update any forward-looking statement or to disclose any facts,
events or circumstances that may affect the accuracy of any forward-looking
statement.
FINANCIAL CONDITION
September 30, 2002 compared to December 31, 2001
The Company continued its operations concentrating in the origination of loans
in southwestern Florida. As discussed more fully below, loan growth was funded
by an increase in deposits from brokered certificates of deposit and from
Internet bulletin board rate postings. No significant changes in operating goals
or policies occurred during the first nine months of 2002.
12
Loans
Loans comprised the largest single category of the Company's earning assets on
September 30, 2002. Loans, net of unearned income and reserve for loan losses,
totaled 83.8% of total assets at September 30, 2002 compared to 82.1% of total
assets at December 31, 2001. During the first nine months of 2002, loans
increased approximately $72 million with $2.5 million of that increase in
agricultural, commercial and industrial loans and the remainder of the increase
in loans secured by real estate. The rapid influx of population to southwest
Florida continued to influence the demand for real estate loans, particularly
construction and development loans.
The company has a significant investment in loans to finance land development
and construction. At September 30, 2002 the Company had $124 million in
construction, land development and other land loans outstanding, compared to a
total loan portfolio of $391 million.
Investment Securities and Other Earning Assets
The investment securities portfolio is used to provide a source of liquidity, to
serve as collateral for borrowings and to secure certain government deposits.
Federal funds sold are the most liquid earning asset and is used to manage the
daily cash position of the Company. Investment securities and other short-term
investments increased $8.3 million during the first nine months of 2002 as the
investment portfolio increased in response to normal growth in assets.
Asset Quality
From December 31, 2001 to September 30, 2002, the Company's asset quality
deteriorated due to the increase in non-performing loans. The ratio of loan loss
allowance to total nonperforming assets (defined as nonaccrual loans, loans past
due 90 days or greater, restructured loans, nonaccruing securities, and other
real estate) decreased from 1.61:1 to 0.53:1. The percentage of nonperforming
assets to total assets increased from 0.61% to 2.27%, and the percentage of
nonperforming loans to total loans increased from 0.74% to 2.67%. These ratios
were affected by a $9.1 million increase in loans secured by real estate that
were nonperforming loans at September 30, 2002. In response to the increase in
non-performing loans, the allowance for loan losses was increased by charging
$1,710,000 to the provision for possible loan losses during the first nine
months of 2002 compared to $450,000 during the same period in 2001.
During the first nine months of 2002, recoveries on loans previously charged-off
exceeded the amount of loans charged-off by $6 thousand.
Deposits
Total deposits of $373.5 million at September 30, 2002 represented an increase
of $55.6 million (17.5%) from total deposits of $317.9 million at year-end 2001.
The majority of the increase was attributable to two deposit sources: Internet
certificates of deposit (gathered by posting the Bank's rates on an Internet
bulletin board accessed by various financial institutions in the United States)
and brokered certificates of deposit. At September 30, 2002, brokered and
Internet certificates of deposit totaled approximately $83.7 million.
13
Shareholders' Equity
Consolidated shareholders' equity increased $3.6 million from December 31, 2001
to September 30, 2002, due to net income during the first nine months of 2002,
less dividends paid.
Liquidity Management
Liquidity is defined as the ability of a company to convert assets (by
liquidating or pledging for borrowings) into cash or cash equivalents without
significant loss. Liquidity management involves maintaining the ability to meet
the day-to-day cash flow requirements of its customers, whether they are
depositors wishing to withdraw funds or borrowers requiring funds to meet their
credit needs. Without proper liquidity management, the Company would not be able
to perform the primary function of a financial intermediary and would,
therefore, not be able to meet the production and growth needs of the
communities it serves.
The primary function of asset and liability management is not only to ensure
adequate liquidity in order to meet the needs of its customer base, but also to
maintain an appropriate balance between interest-sensitive assets and
interest-sensitive liabilities so that the Company also can provide a return to
its shareholders. Daily monitoring of the sources and uses of funds is necessary
to maintain an acceptable position that meets both requirements. To the Company,
both assets and liabilities are considered sources of liquidity funding and both
are, therefore, monitored on a daily basis.
The asset portion of the balance sheet provides liquidity primarily through loan
principal repayments and maturities of investment securities. Loans that mature
in one year or less equaled approximately $122.6 million at September 30, 2002,
and there are approximately $3.0 million of investment securities maturing
within one year. In addition, Federal funds sold (an overnight investment)
totaled $3.8 million at September 30, 2002.
The liability portion of the balance sheet provides liquidity through deposits
to various customers' interest-bearing and noninterest-bearing deposit accounts.
At September 30, 2002, funds also were available through the purchase of federal
funds from correspondent commercial banks from available lines of up to an
aggregate of $22.5 million and credit availability at the Federal Home Loan Bank
of Atlanta (up to 15% of assets, approximately $69 million) of which $29 million
is available and unused. At September 30, 2002, the Bank had unused collateral
totaling approximately $24.8 million, thus limiting the advances potentially
available to that amount.
Capital Resources
A strong capital position is vital to the continued profitability of the Company
and the Bank because it promotes depositor and investor confidence and provides
a solid foundation for future growth of the organization. The Company has
provided a significant portion of its capital requirements through the retention
of earnings.
On June 21, 2002, FCBI Capital Trust I ("FCBI Trust"), a Delaware statutory
trust established by the Company, received $10,000,000 in proceeds in exchange
for $10,000,000 principal amount of FCBI Trust's floating rate cumulative trust
preferred securities (the "preferred securities") in a trust preferred private
placement. The proceeds of that transaction were then used by FCBI Trust to
purchase an equal
14
amount of floating rate subordinated debentures (the "subordinated debentures")
of the Company. The Company has fully and unconditionally guaranteed all
obligations of FCBI Trust on a subordinated basis with respect to the preferred
securities. The Company accounts for the FCBI Trust preferred securities as a
minority interest. Subject to certain limitations, the preferred securities
qualify as Tier 1 capital and are presented in the Consolidated Statements of
Financial Condition as "Guaranteed preferred beneficial interests in the
Company's subordinated debentures." The sole asset of FCBI Trust is the
subordinated debentures issued by the Company. Both the preferred securities of
FCBI Trust and the subordinated debentures of the Company each have
approximately 30-year lives. However, both the Company and FCBI Trust have a
call option of five years, subject to regulatory capital requirements.
On June 13, 2002, the Company entered into a $5,000,000, 360-day term loan
agreement with The Bankers Bank, Atlanta, Georgia, at an interest rate of prime
less one-half (P-1/2%). The Company has pledged 51% of the outstanding shares of
Florida Community Bank, a 100% owned subsidiary of the Company, as collateral on
this note. At September 30, 2002, no portion of this loan was outstanding.
Regulatory authorities are placing increased emphasis on the maintenance of
adequate capital. Capital strength is measured in two tiers, which are used in
conjunction with risk-adjusted assets to determine the risk-based capital
ratios. The Company's Tier I capital, which consists of common equity less
goodwill and the newly issued guaranteed preferred beneficial interest in the
Company's subordinated debentures, subject to limitation, totaled $42.7 million
at September 30, 2002. Tier II capital components include supplemental capital
components such as qualifying allowance for loan losses and the portion of the
guaranteed preferred beneficial interest in the Company's subordinated
debentures which exceeds the allowable Tier I capital amount. Tier I capital
plus the Tier II capital components is referred to as Total Risk-Based capital
and was $48.3 million at September 30, 2002.
The Company's and the Bank's current capital positions exceed the
"well-capitalized" regulatory guidelines. Management has reviewed and will
continue to monitor the Company's asset mix and the loan loss allowance, which
are the areas determined to be most affected by these capital requirements.
RESULTS OF OPERATIONS
Three months ended September 30, 2002 and 2001
Summary
Net earnings of the Company for the three months ended September 30, 2002,
totaled $1,488,217 compared to $1,186,166 for the same period in 2001,
representing a 25.5% increase. The increase was due principally to the after-tax
effect of a $1.4 million increase in net interest income, partially offset by a
$950 thousand increase in the provision for loan losses. As explained more fully
below, the increase in net interest income was due to an increased volume of
loans and interest-bearing deposits, each offset by a decline in rates. The
increase in the provision in loan losses was in response to a significant
increase in non-performing loans secured by real estate.
Net Interest Income
Net interest income, the difference between interest earned on assets and the
cost of interest-bearing liabilities, is the largest component of the Company's
income. Net interest income during the three months ended September 30, 2002
increased $1,433,011 thousand (36.6%) from the same period in 2001.
15
This increase was due primarily to the increase in loan interest and fee income
with a significantly lower increase in interest expense. Interest income
increased due to greater volume, partially offset by a decline in the rate.
Interest expense increased due to greater volume, almost all of which was offset
by the declines in the rate paid for deposits. Lower deposit rates available in
the brokered certificate of deposit markets prompted the Company to seek funds
from that source.
The Company was in an interest sensitive position during 2002 and 2001 with a
larger dollar amount of interest-earning assets subject to repricing than
interest-bearing liabilities. Therefore, during 2002 and 2001 when rates were
generally declining, the Company's loan and investment portfolios rapidly
repriced at lower rates and reduced the net interest margin. Conversely, during
periods when rates generally increase, the Company may benefit from increased
net interest income due to its asset sensitive position. A principal reason for
the improved net interest income during the third quarter of 2002 was the
re-pricing of the Bank's certificates of deposit at lower rates during most of
2002.
Provision for Loan Losses
The provision for loan losses represents the charge against current earnings
necessary to maintain the reserve for loan losses at a level which management
considers appropriate. This level is determined based upon the Bank's historical
charge-offs, management's assessment of current economic conditions, the
composition of the loan portfolio and the levels of nonaccruing and past due
loans. The provision for loan losses was $1,100,000 for the three months ended
September 30, 2002 compared to $150,000 during the same period in 2001.
Charge-offs exceeded recoveries by approximately $10 thousand for the three
months ended September 30, 2002. During the three months ended September 30,
2001, recoveries exceeded net charge-offs by approximately $10 thousand. The
reserve for loan losses as a percent of outstanding loans, net of unearned
income, was 1.41% at September 30, 2002, compared to 1.19% at year-end 2001.
Noninterest Income
Noninterest income for the three months ended September 30, 2002, was $448,941
compared to $325,756 for the same period of 2001, an increase of 37.8%. The
increase was primarily due to an increase in customer service fees of $59
thousand.
Noninterest Expenses
Noninterest expenses for the three months ended September 30, 2002, were
$2,311,914 reflecting an 9.5% increase from the same period of 2001. The primary
components of noninterest expenses are salaries and employee benefits, which
increased $87 thousand for the three months ended September 30, 2002 compared to
the same period in 2001, caused by the offsetting effects of an increase in the
deferral of employee related loan origination expenses and added staff.
Occupancy costs increased $100 thousand. Both employee cost (other than the
deferred portion) and occupancy cost increased due to the new branch offices
opened during 2001and 2002.
Income Taxes
The provision for income taxes of $902,005 for the three months ended September
30, 2002, increased $105 thousand compared to the same period of 2001, due to
higher taxable earnings. The effective tax rate for both periods is more than
the statutory federal rate principally because of state income taxes, net of the
federal tax benefit.
16
Nine months ended September 30, 2002 and 2001
Summary
Net earnings of the Company for the nine months ended September 30, 2002,
totaled $4,700,907 compared to $3,975,090 for the same period in 2001,
representing an 18.3% increase. The increase was due principally to the
after-tax effect of an increase in net interest income of $2.42 million,
partially offset by an increase in the loan loss provision of $1.26 million.
Net Interest Income
Net interest income of the Company during the nine months ended September 30,
2002 increased $2.42 million (20.1%) from the same period in 2001. This increase
was due primarily to the increase in loan interest and fee income and decreased
deposit interest expense. The increase loan interest was caused primarily by
volume increases and the decrease in deposit interest expense was caused by
lower rates paid on a higher volume of certificates of deposit.
The Company was in an asset sensitive position during 2000 and 2001 with a
larger dollar amount of interest-earning assets subject to re-pricing than
interest-bearing liabilities. During the first nine months of 2001 when rates
were generally declining, the Company's interest income has been reduced at a
faster rate than the cost of liabilities. During 2002 rates remained low and the
Company's cost of deposits also re-priced at lower rates, thus contributing to
the improved net interest income.
Provision for Loan Losses
The provision for loan losses was $1,710,000 for the nine months ended September
30, 2002 and $450,000 for the comparable period in 2001. Net recoveries during
the nine months ending September 30, 2002 totaled $6 thousand. During the
comparable period during 2001 net charge-offs totaled $27 thousand. As noted
previously, the increase in the provision during 2002 was in response to an
increase in non-performing loans and due to loan portfolio growth since December
31, 2001.
Noninterest Income
Noninterest income for the nine months ended September 30, 2002, was $1,472,255
compared to $1,112,203 for the same period of 2001. The increase was caused
primarily by an increase in charges for cash services to customers.
Noninterest Expenses
Noninterest expenses for the nine months ended September 30, 2002, totaled
$6,677,334 and reflected a 6.7% increase from the same period of 2001. Both
employee costs (before deferral of loan origination salary expense) and
occupancy expenses increased due to a new branch offices opening in 2001 and
2002.
Income Taxes
The provision for income taxes of $2,824,385 for the nine months ended September
30, 2002 increased $369 thousand compared to the same period of 2001 due to
higher earnings. The effective tax rates of approximately 37.5% for 2002 and
38.2% in 2001 were higher than the federal tax rate due to the effect of state
income tax, net of federal tax benefit.
17
Other Accounting Issues
In September 2000, the FASB issued SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a replacement
of FASB Statement No. 125. While SFAS No. 140 carries over most of the
provisions of SFAS No. 125, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities, it provides new standards for
reporting financial assets transferred as collateral and new standards for the
derecognition of financial assets, in particular transactions involving the use
of special purpose entities. SFAS No. 140 also prescribes additional disclosures
for collateral transactions and for securitization transactions accounted for as
sales. The new collateral standards and disclosure requirements are effective
for fiscal years ending after December 15, 2000, while the new standards for the
derecognition of financial assets are effective for transfers made after March
31, 2001. The adoption of this statement did not have a material effect on the
Company's consolidated financial statements.
In May 2001, the Auditing Standards Board issued Statement on Auditing Standards
("SAS") No. 94, The Effect of Information Technology on the Auditor's
Consideration of Internal Control in a Financial Statement Audit. This statement
amends SAS No. 55, Consideration of Internal Control in a Financial Statement
Audit, by providing additional guidance related to the understanding by the
auditor of an entity's use of information technology relevant to the audit. This
auditing standard is effective for audits of financial statements for periods
beginning on or after June 1, 2001. The impact on the audit of the Company's
consolidated financial statements resulting from the issuance of this auditing
standard is not expected to be material.
In June 2001, the FASB issued SFAS No. 141, Business Combinations. This
statement address financial accounting and reporting for business combinations
and supersedes APB Opinion No. 16, Business Combinations, and SFAS No. 38,
Accounting for Preacquisition Contingencies of Purchased Enterprises. All
business combinations in the scope of SFAS No. 141 are to be accounted for using
one method, the purchase method. Prior to the issuance of this statement,
subject to certain criteria, business combinations were accounted for using one
of two methods, the pooling-of-interests method or the purchase method. The two
methods produce different financial statement results. The single-method
approach used in SFAS No. 141 reflects the conclusion that virtually all
business combinations are acquisitions and therefore should be accounted for in
the same manner as other asset acquisitions based on the values exchanged. This
statement provides expanded and revised guidance related to the allocation of
the purchase price to goodwill and other intangibles arising from the business
combination. The provisions of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001.
Also, in June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which addresses financial accounting and reporting for acquired goodwill
and other intangible assets and supersedes APB Opinion No. 17, Intangible
Assets. SFAS No. 142 provides new standards for accounting relating to
intangible assets after initial recognition in the financial statements. This
statement proscribes the accounting practice of amortizing or expensing
intangibles ratably over a prescribed period of time and imposes new guidance
requiring that goodwill and certain other intangibles be tested for impairment
at least annually by comparing fair values of those assets with their recorded
amounts. Additional disclosure requirements also are provided. The provisions of
SFAS No. 142 are required to be applied in fiscal years beginning after December
15, 2001.
The adoption of SFAS No. 141 and SFAS No. 142 are not expected to have a
material effect on the Company's consolidated financial statements.
18
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The associated asset
retirement costs are capitalized as part of the carrying amount of the
long-lived asset. This statement is effective for financial statements issued
for fiscal years beginning after June 15, 2002. The adoption of this statement
is not expected to have a material effect on the Company's consolidated
financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-lived Assets. This statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This statement
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for
the disposal of a segment of a business (as previously defined in that opinion).
This statement also amends Accounting Research Bulletin No. 51, Consolidated
Financial Statements, to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. The major changes
resulting from this statement relate to the establishment of a single method for
the recognition of impairment losses on long-lived assets to be held and used
whether from discontinuance of a business segment or otherwise. This statement
is effective for financial statements issued for fiscal years beginning after
December 15, 2001. The adoption of this statement is not expected to have a
material effect on the Company's consolidated financial statements.
In December 2001, the Accounting Standards Executive Committee issued Statement
of Position ("SOP") 01-6, Accounting by Certain Entities (Including Entities
With Trade Receivables) That Lend to or Finance the Activities of Others. This
statement reconciles and conforms the accounting and financial reporting
provisions for similar transactions as applied to different entities within the
financial services industry. It eliminates differences in disclosure practices
where not warranted and should provide greater consistency in reporting by
entities in the financial services industry. This statement is effective for
annual and interim financial statements issued for fiscal years beginning after
December 15, 2001. The adoption of SOP 01-6 is not expected to have a material
effect on the Company's consolidated financial statements.
In December 2001, the Auditing Standards Board issued SAS No. 95, Generally
Accepted Auditing Standards. This statement supersedes Generally Accepted
Auditing Standards of SAS No. 1 and generally provides additional guidance to
the independent auditor in the conduct of an audit engagement, primarily by
addressing authoritative and nonauthoritative publications for audit
consideration and guidance. This SAS is effective for audits of financial
statements for periods beginning on or after December 15, 2001.
In January 2002, the Auditing Standards Board issued SAS No. 96, Audit
Documentation. This statement supersedes SAS No. 41, Working Papers and amends
SAS No. 47, Audit Risk and Materiality in Conducting an Audit, SAS No. 56,
Analytical Procedures and SAS No. 59, The Auditor's Consideration of an Entity's
Ability to Continue as a Going Concern. This statement provides revised guidance
to the independent auditor as to the type, purpose and requirements of audit
documentation. This SAS is effective for audits of financial statements for
periods beginning on or after May 15, 2002.
19
In June 2002, the Auditing Standards Board issued SAS No. 97, Amendment to
Statement on Auditing Standards No. 50, Reports on the Application of Accounting
Principles. This statement prohibits an accountant from providing a written
report on the application of accounting principles not involving facts and
circumstances of a specific entity.
The impact of SAS No. 95, SAS No. 96 and SAS 97 on the audit of the Company's
consolidated financial statements resulting from the issuance of these auditing
standards is not expected to be material.
In September 2002, the Auditing Standards Board issued SAS No. 98, Omnibus
Statement on Auditing Standards - 2002. This statement revises and amends
several previously issued Statements on Auditing Standards. The changes required
impose enhanced quality controls and audit considerations on a firm of
independent auditors in the conduct of their audit of a company's financial
statements. The additional requirements primarily relate to more descriptive
guidance on the application of auditing procedures, the auditors report and
related disclosures and supplementary information. Although the impact of this
statement may require additional auditor procedures and documentation in the
conduct of the audit of the Company's consolidated financial statements, it is
not expected to have a material impact on the overall timing, issuance or
content of the Company's consolidated financial statements.
Recently Passed Legislation
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002
("the Act"), which immediately impacts Securities and Exchange Commission
registrants, public accounting firms, lawyers and securities analysts. This
legislation is the most comprehensive since the passage of the Securities Acts
of 1933 and 1934. It has far reaching effects on the standards of integrity for
corporate management, board of directors, and executive management. Additional
disclosures, certifications and possibly procedures will be required of our
company. We do not expect any material adverse effect on our company as a result
of the passage of this legislation, however, the full scope of the Act has not
been determined. The Act provides for additional regulations and requirements of
publicly-traded companies which have yet to be issued.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk arising from adverse changes in the fair value of
financial instruments due to a change in interest rates, exchange rates and
equity prices. The Company's primary market risk arises from the possibility
that interest rates may change significantly and affect the fair value of the
Company's financial instruments (also known as interest rate risk).
The primary objective of Asset/Liability Management at the Company is to manage
interest rate risk and achieve reasonable stability in net interest income
throughout interest rate cycles. This is achieved by maintaining a reasonable
balance between rate sensitive earning assets and rate sensitive
interest-bearing liabilities. The amount invested in rate sensitive earning
assets compared to the amount of rate sensitive liabilities issued are the
principal factors in projecting the effect that fluctuating interest rates will
have on future net interest income and the fair value of financial instruments.
Rate sensitive earning assets and interest-bearing liabilities are those that
can be re-priced to current market rates within a given time period. Management
monitors the rate sensitivity of all interest earning assets and interest
bearing liabilities, but places particular emphasis on the upcoming year. The
Company's Asset/Liability Management policy requires risk assessment relative to
interest pricing and related terms and places limits on the risk to be assumed
by the Company.
20
The Company uses several tools to monitor and manage interest rate sensitivity.
One of the primary tools is simulation analysis. Simulation analysis is a method
of estimating the fair value of financial instruments, the earnings at risk, and
capital at risk under varying interest rate conditions. Simulation analysis is
used to estimate the sensitivity of the Company's net interest income and
stockholders' equity to changes in interest rates. Simulation analysis accounts
for the expected timing and magnitude of assets and liability cash flows as
interest rates change, as well as the expected timing and magnitude of deposit
flows and rate changes whether or not these deposits re-price on a contractual
basis. In addition, simulation analysis includes adjustments for the lag between
movements in market interest rates on loans and interest-bearing deposits. These
adjustments are made to reflect more accurately possible future cash flows,
re-pricing behavior and ultimately net interest income.
As of September 30, 2002, the Company's simulation analysis indicated that the
Company's earnings are at greatest risk in a decreasing interest rate
environment. The table that follows depicts the results of the simulation
assuming one and two percent decreases and increases in market interest rates.
Estimated Fair Value of Financial Instruments
----------------------------------------------------------------
Down Up Down Up
1 Percent 1 Percent 2 Percent 2 Percent
------------ ------------- ------------- --------------
Dollars in Thousands
Interest-earning Assets:
Loans......................................... $ 392,771 $ 383,250 $ 397,063 $ 378,695
Federal funds sold............................ 4,112 4,112 4,112 4,112
Securities.................................... 42,464 40,865 43,056 39,926
------------ ------------- ------------- --------------
Total Interest-earning Assets............... 439,347 428,227 444,231 422,733
------------ ------------- ------------- --------------
Interest-bearing Liabilities
Deposits - Savings and demand................. 113,645 109,733 115,602 107,776
Deposits - Time............................... 207,903 204,307 209,702 202,508
Other borrowings.............................. 40,580 39,526 41,107 38,999
------------ ------------- ------------- --------------
Total Interest-bearing Liabilities.......... 362,128 353,566 366,411 349,283
------------ ------------- ------------- --------------
Net Difference in Fair Value..................... $ 77,219 $ 74,661 $ 77,820 $ 73,450
============ ============= ============= ==============
Change in Net Interest Income.................... $ (420) $ 392 $ (948) $ 775
============ ============= ============= ==============
21
Item 4. Controls and Procedures
The Company's chief executive officer and chief financial officer have evaluated
the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in Exchange Act Rule13a-14(c)) as of a date
within 90 days of the filing date of this quarterly report. Based on that
evaluation, the chief executive officer and chief financial officer have
concluded that the Company's disclosure controls and procedures are effective to
ensure that material information relating to the Company and the Company's
consolidated subsidiaries is made known to such officers by others within these
entities, particularly during the period this quarterly report was prepared, in
order to allow timely decisions regarding required disclosure.
There have not been any significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
22
PART II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
Exhibit No. Exhibit Page
(a) Financial Statements, Financial Schedules and Exhibits.
3.1 Articles of Incorporation of FCBI (included as Exhibit 3.1 to FCBI's
Registration Statement on Form 8-A filed with the SEC on April 15, 2002 and
incorporated herein by reference).
3.2 By-laws of FCBI (included as Exhibit 3.2 to FCBI's Registration Statement
on Form 8-A filed with the SEC on April 15, 2002 and incorporated herein by
reference).
4.1 Subordinated Promissory Note, dated December 24, 2001, between Florida
Community Bank and Independent Bankers Bank of Florida (included as Exhibit
4.1 to the Bank's Form 10-KSB for the year ended December 31, 2001, and
incorporated herein by reference).
4.2 Specimen Common Stock Certificate of FCBI (included as Exhibit 4.1 to
FCBI's Registration Statement on Form 8-A filed with the SEC on April 15,
2002 and incorporated herein by reference).
10.1 Employment agreement with Thomas S. Junker dated December 9, 1997 (included
as Exhibit 10.1 to the Bank's Registration Statement on Form 10-SB-A for
the year ended December 31, 1998 and incorporated herein by reference).
10.2 2002 Key Employee Stock Compensation Program of FCBI (included as Appendix
D to the Bank's Definitive Schedule 14-A filed with the FDIC on March 22,
2002 and incorporated herein by reference).
10.3 Amended and Restated Trust Agreement among Florida Community Banks, Inc. as
depositor, Wilmington Trust Company as property trustee, Wilmington Trust
Company, as Delaware trustee, and Stephen L. Price, and Thomas V. Ogletree
as administrators, dated as of June 21, 2002 (included as Exhibit 10.3 to
the Company's Form 10-Q for the quarter ended June 30, 2002, and
incorporated herein by reference).
10.4 Guarantee Agreement between Florida Community Banks, Inc. as guarantor, and
Wilmington Trust Company as guarantee trustee, dated as of June 21, 2002
(included as Exhibit 10.4 to the Company's Form 10-Q for the quarter ended
June 30, 2002, and incorporated herein by reference).
10.5 Junior Subordinated Indenture between Florida Community Banks, Inc. (as
Company) and Wilmington Trust Company (as trustee), dated as of June 21,
2002 (included as Exhibit 10.5 to the Company's Form 10-Q for the quarter
ended June 30, 2002, and incorporated herein by reference).
23
Exhibit No. Exhibit Page
10.6 Term Loan Agreement between Florida Community Banks, Inc. and The Bankers
Bank, Atlanta, Georgia, dated June 13, 2002 (included as Exhibit 10.6 to
the Company's Form 10-Q for the quarter ended June 30, 2002, and
incorporated herein by reference).
11 Statement of computation of earnings per common share 25
(b) Reports on Form 8-K
During the quarter ended September 30, 2002, no reports were filed for
Florida Community Bank or Florida Community Banks, Inc. on Form 8-K.
99.1 Chief Executive Officer - Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 26
99.2 Chief Financial Officer - Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 27
[The remainder of this page intentionally left blank.]
24
Exhibit 11 - Statements Re: Computation of Per Share Earnings
FLORIDA COMMUNITY BANKS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
The following tabulation presents the calculation of basic and diluted earnings
per common share for the three-month and six-month periods ended September 30,
2002 and 2001. Average shares outstanding have been retroactively adjusted on an
equivalent share basis for the effects of the stock dividends and splits as
discussed in the notes to the financial statements.
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------------ -----------------------------
2002 2001 2002 2001
------------- ------------- ------------- --------------
Basic Earnings Per Share:
Net income.................................... $ 1,488,217 $ 1,186,166 $ 4,700,907 $ 3,975,090
============= ============= ============= ==============
Earnings on common shares..................... $ 1,488,217 $ 1,186,166 $ 4,700,907 $ 3,975,090
============= ============= ============= ==============
Weighted average common shares
outstanding - basic......................... 2,602,764 2,602,764 2,602,764 2,602,764
============= ============= ============= ==============
Basic earnings per common share............... $ 0.57 $ 0.46 $ 1.81 $ 1.53
============= ============= ============= ==============
Diluted Earnings Per Share:
Net income.................................... $ 1,488,217 $ 1,186,166 $ 4,700,907 $ 3,975,090
============= ============= ============= ==============
Weighted average common shares
outstanding - diluted....................... 2,631,120 2,602,764 2,610,696 2,602,764
============= ============= ============= ==============
Diluted earnings per common share............. $ 0.57 $ 0.46 $ 1.80 $ 1.53
============= ============= ============= ==============
25
Exhibit 99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with Florida Community Banks, Inc.'s ("Company") Quarterly Report
on Form 10-Q for the period ended September 30, 2002 ("Report"), each of the
undersigned certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: November 7, 2002 By:/s/ Stephen L. Price
-------------------------------------
Stephen L. Price
President and Chief Executive Officer
26
Exhibit 99.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with Florida Community Banks, Inc.'s ("Company") Quarterly Report
on Form 10-Q for the period ended September 30, 2002 ("Report"), each of the
undersigned certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: November 7, 2002 By:/s/ Thomas V. Ogletree
-----------------------------------
Thomas V. Ogletree
Chief Financial Officer
27
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.
FLORIDA COMMUNITY BANKS, INC.
By: /s/ Stephen L. Price November 7, 2002
------------------------------------- ---------------------------
Stephen L. Price Date
President and Chief Executive Officer
/s/ Thomas V. Ogletree November 7, 2002
-------------------------------------- ---------------------------
Thomas V. Ogletree Date
Chief Financial Officer
28
CERTIFICATIONS
I, Stephen L. Price, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Florida Community
Banks, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 7, 2002
/s/ Stephen L. Price
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Stephen L. Price
Chief Executive Officer
29
CERTIFICATIONS
I, Thomas V. Ogletree, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Florida Community
Banks, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 7, 2002
/s/ Thomas V. Ogletree
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Thomas V. Ogletree
Chief Executive Officer
30