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UNITED STATES
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, 2004
[ ] 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 by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2):
Yes No X
------ -----
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 Outstanding at November 1, 2004: 3,766,384
Form 10-Q
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
TABLE OF CONTENTS
Page No.
Part I - Financial Information
Item 1 - Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition as of September 30, 2004
and December 31, 2003....................................................................... 3
Consolidated Statements of Income For The Three Months Ended
September 30, 2004 and 2003................................................................. 4
Consolidated Statements of Income For The Nine Months Ended
September 30, 2004 and 2003................................................................. 5
Consolidated Statement of Shareholders' Equity For The Nine Months
Ended September 30, 2004.................................................................... 6
Consolidated Statements of Cash Flows For The Nine Months
Ended September 30, 2004 and 2003........................................................... 7
Notes to Consolidated Financial Statements..................................................... 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................................. 14
Item 3 - Quantitative and Qualitative Disclosures About Market Risk..................................... 21
Item 4 - Controls and Procedures........................................................................ 22
Part II - Other Information
Item 1 - Legal Proceedings.............................................................................. 23
Item 5 - Other Information.............................................................................. 23
Item 6 - Exhibits....................................................................................... 24
Signatures
2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2004 (Unaudited) and December 31, 2003
September 30,
2004 December 31,
(Unaudited) 2003
Assets
Cash and due from banks................................................... $ 18,426,282 $ 15,897,716
Federal funds sold........................................................ 8,515,000 13,765,000
Interest-bearing deposits with banks...................................... 1,755,322 857,133
---------------- -----------------
Cash and Cash Equivalents............................................. 28,696,604 30,519,849
Securities available for sale................................................ 3,184,977 3,184,977
Securities held-to-maturity, fair value of $41,706,400 and $35,296,326....... 41,803,645 35,752,905
Loans, net of unearned income................................................ 512,223,250 437,592,827
Allowance for loan losses.................................................... (9,228,466) (8,066,817)
---------------- -----------------
Net Loans............................................................. 502,994,784 429,526,010
Premises and equipment, net.................................................. 12,865,260 12,767,507
Accrued interest............................................................. 2,966,769 2,709,102
Foreclosed real estate....................................................... 5,880,033 6,121,833
Deferred taxes, net.......................................................... 3,688,150 3,162,883
Other assets................................................................. 1,432,957 1,762,640
---------------- -----------------
Total Assets.......................................................... $ 603,513,179 $ 525,507,706
================ =================
Liabilities and Shareholders' Equity
Liabilities
Non-interest-bearing...................................................... $ 96,035,952 $ 78,296,949
Interest-bearing.......................................................... 387,716,369 344,987,453
---------------- -----------------
Total Deposits........................................................ 483,752,321 423,284,402
Short-term borrowings........................................................ 15,000,000 7,500,000
Federal Home Loan Bank advances.............................................. 40,000,000 40,000,000
Notes payable................................................................ - 21,698
Subordinated debentures...................................................... 10,310,000 10,310,000
Deferred compensation........................................................ 330,714 372,870
Accrued interest............................................................. 1,439,177 858,783
Other liabilities............................................................ 2,013,270 1,074,184
---------------- -----------------
Total Liabilities..................................................... 552,845,482 483,421,937
Shareholders' Equity
Common stock-par value $.01 per share, 10,000,000 shares
authorized, 3,766,384 and 3,747,641 shares issued
and outstanding......................................................... 37,664 37,476
Paid-in capital........................................................... 17,152,099 16,680,061
Retained earnings......................................................... 33,477,934 25,368,232
---------------- -----------------
Total Shareholders' Equity............................................ 50,667,697 42,085,769
---------------- -----------------
Total Liabilities and Shareholders' Equity................................... $ 603,513,179 $ 525,507,706
================ =================
See notes to consolidated financial statements
3
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months Ended September 30, 2004 and 2003
(Unaudited)
Three Months
Ended September 30,
2004 2003
Interest Income
Interest and fees on loans................................................ $ 9,649,473 $ 8,149,959
Interest and dividends
Taxable securities...................................................... 381,228 284,050
Tax-exempt securities................................................... - -
Interest on federal funds sold and other interest income.................. 110,076 67,802
---------------- -----------------
Total Interest Income................................................. 10,140,777 8,501,811
Interest Expense
Interest on deposits...................................................... 1,774,026 1,862,040
Interest on borrowed funds................................................ 508,287 518,518
---------------- -----------------
Total Interest Expense................................................ 2,282,313 2,380,558
---------------- -----------------
Net Interest Income.......................................................... 7,858,464 6,121,253
Provision for loan losses.................................................... 750,000 700,000
---------------- -----------------
Net Interest Income After Provision for Loan Losses.......................... 7,108,464 5,421,253
Noninterest Income
Customer service fees..................................................... 453,665 508,363
Real estate rental income ................................................ 20,406 20,283
Other non-interest income................................................. 184,486 134,113
---------------- -----------------
Total Noninterest Income.............................................. 658,557 662,759
Noninterest Expenses
Salaries and employee benefits............................................ 1,937,230 1,903,948
Occupancy and equipment expense........................................... 432,407 378,015
Other non-interest expenses............................................... 592,801 652,331
---------------- -----------------
Total Noninterest Expenses............................................ 2,962,438 2,934,294
---------------- -----------------
Income before income taxes................................................... 4,804,583 3,149,718
Provision for income tax expense............................................. 1,804,852 1,184,675
---------------- -----------------
Net Income................................................................... $ 2,999,731 $ 1,965,043
================ =================
Earnings Per Common Share
Basic..................................................................... $ 0.66 $ 0.44
Diluted................................................................... 0.66 0.43
Weighted Average Shares Outstanding
Basic..................................................................... 4,519,661 4,497,575
Diluted................................................................... 4,575,409 4,520,195
See notes to consolidated financial statements
4
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENTS OF INCOME
Nine months Ended September 30, 2004 and 2003
(Unaudited)
Nine Months
Ended September 30,
2004 2003
Interest Income
Interest and fees on loans................................................ $ 27,443,900 $ 23,950,231
Interest and dividends
Taxable securities...................................................... 1,080,006 1,004,934
Tax-exempt securities................................................... - -
Interest on federal funds sold and other interest income.................. 270,595 297,717
---------------- -----------------
Total Interest Income................................................. 28,794,501 25,252,882
Interest Expense
Interest on deposits...................................................... 5,173,556 6,309,702
Interest on borrowed funds................................................ 1,525,347 1,625,728
---------------- -----------------
Total Interest Expense................................................ 6,698,903 7,935,430
---------------- -----------------
Net Interest Income.......................................................... 22,095,598 17,317,452
Provision for loan losses.................................................... 1,250,000 1,300,000
---------------- -----------------
Net Interest Income After Provision for Loan Losses.......................... 20,845,598 16,017,452
Noninterest Income
Customer service fees..................................................... 1,413,583 1,400,832
Real estate rental income ................................................ 61,898 63,836
Other non-interest income................................................. 613,918 490,748
Gain on sale of fixed assets.............................................. 414,508 -
---------------- -----------------
Total Noninterest Income.............................................. 2,503,907 1,955,416
Noninterest Expenses
Salaries and employee benefits............................................ 5,853,628 5,272,619
Occupancy and equipment expense........................................... 1,287,218 1,137,240
Other non-interest expenses............................................... 1,697,674 1,729,084
---------------- -----------------
Total Noninterest Expenses............................................ 8,838,520 8,138,943
---------------- -----------------
Income before income taxes................................................... 14,510,985 9,833,925
Provision for income tax expense............................................. 5,459,687 3,712,877
---------------- -----------------
Net Income................................................................... $ 9,051,298 $ 6,121,048
================ =================
Earnings Per Common Share
Basic..................................................................... $ 2.00 $ 1.36
Diluted................................................................... 1.98 1.35
Cash Dividends Declared
Cash dividends declared per common share.................................. $ 0.25 $ 0.00
Weighted Average Shares Outstanding
Basic..................................................................... 4,515,556 4,497,575
Diluted................................................................... 4,567,390 4,522,566
See notes to consolidated financial statements
5
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Nine months Ended September 30, 2004
(Unaudited)
Common Paid-in Retained
Stock Capital Earnings Total
Balance at December 31, 2003............... $ 37,476 $ 16,680,061 $ 25,368,232 $ 42,085,769
Net income - Nine months ended
September 30, 2004...................... - - 9,051,298 9,051,298
Payment of cash dividends.................. - - (941,596) (941,596)
Sale of common stock....................... 188 465,014 - 465,202
Effect of expensing stock options.......... - 7,024 - 7,024
-------------- -------------- ---------------- -----------------
Balance at September 30, 2004.............. $ 37,664 $ 17,152,099 $ 33,477,934 $ 50,667,697
============== ============== ================ =================
See notes to consolidated financial statements
6
FLORIDA COMMUNITY BANKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months Ended September 30, 2004 and 2003
(Unaudited)
Nine Months
Ended September 30,
---------------- -----------------
2004 2003
Operating Activities
Net Income................................................................ $ 9,051,298 $ 6,121,048
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses............................................. 1,250,000 1,300,000
Depreciation, amortization, and accretion, net........................ 682,530 542,942
Deferred tax benefit.................................................. (525,351) -
(Increase) decrease in accrued interest receivable.................... (257,667) 125,724
(Decrease) increase in accrued interest payable....................... 580,394 (704,031)
Other, net............................................................ 959,657 (33,404)
---------------- -----------------
Net Cash Provided By Operating Activities............................. 11,740,861 7,352,279
Investing Activities
Net (increase) decrease in held-to-maturity securities.................... (6,050,740) 6,719,284
Net decrease in available-for-sale securities............................. - 500,000
Loans made to customers, net of repayments................................ (74,630,423) (7,845,418)
Purchase of fixed assets, net............................................. (594,571) (2,957,048)
Net decrease (increase) in other real estate owned........................ 241,800 (6,055,411)
---------------- -----------------
Net Cash Used In Investing Activities................................. (81,033,934) (9,638,593)
Financing Activities
Net increase in noninterest-bearing deposits.............................. 17,739,003 12,737,371
Net increase (decrease) in interest-bearing deposits...................... 42,728,917 (27,602,636)
Dividends paid............................................................ (941,596) -
Increase in short-term borrowings......................................... 7,500,000 -
Decrease in other debt.................................................... (21,698) (13,076)
Decrease in Federal Home Loan Bank advances............................... - (10,000,000)
Sale of common stock...................................................... 465,202 -
---------------- -----------------
Net Cash Provided By (Used In) Financing Activities................... 67,469,828 (24,878,341)
---------------- -----------------
Net Decrease in Cash and Cash Equivalents.................................... (1,823,245) (27,164,655)
Cash and Cash Equivalents at Beginning of Period............................. 30,519,849 58,834,665
---------------- -----------------
Cash and Cash Equivalents at End of Period................................... $ 28,696,604 $ 31,670,010
================ =================
See notes to consolidated financial statements
7
FLORIDA COMMUNITY BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
Note A - Basis of Presentation
Florida Community Banks, Inc. ("FCBI" or the "Company") is a bank holding
company, which owns all of the common stock of Florida Community Bank ("Bank" or
"FCB") and a special purpose business trust organized to issue Trust Preferred
Securities. The special purpose business trust is not consolidated in the
financial statements that are included elsewhere herein. 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, 2004, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2004.
The statement of financial condition at December 31, 2003, 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.
For further information, refer to the financial statements and footnotes thereto
for Florida Community Banks, Inc. for the year ended December 31, 2003, included
in Form 10-K filed in March 2004.
Note B - Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. In connection with the determination
of the estimated losses on loans, management obtains independent appraisals for
significant collateral. While management uses available information to recognize
losses on loans, further reductions in the carrying amounts of loans may be
necessary based on changes in local economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the estimated losses on loans. Such agencies may require the Bank to recognize
additional losses based on their judgments about information available to them
at the time of their examination. Because of these factors, it is reasonably
possible that the estimated losses on loans may change materially in the near
term. However, the amount of the change that is reasonably possible cannot be
estimated.
8
FLORIDA COMMUNITY BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
Note C - Income Taxes
The effective tax rates of approximately 37.6% and 37.6% for the three months
ended September 30, 2004 and 2003 and 37.6% and 37.8% for the nine months ended
September 30, 2004 and 2003, 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 D - 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).
The carrying amounts of securities as shown in the consolidated statements of
financial condition and their approximate fair values at September 30, 2004 and
December 31, 2003 were as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Available-for-Sale
September 30, 2004:
Equity Securities........................ $ 3,184,977 $ - $ - $ 3,184,977
December 31, 2003:
Equity Securities........................ $ 3,184,977 $ - $ - $ 3,184,977
Securities Held-to-Maturity
September 30, 2004:
U. S. Government and
agency securities...................... $ 3,748,555 $ 4,911 $ 561 $ 3,752,905
Mortgage-backed securities............... 38,055,090 156,599 258,194 37,953,495
-------------- -------------- ---------------- ----------------
$ 41,803,645 $ 161,510 $ 258,755 $ 41,706,400
=============== =============== ================= ================
December 31, 2003:
U. S. Government and
agency securities...................... $ 1,768,406 $ 52,182 $ 438 $ 1,820,150
Mortgage-backed securities............... 33,984,499 140,176 648,499 33,476,176
--------------- --------------- ---------------- ----------------
$ 35,752,905 $ 192,358 $ 648,937 $ 35,296,326
=============== ================ ================ ================
9
FLORIDA COMMUNITY BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
Note D - Securities - continued
The following tables show our investments' gross unrealized losses and fair
value, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position, at September 30,
2004 and December 31, 2003.
September 30, 2004:
Less Than 12 Months 12 Months or More Total
------------------------- -------------------------- ---------------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Description of Securities Value Losses Value Losses Value Losses
------------------------- -------------------------- ---------------------------
U.S. Treasury obligations
and direct obligations
of U.S. government
agencies.................. $ 3,752,905 $ 561 $ - $ - $ 3,752,905 $ 561
Federal agency mortgage
backed securities......... 29,867,081 133,457 8,072,750 124,737 37,939,831 258,194
-------------- ----------- ------------- ----------- ------------- ------------
Total Temporarily
Impaired Securities..... $ 33,619,986 $ 134,018 $ 8,072,750 $ 124,737 $ 41,692,736 $ 258,755
============== =========== ============= =========== ============= ============
At September 30, 2004 the Company had 14 individual securities that were in an
unrealized loss position or impaired for the timeframes indicated above. All of
these investment positions' impairments are deemed not to be
other-than-temporary impairments. Substantially all of these positions are
backed by 1-4 family mortgages and the unrealized loss of these securities is
based solely on interest rate changes and not due to credit ratings. Management
intends to hold these securities until maturity.
December 31, 2003:
Less Than 12 Months 12 Months or More Total
------------------------- -------------------------- ---------------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Description of Securities Value Losses Value Losses Value Losses
------------------------- -------------------------- ---------------------------
U.S. Treasury obligations
and direct obligations
of U.S. government
agencies.................. $ 1,820,150 $ 438 $ - $ - $ 1,820,150 $ 438
Federal agency mortgage
backed securities......... 33,476,176 648,499 - 33,476,176 648,499
-------------- ----------- ------------- ----------- ------------- ------------
Total Temporarily
Impaired Securities..... $ 33,296,326 $ 648,937 $ - $ - $ 35,296,326 $ 648,937
============== =========== ============= =========== ============= ============
At December 31, 2003, the Company had 9 individual securities that were in an
unrealized loss position or impaired for the timeframes indicated above. All of
these investment positions' impairments are deemed not to be
other-than-temporary impairments. Substantially all of these positions are
backed by 1-4 family mortgages and the related securities have experienced
volatility in their market prices as a result of the fluctuating home mortgage
interest rate environment during 2003.
10
FLORIDA COMMUNITY BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
Note E - Shareholders' Equity
In October 2004, the Company declared a stock split of 1.2 shares for each of
the Company's outstanding shares of common stock. This effect of this stock
split has been retroactively reflected in the financial statements. All
references to weighted average shares outstanding and per share amounts included
in the accompanying financial statements and notes reflect the stock split and
its retroactive effects.
Note F - Segment Information
All of the Company's offices offer similar products and services, are located in
the same geographic region, and serve the same customer 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 G - Stock-Based Compensation
During 2002 the Company adopted a Key Employee Stock Compensation Program under
which statutory and non-statutory stock options may be granted to certain key
employees to purchase up to 87,440 shares (as adjusted for stock splits) at
various prices from $12.50 to $24.00 per share. The options granted provide for
these key employees to purchase shares of the Company's $0.01 par value common
stock at no less than the market value at the dates of grant. The options
granted may be exercised within ten years from the dates of grant subject to
vesting requirements. Prior to 2003, the Company accounted for this plan under
the recognition and measurement provisions of APB No. 25, Accounting for Stock
Issued to Employees, and the related Interpretations. Effective January 1, 2003,
the Company adopted the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, as provided by SFAS No. 148, Accounting
for Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 allows
for a prospective method of adoption of SFAS 123, whereas, the Company can
prospectively account for the current expense of options granted during 2003 and
thereafter. The following table illustrates the effect on net income and
earnings per share as if the fair value based method had been applied to all
outstanding and unearned awards in each period.
The Company's actual and pro forma information follows:
Nine Months
Ended September 30,
2004 2003
---------------- ----------------
Net Income
As Reported.................................................................. $ 9,051,298 $ 6,121,048
Add: Stock-based compensation expense
included in net income, net of related
income tax benefit........................................................ 7,024 -
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of tax.................. (12,859) (16,800)
---------------- -----------------
Pro forma net income......................................................... $ 9,045,463 $ 6,104,248
================ =================
11
FLORIDA COMMUNITY BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
Note G - Stock-Based Compensation - Continued
Nine Months
Ended September 30,
2004 2003
---------------- -----------------
Basic earnings per share:
As Reported.................................................................. $ 2.00 $ 1.36
Pro forma.................................................................... $ 2.00 $ 1.36
Diluted earnings per share:
As Reported.................................................................. $ 1.98 $ 1.35
Pro forma.................................................................... $ 1.98 $ 1.35
The following information relates to options outstanding under the plan at
September 30, 2004.
Weighted
Number of Average Number of
Options Expiration Contractual Options
Outstanding Date Life-Years Exercisable
10/25/01 Options with an Exercise
Price of $10.42...................................... 79,488 10/25/11 7.07 47,693
01/17/03 Options with an Exercise
Price of $13.89...................................... 8,640 01/17/13 8.30 3,456
02/22/03 Options with an Exercise
Price of $20.00...................................... 16,800 12/22/13 9.22 -
09/16/04 Options with an Exercise
Price of $22.92...................................... 65,400 9/16/14 9.96 -
------------- -----------
Total................................................ 170,328 8.45 51,149
============= ===========
The following table presents the activity in the plan for the nine months ended
September 30, 2004 and 2003:
Nine Months Ended September 30,
2004 2003
--------------------------- ------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------- ------------ -------------- --------------
Outstanding at January 1,............................ 104,928 $ 12.13 79,488 $ 10.42
Granted.............................................. 65,400 22.92 8,640 13.89
Forfeited............................................ - 0.00 - 0.00
Expired.............................................. - 0.00 - 0.00
------------- ------------- -------------- --------------
Outstanding at September 30,......................... 170,328 16.34 88,128 10.76
============= ============= ============== ==============
Exercisable at September 30,......................... 51,149 41.610 10.71
12
FLORIDA COMMUNITY BANKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)
Note H - Commitments and Contingencies
In the normal course of business the Company enters into commitments to extend
credit, which are agreements to lend to customers as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and generally require a
payment of fees. Since commitments may expire without being drawn upon, the
total reported above do not necessarily represent expected future cash flows.
Standby letters of credit are commitments issued by the Company to guarantee the
performance of a customer to a third party. These guarantees are primarily
issued to support public and private borrowing arrangements, including
commercial paper, bond financing and similar transactions, and expire in
decreasing amounts with terms ranging from one to four years. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
The following represents the Company's commitments to extend credit and standby
letters of credit as of September 30, 2004 and December 31, 2003:
September 30, December 31,
2004 2003
---------------- -----------------
Commitments to extend credit................................................. $ 152,037,000 $ 99,186,000
Standby and commercial letters of credit..................................... 3,524,000 3,810,000
---------------- -----------------
Total commitments and contingencies.......................................... $ 155,561,000 $ 102,996,000
================ =================
[The remainder of this page intentionally left blank]
13
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
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, 2004, Form 10-Q, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 2003.
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 real estate
development, 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, 2004 compared to December 31, 2003
The Bank continued its operations concentrating in the origination of loans in
southwestern and other areas of Florida. As discussed more fully below, loans
increased 17.1% during the first nine months of 2004, while equity capital grew
at a somewhat higher rate (20.4%). No significant changes in operating goals or
policies occurred during 2004.
14
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
Loans
Loans comprised the largest single category of the Company's earning assets on
September 30, 2004. Loans, net of unearned income, totaled 84.9% of total assets
at September 30, 2004 compared to 83.3% of total assets at December 31, 2003.
During the first nine months of 2004, loans increased approximately $75 million,
a relatively large increase compared with recent periods. The rapid influx of
population to southwest Florida continued to influence the demand for real
estate loans, particularly construction and development loans. That demand
during 2003 was tempered somewhat by the national economic conditions, which
included depressed stock market values, increased job losses, and lower economic
growth. In addition, during 2004, the Company increased its investment in
brokered loans.
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 did not change significantly compared to December 31, 2003 and
totaled $52.7 million at September 30, 2004.
Asset Quality
From December 31, 2003 to September 30, 2004, the Company's asset quality
improved slightly as measured by three key ratios. The ratio of loan loss
allowance to total nonperforming assets (defined as non-accrual loans, loans
past due 90 days or greater, restructured loans, non-accruing securities, and
other real estate) improved from 42.6% to 54.9%. The percentage of nonperforming
assets to total assets decreased from 3.6% to 2.8%, and the percentage of
nonperforming loans to total loans decreased from 4.3% to 3.3%. These ratios
were positively affected by the resolution of loans to a significant borrower
during the first nine months of 2004. However, during August and September 2004
several borrowers' businesses and financial prospects were adversely affected by
hurricanes that struck southwestern and other Florida areas.
In response to the potential loan losses caused by the hurricane related,
deteriorating financial condition of the Company's borrowers, management
undertook a review of the entire loan portfolio and determined that several
loans needed to be downgraded and the allowance for loan losses increased
accordingly. During the third quarter of 2004, the company provided $750,000 to
increase the allowance for loan losses to $9.2 million.
During the first nine months of 2004, net charge-offs totaled $88.4 thousand.
Deposits
Total deposits of $483.8 million at September 30, 2004, represented an increase
of $60.5 million (12.5%) from total deposits of $423.3 million at year-end 2003.
The majority of the increase was attributable to two deposit sources:
certificates of deposit and demand deposit accounts. In addition, an increase of
approximately $8.3 million occurred in money market accounts deposit. The
increase in certificates of deposit was caused by increased brokered funds. At
September 30, 2004, brokered certificates of deposit totaled approximately $140
million.
Shareholders' Equity
Shareholders' equity increased $10.1 million from December 31, 2003 to September
30, 2004, due to retained net income during the nine months ended September 30,
2004, and the sale of common stock to the Company's Employee Stock Ownership
Plan ($465 thousand). On September 30, 2004 the Company and the Bank exceeded
regulatory minimum capital ratio requirements and qualified as well-capitalized
under the regulations of the Federal Reserve System, the State of Florida, and
the FDIC.
15
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
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 can also meet the investment
requirements of 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 $200 million at September 30, 2004,
and there are approximately $6.9 million of investment securities maturing
within one year.
The liability portion of the balance sheet provides liquidity through deposits
to various customers' interest-bearing and non-interest-bearing deposit
accounts. At September 30, 2004, funds also were available through the purchase
of federal funds from correspondent commercial banks from available lines of up
to an aggregate of $45 million and credit availability at the Federal Home Loan
Bank ("FHLB") of up to 15% of assets (approximately $90 million) of which $50
million is available and unused. At September 30, 2004, the bank had unused
collateral totaling approximately $26 million, thus limiting the FHLB 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 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. Subject to certain limitations, the
preferred securities qualify as Tier 1 capital and are presented in the
Consolidated Statements of Financial Condition as 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.
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 and the
2002 issue of subordinated debentures, subject to limitation, totaled $60.7
million at September 30, 2004. 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 $67.7 million at September 30, 2004.
16
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
The Company'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, 2004 and 2003
Summary
Net earnings of the Company for the three months ended September 30, 2004,
totaled $2,999,731 compared to $1,965,044 for the same period in 2003,
representing a 52.7% increase. The increase was due principally to a $1.7
million increase in net interest income. As explained more fully below, the
increase in net interest income was due to the combined effect of added loan
volume, loans reaching the floored interest rates, and a drop in deposit
interest expenses due to lower interest rates.
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, 2004
increased $1.7 million (28.4%) from the same period in 2003. This increase was
due primarily to higher average loan volume, the effect of over $200 million in
loans that reached the floored interest rate in the contract, and lower interest
rates on deposits.
The Company was in an interest sensitive position during 2003 and 2004 with a
larger dollar amount of interest-earning assets subject to re-pricing than
interest-bearing liabilities. Therefore, during 2003 when rates were generally
declining, the Company's loan and investment portfolios rapidly re-priced at
lower rates and reduced the net interest margin. During 2003 the interest rate
on certain adjustable rate on loans stopped declining because a significant
portion of the Company's loan portfolio consists of loans that have interest
rate floors. While the "floored" loans were an advantage when rates reached
historic lows during 2003 and 2004, these loans also will not re-price upward
until a relatively significant rise in rates occurs. Furthermore, during periods
when rates generally increase, the Company's deposit costs will increase and net
interest margins may be reduced as rates rise.
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 non-accruing and past due
loans. During 2004, the Company refined its method of estimating the level of
allowance needed and now considers average losses compared to average loans
outstanding for a rolling ten-year historical period.
During the third quarter of 2004 the provision for loan losses was adversely
impacted by the effect of four hurricanes that struck Florida. In response to
the potential loan losses caused by the hurricane related, deteriorating
financial condition of the Company's borrowers, management undertook a review of
the entire loan portfolio and determined that several loans needed to be
downgraded and the allowance for loan losses increased accordingly. During the
third quarter of 2004, the company provided $750,000 to increase the allowance
for loan losses to $9.2 million, compared to a provision of $700,000 during the
same period in 2003. Loans charged off exceeded recoveries by approximately $88
thousand for the three months ended September 30, 2004. During the three months
ended September 30, 2003, net recoveries totaled $59 thousand. The reserve for
loan losses as a percent of outstanding loans, net of unearned income, was 1.80%
at September 30, 2004, compared to 1.84% at year-end 2003.
17
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
Non-interest Income
Non-interest income for the three months ended September 30, 2004, was $659
thousand compared to $663 for the same period of 2003, an decrease of $4
thousand (0.6%). The decrease was primarily due to lower service charges in
2004.
Noninterest Expenses
Noninterest expenses for the three months ended September 30, 2004, were
$2,962,438 reflecting a 1.0% increase from the same period of 2003. The primary
components of noninterest expenses are salaries and employee benefits, which
increased $33 thousand for the three months ended September 30, 2004 compared to
the same period in 2003, caused by added staff in new branches. Occupancy costs,
during this same period, increased by approximately $54 thousand due to new
branch locations.
Income Taxes
The provision for income taxes of $1,804,852 for the three months ended
September 30, 2004, increased $620 thousand compared to the same period of 2003,
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. Nine months ended September 30, 2004 and 2003
Summary
Net earnings of the Company for the nine months ended September 30, 2004,
totaled $9,051,298 compared to $6,121,049 for the same period in 2003,
representing a 47.9% increase. The increase was due principally to higher net
interest income.
Net Interest Income
Net interest income of the Company during the nine months ended September 30,
2004, increased $4.8 million (27.6%) from the same period in 2003. This increase
was due primarily to increased loan interest and a decline in interest expense
on deposits.
The Company was in an asset sensitive position during 2004 and 2003 with a
larger dollar amount of interest-earning assets subject to re-pricing than
interest-bearing liabilities. During the first nine months of 2002 when rates
were generally declining, the Company's interest income reduced at a faster rate
than the cost of liabilities. During 2003 and 2004 rates remained low and the
Company's cost of deposits also re-priced to lower rates, thus contributing to
the improved net interest income. In addition, over $200 million of variable
rate loans have reached their interest rate floor, aiding in keeping the average
rate on the loan portfolio higher.
Provision for Loan Losses
The provision for loan losses was $1,250,000 for the nine months ended September
30, 2004 and $1,300,000 for the comparable period in 2003. The level of
non-performing loans declined slightly (from $18.9 million to $16.8 million)
during the period from December 31, 2003 to September 30, 2004.
Noninterest Income
Noninterest income for the nine months ended September 30, 2004, was $2.5
million compared to $2.0 for the same period of 2003. The increase was caused
primarily by a gain on sale of excess branch property. During 2003, there was no
similar gain from sale of fixed assets.
Noninterest Expenses
Noninterest expenses for the nine months ended September 30, 2004, totaled
$8,838,520 and reflected a 8.6% increase from the same period of 2003. Most of
the increase occurred in salary and employee benefit costs and occupancy expense
due to branch expansion.
Income Taxes
The provision for income taxes of $5,459,687 for the nine months ended September
30, 2004 increased $1.7 million compared to the same period of 2003 due to
higher taxable earnings. The effective tax rates for 2004 and for 2003 were
higher than the federal tax rate due to the effect of state income tax, net of
federal tax benefit.
18
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
Other Accounting Issues
In December of 2003, the Financial Accounting Standards Board (FASB) revised
Statement of Financial Accounting Standard (SFAS) No.132, Employers' Disclosures
about Pensions and Other Postretirement Benefits (SFAS 132) to require
additional disclosures related to pensions and post retirement benefits. While
retaining the existing disclosure requirements for pensions and postretirement
benefits, additional disclosures are required related to pension plan assets,
obligations, contributions and net benefit costs, beginning with fiscal years
ending after December 15, 2003. Additional disclosures pertaining to benefit
payments are required for fiscal years ending after September 30, 2004. The SFAS
132 revisions also include additional disclosure requirements for interim
financial reports beginning after December 15, 2003. The adoption of this SFAS
is not expected to have a material impact on our results of operations or
financial condition.
In March 2004, the Emerging Issues Task Force (EITF) reached a consensus on the
remaining portions of EITF 03-01, The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments, effective for the first fiscal year
or interim period beginning after June 15, 2004. EITF 03-01 provides new
disclosure requirements for other-than-temporary impairments on debt and equity
investments. Investors are required to disclose quantitative information about:
(i) the aggregate amount of unrealized losses, and (ii) the aggregate related
fair values of investments with unrealized losses, segregated into time periods
during which the investment has been in an unrealized loss position of less than
12 months and greater than 12 months. In addition, investors are required to
disclose the qualitative information that supports their conclusion that the
impairments noted in the qualitative disclosure are not other-than-temporary.
The adoption of this EITF is not expected to have a material impact on our
results of operations or financial condition.
In March 2004, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) issued SAB No. 105, Application of Accounting Principles to Loan
Commitments. SAB 105 requires that the fair value measurement of mortgage loan
commitments, which are derivatives, exclude any expected future cash flows
related to the customer relationship or servicing rights. The guidance in SAB
105 must be applied to mortgage loan commitments entered into after March 31,
2004. The impact on the Company is not material given the declines in mortgage
banking volume but could be in the future. The impact is primarily the timing of
when gains should be recognized in the financial statements.
In December 2003, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer,
which addresses the accounting for differences between contractual cash flows
and expected cash flows for loans acquired in a transfer when those differences
are attributable at least in part to a decline in credit quality. The scope of
SOP 03-3 includes loans where there is evidence of deterioration in credit
quality since origination, and includes loans acquired individually, in pools or
as part of a business combination. Under SOP 03-3, the difference between
expected cash flows and the purchase price is accreted as an adjustment to yield
over the life. The Company does not expect its application to have a material
impact on our consolidated financial position or results of operations.
19
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
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.
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, 2004, the Company's simulation analysis indicated that the
Company is at greatest risk in a sudden decreasing interest rate environment.
This analysis assumes that rates will change suddenly on a specific date. The
Company believes that an actual increase of interest rates will occur over a
prolonged period of time and, during the period of change, liabilities will
re-price faster than the assets (due to the effect of the "floored" loans) and
the Company will experience a decline in its net interest margin. A prolonged
increase in rates is anticipated to have an effect inverse to the simulation
analysis depicted in the following table. This table depicts the results of the
simulation assuming one and two percent decrease and increase in market interest
rates.
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20
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
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......................................... $ 517,642 $ 506,504 $ 522,500 $ 499,973
Federal funds sold and cash equivalents....... 10,281 10,259 10,292 10,248
Securities.................................... 42,512 40,641 43,238 39,418
------------ ------------- -------------- --------------
Total Interest-earning Assets............... 570,435 557,404 576,030 549,639
============ ============= ============== ==============
Interest-bearing Liabilities
Deposits - Savings and demand................. 164,008 158,374 166,826 155,556
Deposits - Time............................... 229,109 223,939 231,693 221,355
Other borrowings.............................. 57,148 52,852 59,296 50,704
------------ ------------- -------------- --------------
Total Interest-bearing Liabilities.......... 450,265 435,165 457,815 427,615
============ ============= ============== ==============
Net Difference in Fair Value..................... $ 120,170 $ 122,239 $ 118,215 $ 122,024
Change in Net Interest Income.................... $ (496) $ 350 $ (1,043) $ 615
21
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company has evaluated the effectiveness of its disclosure controls and
procedures pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934
(the "Exchange Act"), the Company's chief executive officer and chief financial
officer have concluded that as of the end of the period covered by this
Quarterly Report of Form 10-Q such disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Corporation
in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.
Changes in Internal Controls
During the quarter under report, there was no change in the Company's internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
22
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FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
PART II - Other Information
Item 1 - Legal Proceedings
In the ordinary course of business, the Company is subject to legal proceedings,
which involve claims for substantial monetary relief. However, based upon the
advice of legal counsel, management is of the opinion that any legal
proceedings, individually or in the aggregate, will not have a material adverse
effect on the Company's financial condition or results of operations.
Item 5 - Other Information
In October 2004, the Company declared a stock split and issued 1.2 shares for
each share outstanding of the Company's common stock. The 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 consolidated financial statements and accompanying notes
reflect the stock split and its retroactive effect.
23
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FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
Item 6 - Exhibits
The following Exhibits are filed with this report:
Exhibit No. Exhibit Page
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,
2003, 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 September 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).
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).
24
FLORIDA COMMUNITY BANKS, INC.
September 30, 2004
Exhibit No. Exhibit Page
10.7 Employee Stock Ownership Plan (included as Exhibit 10.5 to the
Company's Form S-8 filed May 6, 2004.
11 Statement re: computation of earnings per common share 27
14 Code of Ethics (included as Exhibit 99.1 to the Company's Form 8-K
filed on March 3, 2003, and incorporated herein by reference.)
31.1 Chief Executive Officer - Certification of principal executive officer
pursuant to the Exchange Act Rule 13(a)-14(a) or 15(d)-14(a). 28
31.2 Chief Financial Officer - Certification of principal financial officer
pursuant to the Exchange Act Rule 13(a)-14(a) or 15(d)-14(a). 29
32.1 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. 30
32.2 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. 30
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25
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 10, 2004
------------------------------------- ----------------------
Stephen L. Price Date
President and Chief Executive Officer
By: /s/ Thomas V. Ogletree November 10, 2004
------------------------------------- ----------------------
Thomas V. Ogletree Date
Chief Financial Officer
26
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 nine-month periods ended September 30,
2004 and 2003. 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,
----------------------------- -----------------------------
2004 2003 2004 2003
------------- ------------- ------------- --------------
Basic Earnings Per Share:
Net income.................................... $ 2,999,731 $ 1,965,043 $ 9,051,298 $ 6,121,048
------------- ------------- ------------- --------------
Earnings on common shares..................... $ 2,999,731 $ 1,965,043 $ 9,051,298 $ 6,121,048
------------- ------------- ------------- --------------
Weighted average common shares
outstanding - basic......................... 4,519,661 4,497,575 4,515,556 4,497,575
------------- ------------- ------------- --------------
Basic earnings per common share............... $ 0.66 $ 0.44 $ 2.00 $ 1.36
------------- ------------- ------------- --------------
Diluted Earnings Per Share:
Net income.................................... $ 2,999,731 $ 1,965,043 $ 9,051,298 $ 6,121,048
------------- ------------- ------------- --------------
Weighted average common shares
outstanding - diluted....................... 4,575,409 4,520,195 4,567,390 4,522,566
------------- ------------- ------------- --------------
Diluted earnings per common share............. $ 0.66 $ 0.43 $ 1.98 $ 1.35
------------- ------------- ------------- --------------
27
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
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 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
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
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
first quarter that has materially affected or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 10, 2004 By: /s/ Stephen L. Price
------------------------------------------
Stephen L. Price, President, Chief Executive Officer
and Chairman of the Board of Directors
28
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
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 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
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
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
first quarter that has materially affected or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 10, 2004 By: /s/ Thomas V. Ogletree
----------------------------------------------
Thomas V. Ogletree
Chief Financial Officer
29
EXHIBIT 32.1
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, 2004 ("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 10, 2004 By: /s/ Stephen L. Price
--------------------------------------------
Stephen L. Price
President and Chief Executive Officer
EXHIBIT 32.2
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, 2004 ("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 10, 2004 By: /s/ Thomas V. Ogletree
---------------------------------------
Thomas V. Ogletree
Chief Financial Officer
30