U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-22608
FFLC BANCORP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 59-3204891
------------------------- ----------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
800 North Boulevard West, Post Office Box 490420, Leesburg, Florida 34749-0420
------------------------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (352) 787-3311
--------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common stock, par value $.01 per share 3,572,517 shares outstanding at April 22, 2002
-------------------------------------- ----------------------------------------------
FFLC BANCORP, INC.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
at March 31, 2002 (unaudited) and at December 31, 2001.................2
Condensed Consolidated Statements of Income -
Three months ended March 31, 2002 and 2001 (unaudited).................3
Condensed Consolidated Statement of Changes in Stockholders' Equity -
Three months ended March 31, 2002 (unaudited)..........................4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 2002 and 2001 (unaudited)...............5-6
Notes to Condensed Consolidated Financial Statements (unaudited).......7-9
Review by Independent Certified Public Accountants......................10
Report on Review by Independent Certified Public Accountants............11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................12-17
Item 3. Quantative and Qualitative Disclosures About Market Risk.........18
Part II. OTHER INFORMATION
Item 1. Legal Proceedings................................................18
Item 2. Changes in Securities............................................18
Item 3. Default upon Senior Securities...................................18
Item 5. Other Information................................................18
Item 6. Exhibits and Reports on Form 8-K.................................19
SIGNATURES...................................................................20
1
FFLC BANCORP, INC.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
($ in thousands, except per share amounts)
At At
March 31, December 31,
--------- ------------
2002 2001
---- ----
Assets (unaudited)
Cash and due from banks $ 21,182 19,609
Interest-bearing deposits 19,739 30,183
--------- ---------
Cash and cash equivalents 40,921 49,792
Securities available for sale 69,779 59,503
Loans, net of allowance for loan losses of $4,273 in 2002
and $4,289 in 2001 701,044 685,935
Accrued interest receivable 4,191 4,193
Premises and equipment, net 14,836 14,338
Foreclosed assets 315 373
Federal Home Loan Bank stock, at cost 7,700 7,700
Deferred income taxes 453 274
Other assets 1,309 1,043
--------- ---------
Total $ 840,548 823,151
========= =========
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits 15,577 14,334
NOW and money market accounts 124,964 111,961
Savings accounts 22,133 24,093
Certificates 429,903 434,740
--------- ---------
Total deposits 592,577 585,128
Advances from Federal Home Loan Bank 154,000 154,000
Other borrowed funds 17,398 13,327
Accrued expenses and other liabilities 11,064 6,628
--------- ---------
Total liabilities 775,039 759,083
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none outstanding -- --
Common stock, $.01 par value, 9,000,000 shares authorized,
4,558,380 in 2002 and 4,542,953 in 2001 shares issued 46 45
Additional paid-in-capital 31,469 31,355
Retained income 53,284 51,575
Accumulated other comprehensive income 217 440
Treasury stock, at cost (985,965 shares in 2002 and
979,021 shares in 2001) (19,507) (19,347)
--------- ---------
Total stockholders' equity 65,509 64,068
--------- ---------
Total $ 840,548 823,151
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
2
FFLC BANCORP, INC.
Condensed Consolidated Statements of Income (Unaudited)
($ in thousands, except per share amounts)
Three Months Ended
March 31,
2002 2001
---- ----
Interest income:
Loans $ 12,867 12,805
Securities available for sale 761 714
Other interest-earning assets 240 316
---------- ----------
Total interest income 13,868 13,835
---------- ----------
Interest expense:
Deposits 5,218 6,933
Borrowed funds 2,273 1,988
---------- ----------
Total interest expense 7,491 8,921
---------- ----------
Net interest income 6,377 4,914
Provision for loan losses 258 275
---------- ----------
Net interest income after provision for loan losses 6,119 4,639
---------- ----------
Noninterest income:
Deposit account fees 218 217
Other service charges and fees 482 347
Other 168 51
---------- ----------
Total noninterest income 868 615
---------- ----------
Noninterest expense:
Salaries and employee benefits 2,016 1,707
Occupancy expense 573 481
Deposit insurance premium 26 24
Data processing expense 252 246
Professional services 102 85
Advertising and promotion 111 106
Other 364 314
---------- ----------
Total noninterest expense 3,444 2,963
---------- ----------
Income before income taxes 3,543 2,291
Income taxes 1,335 859
---------- ----------
Net income $ 2,208 1,432
========== ==========
Basic income per share of common stock $ .62 .41
========== ==========
Weighted-average number of shares outstanding for basic 3,567,776 3,534,998
========== ==========
Diluted income per share of common stock $ .61 .40
========== ==========
Weighted-average number of shares outstanding for diluted 3,639,733 3,621,029
========== ==========
Dividends per share $ .14 .13
========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements
3
FFLC BANCORP, INC.
Condensed Consolidated Statement of Changes in Stockholders' Equity
Three Months Ended March 31, 2002 (Unaudited)
($ in thousands)
Accumulated
Other
Additional Compre- Total
Common Paid-In Treasury Retained hensive Stockholders'
Stock Capital Stock Income Income Equity
-------- --------- ---------- ------ ---------- -------------
Balance at December 31, 2001 $ 45 31,355 (19,347) 51,575 440 64,068
-------
Comprehensive income:
Net income (unaudited) -- -- -- 2,208 -- 2,208
Change in unrealized gains on securities
available for sale, net of income taxes
of $135 (unaudited) -- -- -- -- (223) (223)
------- -------
Comprehensive income (unaudited) 1,985
-------
Net proceeds from the issuance of 15,427 shares of
common stock, stock options exercised
(unaudited) 1 114 -- -- -- 115
Dividends paid (unaudited) -- -- -- (499) -- (499)
Purchase of treasury stock, 6,944 shares (unaudited) -- -- (160) -- -- (160)
---------------------------------------------------- ------- ------- ------- ------- ------- -------
Balance at March 31, 2002 (unaudited) $ 46 31,469 (19,507) 53,284 217 65,509
======= ======= ======= ======= ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
4
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
($ in thousands)
Three Months Ended
March 31,
---------------------
2002 2001
---- ----
Cash flows from operating activities:
Net income $ 2,208 1,432
Adjustments to reconcile net income
to net cash provided by operations:
Provision for loan losses 258 275
Depreciation 259 191
Credit for deferred income taxes (44) (53)
Gain on sale of foreclosed assets (30) (9)
Net amortization of premiums and discounts on securities 22 (22)
Net deferral of loan fees and costs (82) 31
Decrease (increase) in accrued interest receivable 2 (165)
Increase in other assets (266) (60)
Increase in accrued expenses and other liabilities 4,436 273
-------- --------
Net cash provided by operating activities 6,763 1,893
-------- --------
Cash flows from investing activities:
Proceeds from principal repayments and maturities on securities
available for sale 4,567 2,551
Purchase of securities available for sale (15,223) (2,138)
Loan disbursements (61,780) (42,507)
Principal repayments on loans 46,229 18,037
Purchase of premises and equipment, net (757) (758)
Proceeds from sales of foreclosed assets 354 220
-------- --------
Net cash used in investing activities (26,610) (24,595)
-------- --------
Cash flows from financing activities:
Net increase in deposits 7,449 22,141
Net increase in other borrowed funds 4,071 5,401
Issuance of common stock 115 61
Purchase of treasury stock (160) (133)
Cash dividends paid (499) (460)
-------- --------
Net cash provided by financing activities 10,976 27,010
-------- --------
Net (decrease) increase in cash and cash equivalents (8,871) 4,308
Cash and cash equivalents at beginning of period 49,792 30,481
-------- --------
Cash and cash equivalents at end of period $ 40,921 34,789
======== ========
(continued)
5
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited), Continued
($ in thousands)
Three Months Ended
March 31,
-------------------
2002 2001
---- ----
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 7,467 8,967
======= =======
Income taxes $ 270 88
======= =======
Noncash investing and financing activities:
Accumulated other comprehensive income (loss), net change in unrealized
gain on securities available for sale, net of tax $ (223) 237
======= =======
Transfers from loans to foreclosed assets $ 407 63
======= =======
Loans originated on sales of foreclosed assets $ 141 5
======= =======
Loans funded by and sold to correspondent $ 2,798 3,032
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements.
6
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation. In the opinion of the management of FFLC Bancorp,
Inc. (the "Holding Company"), the accompanying condensed consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position
at March 31, 2002 and the results of operations and cash flows for the
three-month periods ended March 31, 2002 and 2001. The results of
operations for the three-month period ended March 31, 2002, are not
necessarily indicative of results that may be expected for the year
ending December 31, 2002.
The condensed consolidated financial statements include the accounts of
the Holding Company and its two subsidiaries, First Federal Savings Bank
of Lake County (the "Bank") and First Alliance Title, LLC and the Bank's
wholly-owned subsidiary, Lake County Service Corporation (together, the
"Company"). All significant intercompany accounts and transactions have
been eliminated in consolidation.
2. Loans. The following table sets forth the composition of the Bank's loan
portfolio in dollar amounts and percentages at the dates indicated
(in thousands):
At March 31, 2002 At December 31, 2001
---------------------- --------------------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
Mortgage loans:
One-to-four-family residential $ 413,260 57.24% $ 413,712 58.77%
Construction and land 26,341 3.65 22,951 3.26
Multi-family units 23,141 3.20 20,304 2.88
Commercial real estate, churches and other 116,118 16.08 108,804 15.46
--------- ------- --------- -------
Total mortgage loans 578,860 80.17 565,771 80.37
Consumer loans 124,970 17.31 119,357 16.96
Commercial loans 18,162 2.52 18,814 2.67
--------- ------- --------- -------
Total loans (1) 721,992 100.00% 703,942 100.00%
======= =======
Less:
Loans in process (17,349) (14,310)
Net deferred loan costs 674 592
Allowance for loan losses (2) (4,273) (4,289)
--------- --------
Loans, net $ 701,044 $685,935
========= ========
(1) Total loans outstanding by department consists of the following
(in thousands):
At March 31, 2002 December 31, 2001
----------------- -----------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
Residential $ 404,720 56.06% $ 403,897 57.37%
Commercial 192,302 26.63 180,688 25.67
Consumer 124,970 17.31 119,357 16.96
------- ------- ------- --------
$ 721,992 100.00% $ 703,942 100.00%
======= ====== ======= ======
(continued)
7
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
2. Loans, Continued.
(2) Total allowance for loan losses by department consist of the following
(in thousands):
At March 31, 2002 December 31, 2001
----------------- -----------------
% to % to
Gross Gross
Amount Loans Amount Loans
------ ----- ------ -----
Residential $1,191 .29% $1,229 .30%
Commercial 2,191 1.14 2,039 1.13
Consumer 891 .71 1,021 .86
------ ---- ------ ----
$4,273 .59% $4,289 .61%
====== ==== ====== ====
3. Loan Impairment and Loan Losses. The Company prepares a quarterly review of
the adequacy of the allowance for loan losses to also identify and value
impaired loans in accordance with guidance in the Statements of
Financial Accounting Standards No. 114 and 118.
An analysis of the change in the allowance for loan losses was as
follows (in thousands):
Three Months Ended
March 31,
---------------------
2002 2001
---- ----
Balance at January 1 $ 4,289 3,552
Provision for loan losses 258 275
Net loans charged-off (274) (54)
------ ------
Balance at March 31 $ 4,273 3,773
===== =====
There were no impaired loans at March 31, 2002. The following summarizes
the amount of impaired loans at December 31, 2001, all of which were
collateral dependent (in thousands):
Loans identified as impaired:
Gross loans with no related allowance for losses $ --
Gross loans with related allowance for losses recorded 306
Less: Allowances on these loans (150)
----
Net investment in impaired loans $ 156
====
(continued)
8
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
3. Loan Impairment and Loan Losses, Continued. The average net investment in
impaired loans and interest income recognized and received on impaired
loans was as follows (in thousands):
Three Months Ended
March 31,
------------------
2002 2001
---- ----
Average net investment in impaired loans $ 38 1,215
== =====
Interest income recognized on impaired loans $ -- 11
=== =====
Interest income received on impaired loans $ -- 11
=== =====
4. Income Per Share of Common Stock. Basic income per share of common stock
has been computed by dividing the net income for the period by the
weighted-average number of shares outstanding. Shares of common stock
purchased by the ESOP and RRP incentive plans are only considered
outstanding when the shares are released or committed to be released for
allocation to participants. All ESOP shares have been allocated. Diluted
income per share is computed by dividing net income by the
weighted-average number of shares outstanding including the dilutive
effect of stock options computed using the treasury stock method. The
following table presents the calculation of basic and diluted income per
share of common stock:
Three Months Ended
March 31,
---------
2002 2001
---- ----
Weighted-average shares of common stock issued and
outstanding before adjustments for RRP and
common stock options 3,570,511 3,537,733
Adjustment to reflect the effect of unallocated RRP shares (2,735) (2,735)
---------- ----------
Weighted-average shares for basic net income per share 3,567,776 3,534,998
========== ==========
Basic income per share of common stock $ .62 .41
========== ==========
Total weighted-average common shares and equivalents
outstanding for basic income per share computation 3,567,776 3,534,998
Additional dilutive shares using the average market value for
the period utilizing the treasury stock method regarding stock options 71,957 86,031
---------- ----------
Weighted-average common shares and equivalents outstanding for
diluted income per share 3,639,733 3,621,029
========== ==========
Diluted income per share of common stock $ .61 .40
========== ==========
5. Reclassifications. Certain amounts in the 2001 condensed consolidated
financial statements have been reclassified to conform to the
presentation for 2002.
9
FFLC BANCORP, INC.
Review by Independent Certified Public Accountants
Hacker, Johnson & Smith PA, the Company's independent certified public
accountants, have made a limited review of the financial data as of March 31,
2002, and for the three-month periods ended March 31, 2002 and 2001 presented in
this document, in accordance with standards established by the American
Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
10
Report on Review by Independent Certified Public Accountants
The Board of Directors
FFLC Bancorp, Inc.
Leesburg, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of
FFLC Bancorp, Inc. and Subsidiaries (the "Company") as of March 31, 2002, and
the related condensed consolidated statements of income and cash flows for the
three-month periods ended March 31, 2002 and 2001, and the condensed
consolidated statement of changes in stockholders' equity for the three-month
period ended March 31, 2002. These financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with accounting principles generally accepted
in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 2001, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated January 11, 2002 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 2001, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/ Hacker, Johnson & Smith PA
------------------------------
HACKER, JOHNSON & SMITH PA
Orlando, Florida
April 5, 2002
11
FFLC BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
General
FFLC Bancorp, Inc., (the "Holding Company") is the holding company for its
wholly-owned subsidiary, First Federal Savings Bank of Lake County (the
"Bank"), its 90% owned subsidiary, First Alliance Title, LLC, and the
Bank's wholly-owned subsidiary, Lake County Service Corporation (together,
the "Company"). The Company's consolidated results of operations are
primarily those of the Bank.
The Bank's principal business continues to be attracting retail deposits
from the general public and investing those deposits, together with
principal repayments on loans and investments and funds generated from
operations, primarily in mortgage loans secured by one-to-four-family,
owner-occupied homes, commercial loans, consumer loans and, to a lesser
extent, construction loans, other loans, and multi-family residential
mortgage loans. In addition, the Bank holds investments permitted by
federal laws and regulations including securities issued by the U.S.
Government and agencies thereof. The Bank's revenues are derived
principally from interest on its loan and mortgage-backed securities
portfolios and interest and dividends on its investment securities. The
Bank is a member of the Federal Home Loan Bank ("FHLB") system and its
deposits are insured to the applicable limits by the Savings Association
Insurance Fund ("SAIF") of the Federal Deposit Insurance Corporation (the
"FDIC"). The Bank is subject to regulation by the Office of Thrift
Supervision (the "OTS") as its chartering agency, and the FDIC as its
deposit insurer.
The Bank has 12 full-service banking locations in Lake, Sumter and Citrus
Counties, Florida.
The Company's results of operations are dependent primarily on net
interest income, which is the difference between the interest income
earned primarily on its loan and securities portfolios, and its cost of
funds, consisting of the interest paid on its deposits and borrowings. The
Company's operating results are also affected, to a lesser extent, by fee
income. The Company's operating expenses consist primarily of salaries and
employee benefits, occupancy expenses, and other general and
administrative expenses. The Company's results of operations are also
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies, and
actions of regulatory authorities.
12
FFLC BANCORP, INC.
Capital Resources
The Bank's primary sources of funds include proceeds from payments and
prepayments on mortgage loans and mortgage-backed securities, proceeds
from maturities of investment securities and increases in deposits. While
maturities and scheduled amortization of loans and investment securities
are predictable sources of funds, deposit inflows and mortgage prepayments
are greatly influenced by local conditions, general interest rates, and
regulatory changes.
At March 31, 2002, the Bank had outstanding commitments to originate $19.6
million of loans, commitments to fund approximately $17.3 million of the
undisbursed portion of loans in process and undisbursed lines of credit of
approximately $45.1 million. The Bank believes that it will have
sufficient funds available to meet its commitments. At March 31, 2002,
certificates of deposit which were scheduled to mature in one year or less
totaled $313.8 million. Based on past experience, management believes,
that a significant portion of those funds will remain with the Bank.
The Bank is subject to various regulatory capital requirements
administered by the Federal banking agencies. Failure to meet minimum
capital requirements can require regulators to initiate certain
mandatory-and possibly additional discretionary-actions that, if
undertaken, could have a direct material effect on the Company's financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Bank must meet specific capital
guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts (set forth in the table) of
total and Tier I capital (as defined in the regulations) to risk-weighted
assets (as defined). Management believes that, as of March 31, 2002, the
Bank meets all capital adequacy requirements to which it is subject.
13
FFLC BANCORP, INC.
As of March 31, 2002, the most recent notification from the OTS
categorized the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, the
Bank must maintain minimum tangible, Tier I (core), Tier I (risk-based)
and total risk-based capital percentages as set forth in the table. There
are no conditions or events since that notification that management
believes have changed the institution's category.
The Bank's actual capital amounts and percentages at March 31, 2002 are
also presented in the table.
To Be Well
Minimum Capitalized
For Capital For Prompt
Adequacy Corrective Action
Actual Purposes Provisions
% Amount % Amount % Amount
($ in thousands)
Stockholders' equity,
and ratio to total
assets 7.4% $ 62,114
Less: investment in
nonincludable
subsidiary (500)
Less: unrealized gain on
securities available for sale (268)
---------
Tangible capital,
and ratio to adjusted
total assets 7.3% $ 61,346 1.5% $ 12,605
========= =========
Tier 1 (core) capital, and
ratio to adjusted total
assets 7.3% $ 61,346 3.0% $ 25,211 5.0% $ 42,018
========= ========= =========
Tier 1 capital, and ratio
to risk-weighted assets 11.1% 61,346 4.0% $ 22,175 6.0% $ 33,262
========= ========= =========
Less: Nonincludable investment
in 80% land loans (492)
Tier 2 capital (allowance for
loan losses) 4,189
---------
Total risk-based capital,
and ratio to risk-
weighted assets 11.7% $ 65,043 8.0% $ 44,349 10.0% $ 55,437
========= =========
Total assets $ 841,144
=========
Adjusted total assets $ 840,359
=========
Risk-weighted assets $ 554,367
=========
14
FFLC BANCORP, INC.
The following table shows selected ratios for the periods ended or at the
dates indicated:
Three Months Three Months
Ended Year Ended Ended
March 31, December 31, March 31,
2002 2001 2001
----------------- ----------------- --------------
Average equity as a percentage
of average assets 7.83% 8.05% 8.27%
Total equity to total assets at end of period 7.79% 7.78% 8.16%
Return on average assets (1) 1.06% .82% .79%
Return on average equity (1) 13.54% 10.20% 9.57%
Noninterest expense to average assets (1) 1.65% 1.68% 1.64%
Nonperforming assets to total assets
at end of period .30% .28% .49%
Operating efficiency ratio (1) 47.54% 53.63% 53.59%
(1) Annualized for the three months ended March 31, 2002 and 2001.
At At At
March 31, December 31, March 31,
2002 2001 2001
--------------- --------------- -------------
Weighted-average interest rates:
Interest-earning assets:
Loans 7.46% 7.61% 8.11%
Securities 4.76% 5.16% 6.35%
Other interest-earning assets 2.78% 2.48% 5.82%
Total interest-earning assets 7.06% 7.17% 7.93%
Interest-bearing liabilities:
Interest-bearing deposits 3.47% 3.85% 5.33%
Borrowed funds 5.36% 5.44% 6.08%
Total interest-bearing liabilities 3.89% 4.22% 5.48%
Interest-rate spread 3.17% 2.95% 2.45%
Change in Financial Condition
Total assets increased $17.4 million or 2.1%, from $823.2 million at December
31, 2001 to $840.5 million at March 31, 2002 primarily as a result of a $15.1
million increase in net loans and an increase in securities available for sale
of $10.3 million, partially offset by a decrease in cash and cash equivalents of
$8.9 million. Deposits increased $7.5 million from $585.1 million at December
31, 2001 to $592.6 million at March 31, 2002. The $1.4 million net increase in
stockholders equity during the three months ended March 31, 2002 resulted from
net income of $2.2 million and proceeds of $115,000 from stock options
exercised, partially offset by repurchases of the Company's stock of $160,000,
dividends paid of $499,000 and a $223,000, net of tax decrease in unrealized
gains on securities available for sale.
15
FFLC BANCORP, INC.
Results of Operations
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average costs; (iii) net interest/dividend income; (iv) interest-rate spread;
and (v) net interest margin. Yields and costs were derived by dividing
annualized income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. The average balance of loans includes loans
on which the Company has discontinued accruing interest. The yields and costs
include fees which are considered to constitute adjustments to yields.
Three Months Ended March 31,
-----------------------------------------------------------------
2002 2001
------------------------------- -----------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
------- --------- ---- ------- --------- ----
($ in Thousands)
Interest-earning assets:
Loans $ 690,435 12,867 7.45% $ 628,834 12,805 8.15%
Securities 73,222 761 4.16 43,613 714 6.55
Other interest-earning assets (1) 31,619 240 3.04 20,839 316 6.07
------- -------- ------- ------
Total interest-earning assets 795,276 13,868 6.98 693,286 13,835 7.98
------ ------
Noninterest-earning assets 38,494 30,640
------- --------
Total assets $ 833,770 $ 723,926
======= =======
Interest-bearing liabilities:
NOW and money-market accounts 120,017 400 1.33 87,405 580 2.65
Savings accounts 22,375 56 1.00 19,425 97 2.00
Certificates 435,369 4,762 4.38 407,708 6,256 6.14
Federal Home Loan Bank advances 154,000 2,202 5.72 123,000 1,896 6.17
Other borrowed funds 14,014 71 2.03 8,318 92 4.42
-------- -------- --------- --------
Total interest-bearing liabilities 745,775 7,491 4.02 645,856 8,921 5.53
------ ------
Noninterest-bearing deposits 15,033 12,825
Noninterest-bearing liabilities 7,714 5,388
Stockholders' equity 65,248 59,857
------- --------
Total liabilities and stockholders' equity $ 833,770 $ 723,926
======= =======
Net interest income $ 6,377 $ 4,914
====== ======
Interest-rate spread (2) 2.96% 2.45%
==== ====
Net interest-earning assets, net margin (3) $ 49,501 3.21% $ 47,430 2.84%
======= ==== ======= ====
Ratio of interest-earning assets to
interest-bearing liabilities 1.07 1.07
==== ====
(1) Includes interest-bearing deposits and Federal Home Loan Bank stock.
(2) Interest-rate spread represents the difference between the average yield
on interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin is annualized net interest income divided by average
interest-earning assets.
16
FFLC BANCORP, INC.
Comparison of the Three Months Ended March 31, 2002 and 2001
General Operating Results. Net income for the three-month period ended March 31,
2002 was $2.2 million or $.62 per basic and $.61 per diluted share,
respectively, compared to $1.4 million or $.41 per basic and $.40 per diluted
share, respectively, for the comparable 2001 period. This $776,000 or 54.2%
increase was primarily due to an increase in net interest income of $1.5
million, partially offset by a $481,000 increase in noninterest expense.
Interest Income. Interest income increased $33,000 to $13.9 million for the
three-month period ended March 31, 2002 from the level earned for the
comparable period in 2001. That was due to a $102.0 million increase in the
average balance of interest-earning assets outstanding during the three-month
period ended March 31, 2002, compared to the 2001 period, offset in part by a
decrease in the average yield on interest-earning assets from period to
period from 7.98% for the three-month period ended March 31, 2001, to 6.98%
for the three-month period ended March 31, 2002.
Interest Expense. Interest expense decreased $1.4 million or 16.0%, from $8.9
million for the three-month period ended March 31, 2001 to $7.5 million for
the three-month period ended March 31, 2002. The decrease was primarily due
to a decrease in the average cost of interest bearing liabilities from 5.53%
for the three month period ended March 31, 2001 to 4.02% for the three month
period ended March 31, 2002, partially offset by increases of $63.2 million
in average deposits and $36.7 million in average borrowed funds outstanding.
Average deposits increased from $514.5 million outstanding during the three
months ended March 31, 2001 to $577.8 million outstanding during the
comparable period of 2002. Average borrowed funds increased from $131.3
million outstanding during the three months ended March 31, 2001 to $168.0
million outstanding during the three months ended March 31, 2002.
Provision for Loan Losses. The provision for loan losses is charged to income to
increase the total allowance to a level deemed appropriate by management and
is based upon the volume and type of lending conducted by the Company,
charge-off experience, industry standards, the amount of nonperforming loans,
general economic conditions, particularly as they relate to the Company's
market area, and other factors related to the collectibility of the Company's
loan portfolio. The Company recorded provisions for loan losses for the
three-month periods ended March 31, 2002 and 2001 of $258,000 and $275,000,
respectively. The allowance for loan losses was $4.3 million at March 31,
2002. Management believes the allowance is adequate at March 31, 2002.
Noninterest Income. Noninterest income increased by $253,000 or 41.1% from
$615,000 for the three- month period ended March 31, 2001 to $868,000 for the
three-month period ended March 31, 2002. That increase was mainly due to an
increase in other service charges and fees of $135,000.
Noninterest Expense. Noninterest expense increased by $481,000, or 16.2% from
the three-month period ended March 31, 2001 compared to the three-month
period ended March 31, 2002. The increase was primarily due to increases in
salaries and employee benefits of $309,000, occupancy expense of $92,000 and
other expenses of $50,000 related to the overall growth of the Company.
Income Tax Provision. The income tax provision increased from $859,000 (an
effective tax rate of 37.5%) for the three-month period ended March 31, 2001
to $1.3 million (an effective tax rate of 37.7%) for the corresponding period
in 2002.
17
FFLC BANCORP, INC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss from adverse changes in market prices and
rates. The Company's market risk arises primarily from interest-rate risk
inherent in its lending and deposit taking activities. The Company has little
or no risk related to trading accounts, commodities or foreign exchange.
Management actively monitors and manages its interest rate risk exposure. The
primary objective in managing interest-rate risk is to limit, within
established guidelines, the adverse impact of changes in interest rates on
the Company's net interest income and capital, while adjusting the Company's
asset-liability structure to obtain the maximum yield-cost spread on that
structure. Management relies primarily on its asset-liability structure to
control interest rate risk. However, a sudden and substantial increase or
decrease in interest rates could adversely impact the Company's earnings, to
the extent that the interest rates borne by assets and liabilities do not
change at the same speed, to the same extent, or on the same basis. There
have been no significant changes in the Company's market-risk exposure since
December 31, 2001.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceeding to which FFLC Bancorp, Inc. or
any of its subsidiaries is a party or to which any of their property is
subject.
Item 2. Changes in Securities
Not applicable
Item 3. Default upon Senior Securities
Not applicable
Item 5. Other Information
Not applicable
18
FFLC BANCORP, INC.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report.
3.1 Certificate of Incorporation of FFLC Bancorp, Inc.*
3.2 Bylaws of FFLC Bancorp, Inc. ***
4.0 Stock Certificate of FFLC Bancorp, Inc.*
10.1 First Federal Savings Bank of Lake County Recognition and
Retention Plan**
10.2 First Federal Savings Bank of Lake County Recognition and
Retention Plan for Outside Directors**
10.3 FFLC Bancorp, Inc. Incentive Stock Option Plans for Officers
and Employees**
10.4 FFLC Bancorp, Inc. Stock Option Plan for Outside Directors**
* Incorporated herein by reference into this document from the Exhibits
to Form S-1, Registration Statement, initially filed on September 27,
1993, Registration No. 33-69466.
** Incorporated herein by reference into this document from the Proxy
Statement for the Annual Meeting of Stockholders held on May 12, 1994.
*** Incorporated herein by reference into this document from the September
30, 1999 FFLC Bancorp, Inc. Form 10-Q filed November 3, 1999.
(b) There were no reports on Form 8-K filed during the three months ended
March 31, 2002.
19
FFLC BANCORP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FFLC BANCORP, INC.
(Registrant)
Date: April 25, 2002 By: /s/ Stephen T. Kurtz
---------------- --------------------------------------------------
Stephen T. Kurtz, President and Chief Executive
Officer
Date: April 25, 2002 By: /s/ Paul K. Mueller
---------------- --------------------------------------------------
Paul K. Mueller, Executive Vice President and
Treasurer
20