sv1
As filed with the Securities and
Exchange Commission on May 13, 2011
Registration
No.
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
BOND STREET HOLDINGS,
INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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6021
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27-0775699
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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5301 Blue Lagoon Drive,
Suite 200
Miami, Florida 33126
Telephone:
(305) 740-6000
(Address, including zip code,
and telephone number,
including area code, of
registrants principal executive offices)
Daniel M. Healy, Chief Executive
Officer
Bond Street Holdings,
Inc.
5301 Blue Lagoon Drive,
Suite 200
Miami, Florida 33126
Telephone:
(305) 668-5425
(Name, address, including zip
code, and telephone number,
including area code, of agent
for service)
Copies to:
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Peter G. Smith, Esq.
Kramer Levin Naftalis &
Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
Telephone:
(212) 715-9100
Facsimile:
(212) 715-8000
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Stuart I. Oran
Bond Street Holdings, Inc.
5301 Blue Lagoon Drive,
Suite 200
Miami, Florida 33126
Telephone: (305) 740-6000
Facsimile: (305) 740-7474
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Jennifer A. Bensch, Esq.
Skadden, Arps, Slate,
Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of
the Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
(Do not check if a smaller reporting company)
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Smaller Reporting company o
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CALCULATION OF
REGISTRATION FEE
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Title of Each Class
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Proposed Maximum
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of Securities to be
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Aggregate Offering
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Amount of
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Registered
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Price (1)(2)
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Registration Fee (1)
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Class A Common Stock, par value $0.001 per share
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$150,000,000.00
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$17,415.00
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(1)
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Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(o) under the Securities Act of
1933, as amended.
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(2)
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Includes offering price of shares of Class A Common Stock
that the underwriters have the option to purchase pursuant to
their over-allotment option.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. We may not sell any of the securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
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Subject To Completion, Dated May
13, 2011
Bond Street Holdings,
Inc.
Preliminary
Prospectus
Shares
Class A Common Stock
This is the initial public offering of Bond Street Holdings,
Inc., a bank holding company based in Miami, Florida. We are
offering shares
of our Class A Common Stock. We anticipate that the initial
public offering price will be between
$ and
$ per share.
We intend to apply to list our Class A Common Stock on the
New York Stock Exchange under the trading symbol
.
Investing in our Class A Common Stock involves risk. See
Risk Factors beginning on page 11.
Neither the Securities and Exchanges Commission nor any state
securities commission or state or federal bank regulatory body
has approved or disapproved of these securities or passed upon
the adequacy or accuracy of this prospectus. Any representation
to the contrary is a criminal offense.
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Per Share
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Total
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Public offering price
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$
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$
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Underwriting discounts and commissions
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$
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$
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Proceeds, before expenses, to us
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$
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$
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We have granted the underwriters the right to purchase up
to additional shares of Class A Common Stock to
cover over-allotments.
Shares of our Class A Common Stock are not savings
accounts, deposits or obligations of any bank and are not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
The underwriters expect to deliver the shares against payment in
New York, New York on or
about ,
2011, subject to customary closing conditions.
Joint Book
Running Managers
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Deutsche Bank
Securities |
J.P.
Morgan |
Joint
Co-Lead
Managers
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BofA Merrill
Lynch |
Goldman, Sachs
& Co. |
Co-Manager
Sandler
ONeill + Partners, L.P.
The date of this prospectus
is ,
2011
Bank Branch
Map
Branches (39)
as of
May 9, 2011
ii
TABLE OF
CONTENTS
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Page
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v
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11
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115
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125
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145
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148
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152
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159
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163
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166
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166
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F-1
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EX-23.1 |
In this prospectus, unless the context suggests otherwise,
references to Bond Street Holdings, Bond
Street, the Company, we,
us, and our mean the combined business
of Bond Street Holdings, Inc. and its consolidated subsidiaries,
including, Premier American Bank, National Association (whose
name will be changed to Florida Community Bank, National
Association, which is anticipated to occur in July 2011); and
references to the Bank refer to our wholly-owned
banking subsidiary, Premier American Bank, National Association
(and after the name change, which is anticipated to occur in
July 2011, will refer to the same entity which will then be
named Florida Community Bank, National Association) and its
consolidated subsidiaries which also operates branches under the
Florida Community Bank and Sunshine State Community Bank brands.
References to the Old Banks include Premier American
Bank, or Old Premier, Florida Community Bank, or Old FCB,
Peninsula Bank, or Old Peninsula, Sunshine State Community Bank,
or Old Sunshine, First National Bank of Central Florida, or Old
FNBCF, Cortez Community Bank, or Old Cortez, and Coastal Bank,
or Old Coastal. References to our Class A Common Stock
refer to our Class A voting common stock, par value $0.001
per share; references to our Class B Common Stock refer to
our Class B non-voting common stock, par value $0.001 per
share; and references to our common stock include our
Class A Common Stock and our Class B Common Stock.
iii
ABOUT THIS
PROSPECTUS
You should rely only on the information contained in this
prospectus. We and the underwriters have not authorized anyone
to provide you with different information. If anyone provides
you with different or inconsistent information, you should not
rely on it. We are offering to sell, and seeking offers to buy,
shares of our Class A Common Stock only in jurisdictions
where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or any sale of our Class A Common Stock. Our
business, financial condition, results of operations and
prospects may have changed since that date.
No action is being taken in any jurisdiction outside the United
States to permit a public offering of our common stock or
possession or distribution of this prospectus in that
jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are
required to inform themselves about, and to observe, any
restrictions as to the offering and the distribution of this
prospectus applicable to those jurisdictions.
Unless otherwise expressly stated or the context otherwise
requires, all information in this prospectus assumes that the
underwriters will not exercise their option to purchase
additional shares of Class A Common Stock to cover
over-allotments, if any.
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INDUSTRY AND
MARKET DATA
The market data and other statistical information used
throughout this prospectus are based on independent industry
publications. Some data are also based on our good faith
estimates, which are derived from our review of internal
surveys, as well as independent industry publications,
government publications, reports by market research firms or
other published independent sources. None of the independent
industry publications referred to in this prospectus was
prepared on our or our affiliates behalf or at our expense.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under Prospectus Summary,
Risk Factors, Managements Discussion and
Analysis of Financial Condition and Results of Operations,
Business and elsewhere in this prospectus may
contain forward-looking statements that reflect our current
views with respect to, among other things, future events and
financial performance. We generally identify forward-looking
statements by terminology such as outlook,
believes, expects,
potential, continues, may,
will, could, should,
seeks, approximately,
predicts, intends, plans,
estimates, anticipates or the negative
version of those words or other comparable words. Any
forward-looking statements contained in this prospectus are
based on the historical performance of us and our subsidiaries
or on our current plans, estimates and expectations. The
inclusion of this forward-looking information should not be
regarded as a representation by us, the underwriters or any
other person that the future plans, estimates or expectations
contemplated by us will be achieved. Such forward-looking
statements are subject to various risks and uncertainties and
assumptions relating to our operations, financial results,
financial condition, business prospects, growth strategy and
liquidity. If one or more of these or other risks or
uncertainties materialize, or if our underlying assumptions
prove to be incorrect, our actual results may vary materially
from those indicated in these statements. These factors should
not be construed as exhaustive and should be read in conjunction
with the other cautionary statements that are included elsewhere
in this prospectus. We do not undertake any obligation to
publicly update or review any forward-looking statement, whether
as a result of new information, future developments or
otherwise. A number of important factors could cause actual
results to differ materially from those indicated by the
forward-looking statements, including, but not limited to, those
factors described in Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations.
You should read this prospectus and the documents that we
reference in this prospectus and have filed as exhibits to the
registration statement on
Form S-1,
of which this prospectus is a part, that we have filed with the
Securities and Exchange Commission, completely and with the
understanding that our actual future results, levels of
activity, performance and achievements may be different from
what we expect and that these differences may be material. We
qualify all of our forward looking statements by these
cautionary statements.
v
PROSPECTUS
SUMMARY
This summary provides an overview of selected information
contained elsewhere in this prospectus. This is only a summary
and does not contain all of the information that you should
consider before investing in our Class A Common Stock. You
should read this entire prospectus, including the Risk
Factors section beginning on page 11 and our
financial statements and related notes appearing elsewhere in
this prospectus, before deciding to invest in our Class A
Common Stock. Unless indicated otherwise, the information
included in this prospectus assumes no exercise by the
underwriters of their over-allotment option to purchase up to an
additional shares of our Class A Common Stock
and that the Class A Common Stock to be sold in the
offering is sold at $ per share, which is the
midpoint of the range set forth on the front cover of this
prospectus.
Company
Overview
We are a bank holding company with one wholly-owned national
bank subsidiary, Premier American Bank, National Association,
headquartered in Miami, Florida. The Bank currently operates 39
full-service retail bank branches in Florida. We were formed in
April 2009 and since that time, have raised an aggregate of
approximately $740 million of equity capital and acquired
certain assets and assumed certain liabilities (including
substantially all deposits) of seven failed banks in Florida
from the Federal Deposit Insurance Corporation, or FDIC,
including three acquisitions in 2010 and four acquisitions in
2011, which are collectively referred to as the
Acquisitions. Six of the transactions are covered by
loss share arrangements. Loan portfolios and other real estate
owned, or OREO, which are covered under loss share arrangements
with the FDIC are referred to as Covered Assets.
Pursuant to such loss share arrangements the FDIC bears a
substantial portion of the risk of loss on the Covered Assets.
Our goal is to become a leading regional banking franchise that
focuses on commercial business relationships and provides
customers with a high level of service. Since our first
acquisition, our operational focus has been on the stabilization
of our deposit base and on the workout, collection and sale of
loan and real estate assets acquired in the Acquisitions to
position the Company for future growth. We intend to continue
our acquisition strategy by selectively identifying, acquiring
and integrating depository institutions through traditional
privately negotiated open bank acquisitions and failed bank
acquisitions with the FDIC. In addition, we may acquire deposits
and branches which we believe present attractive risk-adjusted
returns or provide a strategic benefit to our growth strategy.
As of December 31, 2010, we had total stockholders
equity of approximately $728.7 million. Upon completion of
our latest Acquisition, we held consolidated assets of
approximately $3.1 billion and customer deposits of
approximately $2.1 billion.
Our Market
Areas
Our current market extends from Naples to Sarasota, and further
to Brooksville on the west coast of Florida, from Miami to
Daytona Beach on the east coast of Florida, and Orlando in
central Florida. According to estimates from SNL Financial, as
of June 30, 2010, Florida had a total population of
approximately 18.9 million, median household income of
$49,910 and approximately 800,000 active businesses and, in our
top three Metropolitan Statistical Areas, or MSAs:
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Miami-Fort Lauderdale-Pompano
Beach-Homestead had a total population of approximately
5.5 million, median household income of $51,835 and
approximately 260,000 active businesses;
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Orlando-Kissimmee-Sanford had a total population approximately
2.1 million, median household income of $53,598 and
approximately 95,000 active businesses; and
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Cape Coral-Fort Myers had a total population of
approximately 630,000, median household income of $51,699 and
approximately 30,000 active businesses.
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Recently, numerous banking institutions in Florida have
experienced severe distress. Many operate under regulatory
orders, are undercapitalized, have elevated levels of
nonperforming loans or have reduced their lending to customers
in our markets. As of April 30, 2011, 49 banks with more
than $30 billion in combined assets have failed since 2008
in Florida (including the 7 banks we acquired).
We believe the general dislocation in our markets provides an
opportunity for us to grow market share through additional
acquisitions and organic growth in what we believe are some of
the most attractive markets in the Florida. Over time, we expect
to expand our branch network in Florida and may look to expand
to other areas in the Southeastern United States.
Our Competitive
Strengths
We believe the following are our competitive strengths:
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Experienced and Talented Management
Team. Our senior management team has
substantial experience with regional banking franchises,
including North Fork Bancorporation, Bank One, and the Florida
operations of Fifth Third Bank and Wachovia Bank. We have
recruited to the Bank a substantial number of strong, seasoned
commercial bankers.
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Extensive Target Evaluation Capabilities and Successful
Acquisition Integration Experience. We
believe that we have demonstrated our ability to effectively
identify, analyze, acquire and integrate acquisitions of banking
businesses in Florida. Since January 2010, we have successfully
acquired seven such institutions on what we believe were
attractive terms.
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Seasoned Loan Workout Team. As we
continue to grow, we expect that the collection/workout of
acquired loans will continue to be a significant source of
income. We have assembled a management team with extensive
experience evaluating nonperforming assets and the subsequent
workout of those assets. This group now consists of 34 full time
employees with responsibility for the ongoing credit management
and strategic workout of acquired loan portfolios.
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Full-Service Scalable Banking
Platform. Since our first Acquisition, we
have focused on investing in our infrastructure and technology
to create an efficient, scalable platform to support future
growth, support our risk management activities and enhance
lending and fee income opportunities through a full suite of
traditional banking products and services.
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Robust Commercial Business Platform. We
have substantially built out our commercial banking in our
strategic Florida markets, and we have repositioned our
community banking platform and implemented our new treasury
services to provide a full range of banking services to our
commercial customers. All of those efforts are now substantially
complete, and we have begun originating commercial loans, with
approximately $150 million of such loans closed in the
first quarter of 2011.
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Strong Capital Position. We believe our
strong capital position affords us the opportunity to pursue our
growth strategy. As of December 31, 2010, our Tier 1
leverage ratio was 29.4%, our Tier 1 risk-based capital
ratio was 104.1%, our Total risk-based capital ratio was 105.4%
and our tangible common equity ratio was 29.5%. As of
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December 31, 2010, the Banks Tier 1 leverage
ratio was 13.5%, Tier 1 risk-based capital ratio was
51.20%, Total risk-based capital ratio was 52.5% and tangible
common equity ratio was 13.6%.
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Liquidity Position. We believe our
significant cash reserves and liquid securities portfolio
position us well for future growth. As of December 31,
2010, we held investment securities of approximately
$1.5 billion primarily in U.S. government agencies and
U.S. government sponsored enterprises obligations. The
remaining investment portfolio is comprised of highly liquid
investment-grade corporate securities.
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Limited Credit Risk. As of
December 31, 2010, in excess of 95% of our loan portfolio
was covered by loss sharing arrangements with the FDIC resulting
in limited credit risk exposure for our Covered Assets. In
addition, our credit team is comprised of commercial bankers
with local market knowledge and strong relationships in their
communities. In addition, we have adopted what we believe are
conservative credit standards and disciplined underwriting
requirements to maintain proper credit risk management over
assets not covered by our loss sharing arrangements.
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Our Growth
Strategies
We intend to build a leading regional banking franchise by
growingboth through acquisitions and
organicallywithin our existing markets, as well as other
attractive markets that may complement our current footprint. We
intend to pursue the following growth strategies:
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Pursue Acquisition Opportunities. Over
the next several years, we intend to acquire other banking
institutions or their assets and deposits to meet our growth
objectives.
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Expansion of Commercial Lending
Business. We intend to continue to expand our
commercial lending business through the build out and staffing
of our commercial banking platform. We have hired experienced
commercial bankers in each of our metro markets; enhanced our
community banking platform with an experienced leader in the
industry and hired 12 other community and business bankers in
our Florida markets; and implemented full-scale treasury
services platform. We believe these efforts will help increase
our loan origination and associated revenue and attract new
deposits that are focused on transactional accounts that provide
a lower cost of funds.
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Expansion of Residential Mortgage Lending
Business. We intend to continue to build out
our mortgage loan origination platform. We have hired a team
consisting of an experienced mortgage origination leader, four
mortgage loan originators covering our key markets and a
mortgage loan processing and underwriting staff. We have also
contracted with a third-party mortgage origination and servicing
platform to provide the necessary compliance and servicing
functionality for our mortgage business. We may elect not to
retain a significant portion of the mortgages loans we originate
and expect to seek to sell these assets to third parties as
opportunities arise. These efforts are designed to increase
mortgage lending revenue as well as expand our existing suite of
services to attract new deposits.
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Attract and Retain Retail Deposits. The
Bank has developed and deployed a successful branded conversion
strategy, titled Stronger Than Ever, to support the
stabilization of our customer and deposit base. We intend to
continue pursuing these strategies with respect to future
acquisitions with the goal of continuing to attract and retain
key customers and core deposits.
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Building the Systems and Product Suite Necessary for
a Leading Regional Banking Franchise. We have
integrated and significantly upgraded the core operating
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systems previously utilized by Old Premier, Old FCB and Old
Peninsula. The conversion of the core operating systems of the
other Old Banks is scheduled to occur later in 2011. Our core
operating system enables us to provide a full suite of high
quality products and services to our customers, which include
integrated payables and receivables and
e-banking
services, as well as treasury services such as remote deposit
capture, account lock box services, fraud prevention
capabilities, zero balance accounts, mobile banking and
automatic cash sweeps.
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Risk
Factors
For a discussion of certain risk factors you should consider
before making an investment, see Risk Factors
beginning on page 11.
Company
Information
Our principal executive offices are located at 5301 Blue Lagoon
Drive, Suite 200, Miami, Florida, 33126, and our telephone
number is
(305) 740-6000.
Our website address is www.bondstreetholdings.com. The
information and other content contained on our website are not
part of this prospectus.
4
The
Offering
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Common Stock Offered by us |
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shares of Class A Common Stock (1)
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Over-allotment Option |
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shares of Class A Common Stock
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Common Stock to be Outstanding Immediately After the Offering |
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shares, consisting of shares of
Class A Common Stock and 4,462,692 shares of
Class B common stock (2)
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Use of Proceeds |
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We estimate that we will receive net proceeds from the offering
of approximately $ million, or
$ million if the option to purchase additional
shares of Class A Common Stock is exercised in full by the
underwriters assuming an initial public offering price of
$ per share, the midpoint of the range set
forth on the cover page of this prospectus. We intend to use the
net proceeds from the offering for general corporate purposes,
including acquisitions consistent with our growth strategy. See
Use of Proceeds. |
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Regulatory Ownership Restrictions |
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We are a bank holding company. A holder of shares of common
stock (or group of holders acting in concert) that
(i) directly or indirectly owns, controls or has the power
to vote more than 5% of the total voting power of the Company,
(ii) directly or indirectly owns, controls or has the power
to vote 10% or more of any class of voting securities of the
Company, (iii) directly or indirectly owns, controls or has
the power to vote 25% or more of the total equity of the
Company, or (iv) is otherwise deemed to control
the Company under applicable regulatory standards may be subject
to important restrictions, such as prior regulatory notice or
approval requirements and applicable provisions of the FDIC
Statement of Policy on Qualifications for Failed Bank
Acquisitions, or FDIC Policy. |
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See Supervision and RegulationFDIC Statement of
Policy on Qualifications for Failed Bank Acquisitions and
Risk FactorsWe and certain of our existing
stockholders are required to comply with the applicable
provisions of the FDIC Statement of Policy on Qualifications for
Failed Bank Acquisitions, including a three-year prohibition on
sales or transfers of our securities until January 25, 2013
without prior FDIC approval. For a further discussion of
regulatory ownership restrictions see Supervision and
Regulation. |
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Classes of Common Stock; Voting Rights; Conversion |
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The shares of common stock of the Company are divided into two
classes: Class A Common Stock and Class B Common
Stock. The Class A Common Stock possesses all of the voting
power for all matters requiring action by holders of the
Companys common stock, with certain limited exceptions.
Each share of Class B Common Stock is convertible into one
share of Class A Common Stock, subject to certain
restrictions. The Class A Common Stock |
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is not convertible. Other than with respect to voting rights and
the restrictions on transfer and conversion relating to the
Class B Common Stock described in this prospectus, the
Class A Common Stock and the Class B Common Stock are
treated equally and identically, including with respect to
distributions. See Description of Capital
StockCommon Stock for a further discussion of our
common stock. |
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Dividend Policy |
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We do not currently intend to pay dividends on shares of our
common stock. We are a bank holding company and accordingly, any
dividends paid by us are subject to various federal and state
regulatory limitations and also may be subject to the ability of
our subsidiary depository institution(s) to make distributions
or pay dividends to us. The ability of the Company to pay
dividends is limited by minimum capital and other requirements
prescribed by law and regulation. In addition, our agreement
with the Office of the Comptroller of the Currency, or OCC
(which was entered into in connection with the acquisition of
Old Premier) prohibits the Bank from paying a dividend to us
prior to January 25, 2013. After January 25, 2013, the
OCC agreement imposes other restrictions on the Banks
ability to pay dividends to us, including requiring prior
approval from OCC, before any dividends are paid. The relevant
banking regulators have authority to impose additional limits on
dividends and distributions by the Company and its subsidiaries.
Certain restrictive covenants in future debt instruments, if
any, may also limit our ability to pay dividends or the
Banks ability to make distributions or pay dividends to
us. See Dividend Policy and Supervision and
RegulationRegulatory Limits on Dividends and
Distributions. |
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Proposed New York Stock Exchange Symbol |
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We intend to apply to list our Class A Common Stock on the
New York Stock Exchange under the trading symbol
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(1)
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The number of shares of
Class A Common Stock offered assumes that the
underwriters over-allotment option is not exercised. If
the over-allotment option is exercised in full, we will issue
and sell an additional shares of Class A
Common Stock.
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(2)
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Based on shares of common stock
outstanding as of December 31, 2010. Unless otherwise
indicated, information contained in this prospectus regarding
the number of shares of our common stock outstanding after the
offering does not include any shares that may become issuable by
the Company to the FDIC pursuant to the value appreciation
instrument agreements (as described more fully in
BusinessAcquisitions) and does not include an
aggregate of up to shares of common stock
comprised of:
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up to shares of Class A Common Stock
issuable by us upon exercise of the underwriters
over-allotment option;
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3,310,428 shares of Class A Common Stock issuable upon
the exercise of outstanding warrants with an expiration date of
November 12, 2016 at exercise prices of $24.24, $26.18 and
$28.28 per share, each for one-third of such shares;
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6
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2,142,000 shares of Class A Common Stock issuable upon
the exercise of outstanding warrants with an expiration date of
August 13, 2017 at an exercise price of between $26.45 and
$35.99 per share (depending on the date of exercise);
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1,354,599 shares of Class A Common Stock issuable upon
the exercise of outstanding stock options under the Bond Street
Holdings LLC 2009 Option Plan, as amended (the 2009 Option
Plan), with a weighted average exercise price of $20.15
per share; and
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an aggregate of 2,346,561 shares of common stock reserved
for future issuance under the 2009 Option Plan.
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7
Summary
Consolidated Financial Data
The following table sets forth our summary consolidated
financial data. You should read this information in conjunction
with Selected Consolidated Financial Data,
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated
financial statements and the related notes thereto included
elsewhere in this prospectus. The summary historical
consolidated financial information set forth below at and for
the year ended December 31, 2010 is derived from our
audited consolidated financial statements included elsewhere in
this prospectus.
On January 22, 2010, January 29, 2010 and
June 25, 2010, we consummated the acquisition of certain
assets and assumed certain liabilities, including substantially
all deposits, ofOld Premier, Old FCB and Old Peninsula,
respectively, from the FDIC, as receiver. Although we were
formed in April 2009, our activities prior our first Acquisition
consisted solely of organizational, capital raising and related
activities and activities related to identifying and analyzing
potential acquisition candidates. We did not engage in any
substantive operations (including banking operations) prior to
our first Acquisition.
Our results of operations for the post-acquisition periods of
each of the Old Banks are not comparable to the results of
operations of those Old Banks for the pre-acquisition periods
mainly due to the fact that the loss sharing arrangements have
completely altered the risks associated with the loans and
foreclosed real estate of the Old Banks, making historical
financial information of the Old Banks immaterial to an
understanding of our present and planned future operations. In
addition, our business since January 22, 2010 and for the
immediate future relies heavily on our acquisition activities
and our loss share resolution businesses and on the income
generated from the remediation and disposal of assets we
acquired from the FDIC and is fundamentally different from the
business of the Old Banks. Consequently, such information with
respect to the pre-acquisition periods has not been presented.
Results of operations for the post-acquisition periods reflect,
among other things, the acquisition method of accounting,
accretion of the loss-share indemnification asset and accretion
of fair value discounts on loans acquired.
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Year Ended
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December 31, 2010
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($ in thousands)
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Summary Results of Operations Data
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Interest income
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$
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46,573
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Interest expense
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14,848
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Net interest income
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31,725
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Provision for loan losses
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9,862
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Net interest income after provision for loan losses
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21,863
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Noninterest income
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64,074
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Noninterest expenses
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68,111
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Income before income tax benefit
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17,826
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Income tax benefit
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3,807
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Net income
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$
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21,633
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8
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Year Ended
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December 31, 2010
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($ in thousands)
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Per Share Data
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Earnings
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Basic
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$
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0.77
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Diluted
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$
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0.77
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Tangible book value
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$
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19.51
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Weighted average shares outstanding
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Basic
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28,247,986
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Diluted
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28,247,986
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Performance Ratios
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Return on average assets
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1.2
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%
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Return on average equity
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4.0
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%
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Net interest margin
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2.35
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%
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Interest rate spread
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2.10
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%
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Efficiency ratio (Bank level) (1)
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66.7
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%
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Average interest-earning assets to average interest-bearing
liabilities
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122.5
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%
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Average loans receivable to average deposits
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39.2
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%
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Cost of interest-bearing liabilities
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1.3
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%
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Asset Quality
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Nonperforming loans to loans receivable (2)
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Covered under loss sharing agreements with the FDIC
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24.5
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%
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Not covered under loss sharing agreements with the FDIC
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0.2
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%
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Nonperforming assets to total assets (3)
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Covered under loss sharing agreements with the FDIC
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6.2
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%
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Not covered under loss sharing agreements with the FDIC
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0.0
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%
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Allowance for loan losses to non-performing loans
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6.95
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%
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Capital Ratios
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Average equity to average total assets
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31.1
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%
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Tangible common equity ratio
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29.5
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%
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Tier 1 Leverage ratio
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29.4
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%
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Tier 1 risk-based capital ratio
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104.1
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%
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Total risk-based capital ratio
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105.4
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%
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(1)
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Noninterest expense over (net
interest income plus noninterest income).
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(2)
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Non-performing loans includes loans
or pools of loans that are considered impaired but retain
accrual status due to accretion and loans in non-accrual status.
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(3)
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Non-performing assets includes
loans or pools of loans that are considered impaired but retain
accrual status due to accretion and loans in non-accrual status
and Other Real Estate Owned, or OREO.
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9
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As of
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December 31, 2010
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($ in thousands)
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Summary Balance Sheet Data
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Cash and cash equivalents, as adjusted $ (1)
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$
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43,412
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Investment securities
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1,643,657
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Loans receivable
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Not covered under FDIC loss sharing agreements
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8,679
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Covered under FDIC loss sharing agreements
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506,642
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FDIC indemnification asset
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162,596
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OREO
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Covered under FDIC loss sharing agreements, net
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23,219
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Other intangible assets, net
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6,423
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Other assets
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59,033
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Total assets
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$
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2,453,661
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Deposits
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$
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1,514,259
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Advances from Federal Home Loan Bank
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176,689
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Other liabilities
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34,010
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Total liabilities
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1,724,958
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Stockholders equity
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728,703
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Total liabilities and stockholders equity
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$
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2,453,661
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(1)
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On an as adjusted basis to give
effect to (i) the sale
of l shares
of our Class A Common Stock in the offering, at an assumed
initial public offering price of
$ l
per share, the midpoint of the range set forth on the cover page
of this prospectus, after deducting underwriting discounts and
commissions and estimated offering expenses and
(ii) payment of the deferred portion of the placement agent
fees to Deutsche Bank Securities Inc. from our 2009 and 2010
private placements of equity interests of
$ l
million in the aggregate. Does not give effect to
$ l
in fees owing to the FDIC pursuant to the value appreciation
instruments (as described more fully in
Business Acquisitions).
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10
RISK
FACTORS
Investing in our Class A Common Stock involves a high
degree of risk. You should carefully consider the following risk
factors, as well as the other information in this prospectus
before deciding whether to invest in our Class A Common
Stock. If any of the events, highlighted in the following risks
actually occurs, our business, results of operations or
financial condition would likely suffer. In such an event, the
trading price of our Class A Common Stock could decline and
you could lose all or part of your investment.
Risks Related to
Our Business and Industry
We have recently
completed seven acquisitions and have a limited operating
history for which investors can evaluate our profitability and
prospects.
The Company was organized in April 2009 and acquired certain of
the assets and assumed certain liabilities of two failed banks
in January 2010, one in June 2010, one in February 2011, two in
April 2011 and one in May 2011. We have recently completed the
process of integrating three of the acquired banking platforms
(Old Premier, Old FCB and Old Peninsula) into a single unified
operating platform and we are working on integrating the
remaining acquired banking platforms. Accordingly, because our
banking operations began in 2010, we do not have a meaningful
operating history upon which investors can evaluate our
operational performance or compare our recent performance to
historical performance. Although we acquired certain assets and
assumed certain liabilities of seven failed financial
institutions which had operated for longer periods of time than
we have, their business models and experiences are not
reflective of our plans. Accordingly, our limited time running
the Old Banks operations may make it difficult to predict
our future prospects and financial performance based on the
prior performance of such depository institutions. Moreover,
given that most of the loans and other real estate we acquired
in the Acquisitions are covered by loss sharing agreements with
the FDIC, the historical financial results of the acquired banks
are immaterial to an understanding of our future operations.
Certain other factors may also make it difficult to predict our
future financial and operating performance including, among
others:
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our current asset mix (which is comprised primarily of
government agency and investment grade securities and the legacy
loan portfolios that were acquired from the FDIC), loan quality
and allowances are not representative of our anticipated future
asset mix, loan quality and allowances, which may change
materially as we commence meaningful organic loan origination
and banking activities and grow through future acquisitions;
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our significant cash reserves and liquid securities portfolio,
which result in large part from the proceeds of our 2009 and
2010 private placement financings and cash payments from the
FDIC in connection with FDIC-assisted failed bank acquisition
transactions subject and not subject to loss-sharing agreements,
are not necessarily representative of our future cash
position; and
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our cost structure and capital expenditure requirements during
the transitional periods for which financial information is
available are not reflective of our anticipated cost structure
and capital spending as we integrate future acquisitions and
continue to grow our organic banking platform.
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11
Since a large
portion of our income is currently generated from the accretable
discounts and the amoritization of the FDIC loss share
indemnification asset, which over time will need to be replaced
with performing interest earning assets, the failure to generate
sufficient organic loan origination and other asset growth could
have an adverse impact on our future financial condition and
earnings.
As a result of our FDIC-assisted acquisitions, a significant
portion of our current income over the next several years will
be derived from the realization of accretable discounts on the
loans that we purchased and from the amoritization of the FDIC
indemnification assets associated with the FDIC loss sharing
agreements. For the year ended December 31, 2010, we
recognized $37.5 million of income, or 33.9% of total
income, from the realization of accretable discounts on our
acquired loans and the amoritization of the FDIC indemnification
asset. If we are unable to replace our acquired loans and the
related discount accretion with new performing loans and other
performing assets, our financial condition and earnings would be
adversely affected.
Failure to comply
with the terms of our loss sharing agreements with the FDIC may
result in significant losses.
We have purchased certain of the assets and assumed certain of
the liabilities of seven failed banks from the FDIC, and
presently a substantial majority of our revenue is derived from
those assets. The purchased loans, commitments and foreclosed
assets from six of those purchases are covered by the loss
sharing agreements with the FDIC, which provide that a
significant portion of the losses related to the Covered Assets
will be borne by the FDIC. We are subject to audit by the FDIC
at its discretion to ensure we are in compliance with the terms
of these agreements. We may experience difficulties in complying
with the terms of the loss sharing agreements, which could
result in the loss of some or all of the loss sharing coverage
and our being required to recognize the full amount of any such
uncovered losses. Any significant loss of coverage would have a
material adverse effect on our business.
Certain
provisions of the loss sharing agreements entered into with the
FDIC may have anti-takeover effects and could limit our ability
to engage in certain strategic transactions that would be in the
best interests of stockholders.
Our loss sharing agreements with the FDIC require that we
receive prior FDIC consent, which may be withheld by the FDIC in
its sole discretion, prior to us or certain of our stockholders
engaging in certain transactions.
Among other things, prior FDIC consent is required for certain
mergers or consolidations of the Company or the Bank with or
into another company, the sale of all or substantially all of
the assets of the Bank, the sale of a certain percentage of our
shares by the Company, and a stockholder or a group of
stockholders acting in concert. Such a sale by stockholders may
occur beyond our control. In addition, under the Old Premier and
Old FCB loss sharing agreements, any public or private offering
of common stock by us that would increase our outstanding shares
by more than 9% requires the consent of the FDIC. When the
consent of the FDIC is required under the loss sharing
agreements, the FDIC may withhold its consent or may condition
its consent on terms that we do not find acceptable. If the FDIC
does not grant its consent to a transaction we would like to
pursue, or conditions its consent on terms that we do not find
acceptable, we may be unable to engage in certain corporate or
strategic transactions that might otherwise benefit our
stockholders or we may elect to pursue a transaction without
obtaining FDIC consent. If we failed to obtain prior FDIC
consent and the FDIC withdrew its loss share protection, there
could be a material adverse effect on our financial condition,
results of operations and cash flows.
12
If we fail to
effectively manage credit risk, our business and financial
condition will suffer.
We must effectively manage credit risk. There are risks inherent
in making any loan, including risks with respect to the period
of time over which the loan may be repaid, risks relating to
proper loan underwriting and guidelines, risks resulting from
changes in economic and industry conditions, risks inherent in
dealing with individual borrowers and risks resulting from
uncertainties as to the future value of collateral. The majority
of loans held by the Bank were acquired in six FDIC-assisted
transactions which are covered by FDIC loss sharing
arrangements, and one FDIC-assisted transaction which is not
subject to FDIC loss sharing coverage. In addition, a primary
component of our strategy is to grow our commercial loan
origination business. There is no assurance that our credit risk
monitoring and loan approval procedures are or will be adequate
or will reduce the inherent risks associated with lending. Our
credit administration personnel, policies and procedures may not
adequately adapt to changes in economic or any other conditions
affecting customers and the quality of our loan portfolio. Any
failure to manage such credit risks may materially adversely
affect our business and our consolidated results of operations
and financial condition.
Economic and
market developments, including the potential for inflation, may
have an adverse effect on our business, possibly in ways that
are not predictable or that we may fail to anticipate.
Recent economic and market disruptions and the potential for
future economic disruptions and inflation present considerable
risks and challenges to us. Dramatic declines in the housing
market and increasing business failures have negatively impacted
the performance of mortgage, commercial and construction loans
and resulted in significant write downs of assets by many
financial institutions. General downward economic trends,
reduced availability of commercial credit and high unemployment
have also negatively impacted the credit performance of
commercial and consumer loans, resulting in additional write
downs. These risks and challenges have significantly diminished
overall confidence in the national economy, the financial
markets and many financial institutions. This reduced confidence
could further compound the overall market disruptions and risks
to banks and bank holding companies, including us. These
conditions, among others, are some of the factors that
ultimately led to the failure of the banks whose assets we have
purchased to date. Although, as a new market entrant in 2010, we
benefited from these market dislocations as reflected in our
purchase price for the acquired assets, continuation or further
deterioration of weak real estate markets and related impacts,
including increasing foreclosures, business failures and
unemployment, may adversely affect our results of operations,
especially as we attempt to increase our loan origination
activities which will not be protected by loss sharing
arrangements with the FDIC. A continued decline in real estate
values could also lead to higher charge-offs in the event of
defaults in our real estate loan portfolio. Given that our
business may be similar in certain respects to the failed banks
whose assets and liabilities we acquired, and that we may be
serving the same general customer base with portions of a
product mix which may be similar to that of the failed banks,
there is no guarantee that similar economic conditions to those
which adversely affected the failed banks results of
operations will not similarly adversely affect our results of
operations.
Our business and
operations are located in Florida, which has experienced, and
may continue to experience, economic difficulties worse than
many other parts of the United States.
In addition to general, regional, national and international
economic conditions, our operating performance will be impacted
by the economic conditions in Florida. The declines in, and
volatility relating to, the value of real estate, disruption in
the credit markets, increase in
13
unemployment levels, decreased availability of financing for
commercial borrowers in Florida have, among other factors,
resulted in low consumer confidence, depressed real estate
markets and a regional economic performance that has been worse
than for the United States as a whole. These conditions may
continue or worsen in Florida, even if the general economic
conditions in the United States show continued signs of
improvement. In addition, the Florida economy is largely
dependent on the tourism industry. If there is a significant
decline in tourism, the resulting economic effect could have a
material negative impact on our operating results by reducing
our growth prospects, affecting the ability of our customers to
repay their loans to us and generally adversely affecting our
financial condition.
As of December 31, 2010, a substantial portion of our loan
portfolio was secured by commercial properties and residential
properties, in each case, including properties under
construction, located in Florida. It is possible that a
substantial portion of our future loan activities will involve
commercial and residential properties in Florida. A
concentration of our loans in Florida would subject us to risk
that a failure of the Florida economy to recover or a further
downturn could result in a lower than expected loan origination
volume and higher than expected delinquency and foreclosure
rates or losses on loans. Further, if Florida real estate
markets do not recover, it will become more difficult and costly
for us to liquidate foreclosed properties. The occurrence of a
natural disaster in Florida, such as a hurricane, tropical
storm, tsunami or other severe weather event, or a manmade
disaster, such as the 2010 oil spill in the Gulf of Mexico,
could negatively impact regional economic conditions, cause a
decline in the value or destruction of mortgaged properties and
an increase in the risk of delinquencies, foreclosures or loss
on loans originated by us, damage our banking facilities and
offices and negatively impact our growth strategy. In addition,
many residents and businesses in Florida have incurred
significantly higher property and casualty insurance premiums on
their properties, which has and may continue to adversely affect
real estate sales and values in our markets. We may suffer
further losses due to the decline in the value of the properties
underlying our mortgage loans, which could have a material
adverse impact on our operations. Any individual factor or a
combination of factors could materially negatively impact our
business, financial condition, results of operations and
prospects. A high rate of foreclosures or loan delinquencies,
particularly if those loans were not covered by loss sharing
agreements, could have a material adverse effect on our
operations and our business.
Changes in
national and local economic conditions could lead to higher loan
charge-offs
which could have a material adverse impact on our
business.
Although the loan portfolios acquired in the acquisitions of the
Old Banks have been initially accounted for at fair value, we do
not yet know whether a significant amount of loans will become
impaired, and impairment may result in additional charge-offs to
the portfolio. The fluctuations in national, regional and local
economic conditions, including those related to local
residential, commercial real estate and construction markets,
may increase the level of charge-offs that we make to our loan
portfolio, including any loans we originate or acquire in the
future, and, consequently, reduce our net income. These
fluctuations are not predictable, cannot be controlled and may
have a material adverse impact on our operations and financial
condition even if other favorable events occur.
Although we have entered into loss sharing agreements with the
FDIC in six of the seven Acquisitions, which provide that a
significant portion of losses related to those covered loan
portfolios will be borne by the FDIC, we are not protected
against all losses resulting from charge-offs with respect to
those loan portfolios. In addition, none of our newly originated
loans nor any of the assets acquired in the acquisition of Old
Sunshine are covered by loss sharing agreements. Additionally,
the loss sharing agreements have fixed terms. Any charge-off of
related losses that we experience after the loss sharing
agreements expire will not be reimbursed by the FDIC and would
negatively impact our net income. If any of those events
14
occur, our losses could increase. For a more detailed discussion
of the loss sharing agreements, see
BusinessAcquisitions.
Many of our loans
are to commercial borrowers, which have a higher degree of risk
than other types of loans.
Commercial and Industrial loans, including commercial real
estate and construction loans, consisted of $467.6 million
in loans which made up or 87.9% of our total loan portfolio as
of December 31, 2010 but we expect will represent a bigger
percentage of our portfolio over time, are often larger and
involve greater risks than other types of lending. Because
payments on such loans are often dependent on the successful
operation or development of the property or business involved,
repayment of such loans is more sensitive than other types of
loans to adverse conditions in the real estate market or the
general economy. Unlike residential mortgage loans, which
generally are made on the basis of the borrowers ability
to make repayment from their employment and other income and
which are secured by real property whose value tends to be more
easily ascertainable, commercial loans typically are made on the
basis of the borrowers ability to make repayment from the
cash flow of the related commercial venture. If the cash flow
from business operations is reduced, the borrowers ability
to repay the loan may be impaired. Due to the larger average
size of a commercial loan in comparison to other loans such as
residential loans, as well as the collateral which is generally
less readily-marketable, losses incurred on a small number of
commercial loans, to the extent not covered by FDIC loss sharing
arrangements, could have a material adverse impact on our
financial condition and results of operations. In addition,
commercial loan customers often have the ability to fund current
interest payments through additional borrowings, and as a result
the actual credit of these customers may be worse than
anticipated.
The performance
of our residential loan portfolio depends in part upon a third
party service provider and a failure by this third party to
perform its obligations could adversely affect our results of
operations or financial condition.
Substantially all of our residential loans are serviced by
Bayview Loan Servicing, LLC, or BLS, which provides both primary
servicing and special servicing. As of December 31, 2010,
BLS serviced loans representing approximately 5.0% of our loan
portfolio. Primary servicing includes the collection of regular
payments, processing of taxes and insurance, processing of
payoffs, handling borrower inquiries and reporting to the
borrower. Special servicing is focused on borrowers who are
delinquent or on loans which are more complex or in need of more
hands-on attention. If current housing market trends continue or
worsen, the number of delinquent mortgage loans serviced by BLS
could increase. In the event that BLS, or any third-party
servicer we may use in the future, fails to perform its
servicing duties or performs those duties inadequately, we could
experience a temporary interruption in collecting principal and
interest, sustain credit losses on our loans or incur additional
costs associated with obtaining a replacement servicer. Any of
these events could have a material adverse impact on our results
of operations or financial condition. Similarly, if BLS or any
future third-party mortgage loan servicer becomes ineligible,
unwilling or unable to continue to perform servicing activities,
we could incur additional costs to obtain a replacement servicer
and there can be no assurance that a replacement servicer could
be retained in a timely manner or at similar rates.
We are exposed to
risk of environmental liabilities with respect to properties to
which we take title.
In the course of our business, we may own or foreclose and take
title to real estate, and we could become subject to
environmental liabilities with respect to these properties. We
may be held liable to a governmental entity or to third parties
for property damage, personal injury,
15
investigation and
clean-up
costs incurred by these parties in connection with environmental
contamination, or we may be required to investigate or clean up
hazardous or toxic substances or chemical releases at a
property. The costs associated with investigation or remediation
activities could be substantial. In addition, if we were to
become the owner or former owner of a contaminated site, we may
be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination
emanating from the property. If we ever become subject to
significant environmental liabilities, our business, financial
condition, liquidity and results of operations could be
materially and adversely affected.
Our deposit
insurance premiums could be substantially higher in the future,
which could have a material adverse effect on our future
earnings.
The FDIC insures deposits at FDIC-insured depository
institutions, such as the Bank, up to applicable limits. The
amount of a particular institutions deposit insurance
assessment is based on that institutions risk
classification under an FDIC risk-based assessment system. An
institutions risk classification is assigned based on its
capital levels and the level of supervisory concern the
institution poses to its regulators. Recent market developments
and bank failures have significantly depleted the FDICs
deposit insurance fund (DIF), and reduced the ratio of reserves
to insured deposits. As a result of recent economic conditions
and the enactment of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (Dodd-Frank Act), banks are now
assessed deposit insurance premiums based on the banks
average consolidated total assets, and the FDIC has modified
certain risk-based adjustments which increase or decrease a
banks overall assessment rate. This has resulted in
increases to the deposit insurance assessment rates and thus
raised deposit premiums for insured depository institutions. If
these increases are insufficient for the DIF to meet its funding
requirements, further special assessments or increases in
deposit insurance premiums may be required. We are generally
unable to control the amount of premiums that we are required to
pay for FDIC insurance. If there are additional bank or
financial institution failures, we may be required to pay even
higher FDIC premiums than the recently increased levels. Any
future additional assessments, increases or required prepayments
in FDIC insurance premiums could reduce our profitability, may
limit our ability to pursue certain business opportunities, or
otherwise negatively impact our operations.
Changes in
interest rates could negatively impact our net interest income,
weaken demand for our products and services or harm our results
of operations and cash flows.
Our earnings and cash flows are anticipated to be largely
dependent upon net interest income, which is the difference
between interest income earned on interest-earning assets such
as loans and securities and interest expense paid on
interest-bearing liabilities such as deposits and borrowed
funds. Interest rates are highly sensitive to many factors that
are beyond our control, including general economic conditions
and policies of various governmental and regulatory agencies,
particularly the Board of Governors of the Federal Reserve
System, or the Federal Reserve. Changes in monetary policy,
including changes in interest rates, could influence the
interest we receive on loans and securities and the amount of
interest we pay on deposits and borrowings, but such changes
could also adversely affect (1) our ability to originate
loans and obtain deposits, (2) the fair value of our
financial assets and liabilities, (3) our ability to
realize gains on the sale of assets and (4) the average
duration of our mortgage-backed investment securities portfolio.
An increase in interest rates may reduce customers desire
to borrow money from us as it increases their borrowing costs
and may potentially adversely affect their ability to pay the
principal or interest on loans. A portion of our loan portfolios
are floating rate loans. Consequently, an increase in interest
rates may lead to an increase in nonperforming assets and a
reduction of income recognized, which could harm our results of
operations and cash flows. In contrast, decreasing interest
rates may
16
have the effect of causing customers to refinance mortgage loans
faster than originally anticipated. Any substantial, unexpected
or prolonged change in market interest rates could have a
material adverse effect on net interest income, asset quality,
loan origination volume, financial condition, results of
operations and prospects.
The fair value of
our investment securities can fluctuate due to market conditions
out of our control.
As of December 31, 2010, approximately 92.6% of our
investment securities portfolio was comprised of
U.S. government agency and sponsored enterprises
obligations, U.S. government agencies and sponsored
enterprises mortgage-backed securities and securities of
municipalities. As of December 31, 2010, the fair value of
our investment securities portfolio was approximately
$1.6 billion. Factors beyond our control can significantly
influence the fair value of securities in our portfolio and can
cause potential adverse changes to the fair value of these
securities. These factors include but are not limited to rating
agency downgrades of the securities, defaults by the issuer or
with respect to the underlying securities, changes in market
interest rates and continued instability in the credit markets.
In addition, we have historically taken a conservative
investment posture, with concentrations of government issuances
of short duration. In the future, we may seek to increase yields
through more aggressive investment strategies, which may include
a greater percentage of corporate issuances and structured
credit products. Any of these mentioned factors, among others,
could cause other- than-temporary impairments in future periods
and result in a realized loss, which could have a material
adverse effect on our business.
Any requested or
required changes in how we determine the impact of loss share
accounting on our financial information could have a material
adverse effect on our reported results.
A substantial portion of our financial results are based on loss
share accounting, which is subject to assumptions and judgments
made by us, our accountants and the regulatory agencies to whom
we report such information. Loss share accounting is a complex
accounting methodology. If these assumptions are incorrect or
our accountants or the regulatory agencies to whom we report
require that we change or modify our assumptions, such change or
modification could have a material adverse effect on our
financial condition, operations or our previously reported
results. As such, any financial information generated through
the use of loss share accounting is subject to modification or
change. Any significant modification or change in such
information could have a material adverse effect on our results
of operations and our previously reported results.
Our financial
information reflects the application of purchase accounting. Any
change in the assumptions used in such methodology could have an
adverse effect on our results of operations.
As we recently acquired all of our operating assets and assumed
substantially all of our liabilities from third parties, our
financial results are heavily influenced by the application of
purchase accounting. Purchase accounting requires management to
make assumptions regarding the assets purchased and liabilities
assumed to determine their fair market value. If these
assumptions are incorrect or our accountants or the regulatory
agencies to whom we report require that we change or modify our
assumptions, such change or modification could have a material
adverse effect on our financial condition or results of
operations or our previously reported results.
17
We depend on our
senior management team, and the unexpected loss of one or more
of our senior executives could adversely affect our business and
financial results.
Our future success significantly depends on the continued
services and performance of our key management personnel and our
future performance will depend on our ability to motivate and
retain these and other key personnel. The loss of the services
of members of our senior management, or other key employees, or
the inability to attract additional qualified personnel as
needed, could materially and adversely affect our businesses and
our consolidated results of operations and financial condition.
We may not be
able to retain or develop a strong core deposit base or other
low-cost funding sources.
We expect to depend on checking, savings and money market
deposit account balances and other forms of customer deposits as
our primary source of funding for our lending activities. Our
future growth will largely depend on our ability to retain and
grow a strong deposit base. Because a substantial majority of
our existing deposit base on time deposits that were acquired
from failed banks, it may prove harder to maintain and grow our
deposit base than would otherwise be the case. We are also
working to transition certain of our customers to lower cost
traditional banking services as higher cost funding sources,
such as high interest certificates of deposit, mature. Many
banks in Florida are struggling to maintain depositors in light
of the recent financial crisis, and there may be competitive
pressures to pay higher interest rates on deposits, which could
increase funding costs and compress net interest margins. There
is no assurance customers will transition to lower yielding
savings and investment products or continue their business with
the Bank, which could adversely affect our operations. Further,
even if we are able to grow and maintain our deposit base, the
account and deposit balances can decrease when customers
perceive alternative investments, such as the stock market, as
providing a better risk/return tradeoff. If customers move money
out of bank deposits and into other investments (or similar
products at other institutions that may provide a higher rate of
return), we could lose a relatively low cost source of funds,
increasing our funding costs and reducing our net interest
income and net income. Additionally, any such loss of funds
could result in lower loan originations, which could materially
negatively impact our growth strategy.
Recent market
disruptions have caused increased liquidity risks.
The recent disruption and illiquidity in the credit markets are
continuing challenges for banking institutions that have
generally made potential funding sources more difficult to
access, less reliable and more expensive. In addition, liquidity
in the inter-bank market, as well as the markets for commercial
paper and other short-term instruments, have contracted
significantly. These market conditions present significant
challenges in the management of our own and our customers
liquidity, particularly in light of our recent commencement of
loan origination activities. A further deterioration in the
credit markets or a prolonged period without improvement of
market liquidity could adversely affect our liquidity and
financial condition, including our regulatory capital ratios,
and could adversely affect our business, results of operations
and prospects.
We may not be
able to meet the cash flow requirements of our depositors and
borrowers if we do not maintain sufficient liquidity.
Liquidity is the ability to meet current and future cash flow
needs on a timely basis at a reasonable cost. Our liquidity is
used to make loans and to repay deposit liabilities as they
become due or are demanded by customers. Potential alternative
sources of liquidity include federal funds purchased and
securities sold under repurchase agreements. We maintain a
portfolio of investment securities that may be used as a
secondary source of liquidity to the extent
18
the securities are not pledged for collateral. However, we do
not expect to maintain our current level of investment
securities (relative to the size of our business) as we pursue
our acquisition growth strategy. Other potential sources of
liquidity include the sale or securitization of loans, the
utilization of available government and regulatory assistance
programs, the ability to acquire national market non-core
deposits, the issuance of additional collateralized borrowings
such as Federal Home Loan Bank (FHLB) advances, the issuance of
debt securities, issuance of equity securities and borrowings
through the Federal Reserves discount window. However,
there can be no assurance that these sources will continue to be
available to us on terms acceptable to us or at all. Although we
currently have sufficient liquidity to meet the anticipated cash
flow requirements of our depositors and borrowers, there is no
guarantee that we will continue to maintain such liquidity.
Without sufficient liquidity, we may not be able to meet the
cash flow requirements of our depositors and borrowers, which in
turn could have a material adverse impact on our operations.
An inadequate
allowance for loan losses would reduce our earnings.
The loans acquired from Old Sunshine are not covered by any loss
sharing arrangement with the FDIC. In addition, as we increase
our loan origination and other product offerings, the percentage
of assets not covered by the FDIC loss sharing agreements that
make up our loan portfolio will increase. As such, the long-term
success of our business will be largely attributable to the
quality of our assets, particularly newly-originated loans. The
risk of loss on originated loans not covered by FDIC loss
sharing arrangements that we hold on our balance sheet will vary
with, among other things, general economic conditions, the
relative product mix of loans being made, the creditworthiness
of the borrower over the term of the loan and, in the case of a
collateralized loan, the quality of the collateral for the loan.
For our originated loans, we will maintain an allowance for loan
losses based on, among other things, historical rates, an
evaluation of economic conditions, regular reviews of
delinquencies and loan portfolio quality, and regulatory
requirements. We account for loans acquired through purchase
transactions under Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 310-30, Loans
and Debt Securities Acquired with Deteriorated Credit
Quality formerly AICPA Statement of Position
03-03,
Accounting for Certain Loan and Debt Securities Acquired
in a Transfer. Based upon the foregoing factors, we make
assumptions and judgments about the ultimate collectability of
the particular loan and provide an allowance for probable loan
losses based upon a percentage of the outstanding balances and
for specific loans when their ultimate collectability is
considered questionable. If any of these assumptions are
incorrect, it could have a material adverse effect on our
earnings.
If borrowers and
guarantors fail to perform as required by the terms of their
loans, we will sustain losses.
Over time, as a more significant portion of our loan portfolio
consists of loans originated by us or are otherwise not covered
by any loss sharing arrangement, a significant source of risk
arises from the possibility that losses will be sustained if the
Banks borrowers and guarantors fail to perform in
accordance with the terms of their loans and guaranties. This
risk increases when the economy is weak. We have implemented
underwriting and credit monitoring procedures and credit
policies, including the establishment and review of the
allowance for loan losses, that we believe are appropriate to
reduce this risk by assessing the likelihood of nonperformance
and we are in the process of diversifying our credit portfolio.
These policies and procedures, however, may not prevent
unexpected losses that could materially adversely affect our
results of operations.
19
We may not be
able to effectively manage our growth.
As a result of the acquisitions of the assets of seven failed
banks since January 2010, we have become a relatively large
organization in a short period of time. Our future operating
results depend to a large extent on our ability to successfully
manage our rapid growth and our ability to recruit and retain
additional qualified employees, especially seasoned relationship
bankers. Our business plan includes, and is dependent upon,
hiring and retaining highly qualified and motivated executives
and employees at every level and, in particular, bankers that
have long-standing relationships within their communities. These
professionals bring with them valuable customer relationships,
and they will be an integral part of our ability to attract and
grow deposits, generate new loan origination and grow in our
market areas. We expect to experience substantial competition in
our endeavor to identify, hire and retain the top-quality
employees that we believe are key to our future success. If we
are unable to hire and retain qualified employees, we may not be
able to successfully execute our business strategy. If we are
unable to effectively manage and grow the Bank, our business and
our consolidated results of operations and financial condition
could be materially and adversely impacted.
The process of
integrating the assets of the Old Banks and other assets we may
acquire in the future into a single unified operating platform
may delay the attainment of other operating
objectives.
While the Bank has already integrated the operations of the
former platforms of Old Premier, Old FCB and Old Peninsula onto
a single core operating system, the process of doing so, and the
process of integrating Old Sunshine, Old FNBCF, Old Cortez and
Old Coastal and other future acquisitions into one business has
required and will continue to require a significant amount of
attention from our senior management. We are also completing
implementation of a modern treasury services system in
partnership with Fidelity National Information Services, Inc.,
or FIS, to allow the Bank to offer integrated receivables and
payables and
e-banking
services to its commercial and industrial customers. There can
be no guarantee that the conversion to a new operating platform
or the implementation of a new treasury services system will
provide all of the benefits anticipated by the Bank. In
addition, such projects could continue to require the
Banks management and resources to be diverted from its
core business to assist with the new systems integration. We
also have incurred and will continue to incur additional
expenses in connection with the integration processes, and there
may be service outages or delays due to the installation of such
new systems (and customer issues therewith). In addition, any
future acquisition may further delay the completion of a unified
banking platform. Any delays or other problems with respect to
these projects may impact the financial and other benefits that
the Banks management expects to result and could have a
material adverse effect on our business, financial condition and
operations. In the event that continuing our new integration
processes distract senior management from continuing to build
the core businesses of the Bank, our ability to operate and grow
could be materially and adversely impacted.
Our acquisition
of assets and assumption of deposits and liabilities of seven
failed banks involve a number of special risks.
Our acquisition of certain assets and assumption of certain
liabilities of each of the Old Banks followed the determination
by these banks primary regulators that such banks had
failed and the appointment of the FDIC as receiver. Although
FDIC-assisted transactions mitigate certain risks, such as
sharing exposure to loan losses and providing indemnification
against certain liabilities of the failed institution (other
than the acquisition related to Old Sunshine), we are (and would
be in future similar transactions) subject to many of the same
risks we would face in acquiring a non-failed bank in a
negotiated transaction, including risks
20
associated with stability of the deposit base, maintaining
customer relationships and failure to realize the anticipated
acquisition benefits in the amounts and within the timeframes we
expect. In addition, because these acquisitions were conducted
by the FDIC in a manner that did not allow us the time and
access to information normally associated with preparing for and
evaluating a negotiated acquisition, we may face additional
risks, including additional strain on management resources,
management of problem loans, integration of personnel and
operating systems and impact to our capital resources requiring
us to raise additional capital.
Although our senior management team has experience managing the
operations of regional banks, there may be key employees that
have more knowledge or expertise about the history, region or
past practices of the Old Banks. Such key employees may also
have important relationship ties with the community and one or
more significant existing or potential customers. If we lose
such key employees or if we fail to attract qualified personnel
to meet our needs, our ability to continue to maintain and grow
our businesses may suffer and our consolidated results of
operations and financial condition may be materially and
adversely impacted.
There is no assurance that we will be successful in overcoming
these risks or any other problems encountered in connection with
our FDIC-assisted transactions including the acquisition of Old
Sunshine. Although we have entered into loss sharing agreements
with the FDIC in connection with our acquisitions of loans from
each of the Old Banks (except for Old Sunshine), and may enter
into loss sharing agreements if future FDIC-assisted
transactions are consummated, we cannot guarantee that we will
be able to adequately manage their respective loan portfolios
within the limits of the loss protections already provided by
the FDIC or in any future FDIC-assisted acquisition. Further, as
was the case in connection with our acquisition of the assets of
Old Sunshine, we may determine even in the context of future
acquisitions of failed banks from the FDIC to acquire such banks
without the benefit of loss share protection, in whole or in
part. Our inability to overcome these risks could have a
material adverse effect on our business, financial condition and
operations.
We are exposed to
operational risks that can negatively affect our financial
condition.
We are exposed to operational risk. In our daily operations, we
rely on the continued efficacy of our technical and
telecommunication systems, operational infrastructure,
relationships with third parties and the vast array of
associates and key executives. Failure by any or all of these
resources subjects us to risks that may vary in size, scale and
scope. These risks include, among other things, operational,
technical and computer system failures, ineffectiveness or
exposure due to interruption in third party support, the risk of
fraud or theft by employees or outsiders and unauthorized
transactions by employees or operational errors (including
clerical or recordkeeping errors), as well as the loss of key
individuals or failure on the part of the key individuals to
perform properly.
We face strong
competition from financial services companies and other
companies that offer banking services which could negatively
affect our business.
We currently conduct our banking operations primarily in
Broward, Collier, Lee, Hendry, Charlotte, Miami-Dade, Palm
Beach, Volusia, Sarasota, Orange, Seminole, Brevard and Hernando
counties, all of which are located in Florida. We may not be
able to compete successfully against current and future
competitors, which may result in fewer customers and reduced
loans and deposits. Many competitors offer banking services
identical to those offered by us in our service areas. These
competitors include national banks, regional banks and community
banks. We also face competition from many other types of
financial institutions, including without limitation, savings
and loan institutions, finance companies, brokerage firms,
insurance companies, credit unions, mortgage banks and other
financial intermediaries. Some
21
of these competitors may have a long history of successful
operations in our markets and have greater ties to local
businesses and banking relationships, as well as a more
well-established depositor base. Competitors with greater
resources may possess an advantage by being capable of
maintaining numerous banking locations in more convenient
locations, owning more ATMs and conducting extensive promotional
and advertising campaigns or operating at a lower fixed-cost
basis through the Internet.
Additionally, banks and other financial institutions with larger
capitalizations and financial intermediaries (some of which are
not subject to bank regulatory restrictions) have larger lending
limits than we have and thereby are able to serve the credit
needs of larger customers. Specific areas of competition include
interest rates for loans and deposits, efforts to obtain
deposits and range and quality of products and services
provided, including new technology-driven products and services.
Technological innovation continues to contribute to greater
competition in domestic and international financial services
markets as technological advances enable more companies to
provide financial services. Non-local banks with web-based
banking are able to compete for business, further increasing
competition without having a physical presence in the Florida
market.
Our ability to compete successfully depends on a number of
factors, including, among other things:
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the ability to develop, maintain and build upon long-term
customer relationships based on quality service, high ethical
standards and safe, sound assets;
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the ability to expand our market position;
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the scope, relevance and pricing of products and services
offered to meet customer needs and demands;
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the rate at which we introduce new products and services
relative to our competitors;
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customer satisfaction with our level of service; and
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industry and general economic trends.
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Failure to perform in any of these areas could significantly
weaken our competitive position, which could adversely affect
our growth and profitability, which, in turn, could materially
harm our business, financial condition, results of operations
and prospects.
The Bank is a de
novo bank and may be mistaken for one of the failed banks whose
assets and liabilities it acquired, which, along with other
reputational risks, could affect our results.
The Bank was chartered by the OCC as a de novo national
bank effective January 25, 2010 and is operating under the
trade names of several of the failed banks whose assets and
liabilities it acquired (i.e., Premier American Bank, National
Association, Florida Community Bank (a division of Premier
American Bank, N.A.), and Sunshine State Community Bank (a
division of Premier American Bank, N.A.)). If we continue to
operate under the trade names of these failed institutions, we
must overcome the reputational damage resulting from their
recent failures. Our ability to originate and maintain deposit
accounts is highly dependent upon consumer and other external
perceptions of our business practices and our financial health.
Adverse perceptions regarding our business practices or our
financial health could damage our reputation in both the
customer and funding markets, leading to difficulties in
generating, maintaining and financing accounts, and completing
attractive loan originations. Adverse developments with respect
to the consumer or other external perceptions regarding the
practices of our competitors, or our industry as a whole, may
also adversely impact our reputation. In addition, adverse
reputational impacts on third parties with whom we have
important relationships may also negatively affect our business.
Such adverse reputational
22
impacts or events may also increase our litigation risk. If we
experience any of the foregoing, our business could be
materially adversely affected.
We do not expect
to promptly deploy the capital raised in the offering and may
not receive a favorable return on our investment of the proceeds
of the offering or the proceeds from prior offerings.
We do not expect to immediately deploy the capital raised in the
offering. In addition, we have significant funds from our 2009
and 2010 private placement financings that remain undeployed. We
expect to invest the offering proceeds, and we have invested the
proceeds from the prior offerings, in securities until we are
able to deploy the proceeds, which provides lower margins than
we would expect to earn on loans, potentially adversely
affecting equity holder returns, including earnings per share of
common stock, return on assets and return on equity. To the
extent we are unable to deploy the capital raised in the
offering or the prior offerings to our banking operations, our
return on such funds may be very low. If return rates decrease
on the investments in which we invest such funds, our margin in
such funds will be adversely affected.
We do not
anticipate paying any dividends on our common stock. The
Banks ability to pay dividends or lend funds to us is
subject to regulatory limitations, which, to the extent we are
not able to access those funds, may impair our ability to
accomplish our growth strategy and pay our operating
expenses.
We have never paid a cash dividend and do not currently
anticipate paying a cash dividend in the foreseeable future. We
expect to use our earnings for operations and expansion of our
business. Since we are a bank holding company with no
significant assets other than the capital stock of our banking
subsidiary, if we exhaust the capital raised in the offering and
our prior offerings, we will need to depend upon dividends from
the Bank for substantially all of our income or raise capital
through future offerings. Accordingly, at such time, our ability
to pay dividends to our stockholders will depend primarily upon
the receipt of dividends or other capital distributions from the
Bank. The Banks ability to pay dividends to us is subject
to, among other things, its earnings, financial condition and
need for funds, as well as federal and state governmental
policies and regulations applicable to us and the Bank, which
limit the amount that may be paid as dividends without prior
approval. Currently, the Bank is not permitted to pay any
dividends to us until at least January 25, 2013 and, after
that date, approval of the OCC is required. As such, we will
have no ability to rely on dividends from the Bank during this
time period. As a result, you may only receive a return on your
investment in the Class A Common Stock if its market price
increases.
Risks Related to
Our Acquisition Strategy
Our growth and
expansion strategy involves risks and may not be successful, and
our market value and profitability may suffer.
Growth through the acquisition of failed or failing banks, as
well as the selective acquisition of assets, deposits and
branches, represent an important component of our business
strategy. Any future acquisitions will be accompanied by the
risks commonly encountered in any acquisitions. These risks
include, among other things: credit risk associated with the
acquired banks loans and investments; difficulty of
integrating operations; retaining and integrating key personnel;
and potential disruption of our existing business. We expect
that competition for suitable acquisition targets may be
significant. We cannot assure you that we will be able to
successfully identify and acquire suitable acquisition targets
on terms and conditions we consider to be acceptable.
23
Failed bank acquisitions involve risks similar to acquiring open
banks even though the FDIC might provide assistance to mitigate
certain risks, such as sharing in exposure to loan losses and
providing indemnification against certain liabilities of the
failed institution. However, because these acquisitions are
typically conducted by the FDIC in a manner that does not allow
the time typically taken for a due diligence review or for
preparing the integration of an acquired institution, we may
face additional risks in transactions with the FDIC. These risks
include, among other things, accuracy or completeness of due
diligence materials, the loss of customers and core deposits,
strain on management resources related to collection and
management of problem loans and problems related to integration
and retention of personnel and operating systems. There can be
no assurance that we will be successful in overcoming these
risks or any other problems encountered in connection with
acquisitions (including FDIC-assisted transactions). Our
inability to overcome these risks could have an adverse effect
on our ability to achieve our business strategy and maintain our
market value and profitability.
As a result of
acquisitions, we may be required to take write-downs or
write-offs, as well as restructuring and impairment or other
charges that could have a significant negative effect on our
financial condition and results of operations.
We have conducted diligence in connection with our past
acquisitions and must conduct due diligence investigations of
any potential acquisition targets. Intensive due diligence is
time consuming and expensive due to the operations, accounting,
finance and legal professionals who must be involved in the due
diligence process and the fact that such efforts do not always
lead to a consummated transaction. Even if we conduct extensive
due diligence on an entity we decide to acquire, this diligence
may not reveal all material issues that may affect a particular
entity. In addition, factors outside the control of the entity
and outside of our control may later arise. If, during the
diligence process, we fail to identify issues specific to an
entity or the environment in which the entity operates, we may
be forced to later write down or write off assets, restructure
our operations, or incur impairment or other charges that could
result in other reporting losses. In addition, charges of this
nature may cause us to violate net worth or other covenants to
which we may become subject if we obtain debt financing. The
diligence process in failed bank transactions is also expedited
due to the short acquisition timeline that is typical for
failing depository institutions. There can be no assurance that
we will not have to take write-downs or write-offs in connection
with the acquisitions of certain of the assets and assumption of
certain liabilities of each of the Old Banks, or any depository
institution which we later acquire, a portion of which may not
be covered by loss sharing agreements.
We may acquire
entities with significant leverage, increasing the entitys
exposure to adverse economic factors.
Our future acquisitions could include entities whose capital
structures may have significant leverage. Although we will seek
to use leverage in a manner we believe is prudent, any leveraged
capital structure of such investments will increase the exposure
of the entity to adverse economic factors such as rising
interest rates, downturns in the economy or deteriorations in
the condition of the relevant entity or their industries. If an
entity cannot generate adequate cash flow to meet its debt
obligations, we may suffer a partial or total loss of capital
invested in such entity. To the extent there is not ample
availability of financing for leveraged transactions (e.g., due
to adverse changes in economic or financial market conditions or
a decreased appetite for risk by lenders), our ability to
consummate certain transactions could be impaired.
24
Projected
operating results may be inaccurate and may vary significantly
from actual results.
We will generally establish the pricing of transactions and the
capital structure of entities to be acquired by us on the basis
of financial projections for such entities. Projected operating
results will normally be based primarily on management
judgments. In all cases, projections are only estimates of
future results that are based upon assumptions made at the time
that the projections are developed. There can be no assurance
that the projected results will be obtained, and actual results
may vary significantly from the projections. General economic,
political and market conditions, which are not predictable, can
have a material adverse impact on the reliability of such
projections. In the event that the projections made in
connection with our acquisitions of substantially all the assets
and assumption of certain of the liabilities of each Old Bank
vary from actual results, or future projections with respect to
new acquisitions are not accurate, such failures could
materially and adversely affect our business and our
consolidated results of operations and financial condition.
Risks Related to
the Regulation of Our Industry
We operate in a
highly regulated environment and, as a result, are subject to
extensive regulation and supervision that could adversely affect
our financial performance and our ability to implement our
business strategy.
We are subject to extensive regulation, supervision and
legislation that govern almost all aspects of our operations.
This is primarily intended to protect customers, depositors and
the DIF, and the financial system as a whole, not our equity
holders. These laws and regulations, among other things,
prescribe minimum capital requirements, impose limitations on
our business activities, restrict the Banks ability to
guarantee our debt and engage in certain transactions with us,
impose certain specific accounting requirements on us that may
be more restrictive and may result in greater or earlier charges
to earnings or reductions in our capital than accounting
principles generally accepted in the United States of America
(GAAP). We are currently facing increased regulation and
supervision of our industry as a result of the recent financial
crisis in the banking and financial markets, and, to the extent
that we participate in any programs established or to be
established by the U.S. Treasury or by the federal bank
regulatory agencies, there may be additional and changing
requirements and conditions imposed on us. Such additional
regulation and supervision may increase our costs and limit our
ability to pursue business strategies and opportunities.
Further, our failure to comply with these laws and regulations,
even if the failure follows good faith effort or reflects a
difference in interpretation, could subject us to restrictions
on our business activities, fines and other penalties, any of
which could adversely affect our results of operations, capital
base and the price of our common stock.
The Bank and, with respect to certain provisions the Company, is
subject to an Order of the FDIC, dated January 22, 2010,
issued in connection with the FDICs approval of the
Banks application for Federal deposit insurance (the
Order). The Order requires, among other things, that
during the first three years of operation, the Bank obtains FDIC
approval before implementing certain compensation plans, submit
updated business plans and reports of material deviations from
those business plans, and submit quarterly loss share reports. A
failure by the Bank to comply with the requirements of the OCC
Agreement or the Order, or the objection by the OCC or the FDIC
to any materials or information submitted pursuant to the OCC
Agreement or the Order, could prevent us from executing our
business strategy and materially and adversely affect our
businesses and our consolidated results of operations and
financial condition.
25
Federal bank
regulatory agencies periodically conduct examinations of us and
the Bank, including for compliance with laws and regulations,
and our failure to comply with any supervisory actions to which
we are or become subject as a result of such examinations may
adversely affect us.
The Federal Reserve may conduct examinations of our business and
any nonbank subsidiary, including for compliance with applicable
laws and regulations. In addition, the OCC periodically conducts
examinations of the Bank, including for compliance with
applicable laws and regulations. If, as a result of an
examination, the Federal Reserve or the OCC was to determine
that the financial condition, capital resources, asset quality,
asset concentrations, earnings prospects, management, liquidity,
sensitivity to market risk, or other aspects of any of our or
the Banks operations had become unsatisfactory, or that we
or our management were in violation of any law, regulation or
guideline in effect from time to time, the Federal Reserve or
the OCC may take a number of different remedial actions as it
deems appropriate. These actions include the power to enjoin
unsafe or unsound practices, to require affirmative
actions to correct any conditions resulting from any violation
or practice, to issue an administrative order that can be
judicially enforced, to direct an increase in our or the
Banks capital, to restrict our growth, to change the
composition of our concentrations in portfolio or balance sheet
assets, to assess civil monetary penalties against officers or
directors, to remove officers and directors and, if such
conditions cannot be corrected or there is an imminent risk of
loss to depositors, the FDIC may terminate the Banks
deposit insurance.
The Federal
Reserve may require us to commit capital resources to support
our bank subsidiary.
As a matter of policy, the Federal Reserve, which examines us
and our subsidiaries, expects a bank holding company to act as a
source of financial and managerial strength to a subsidiary bank
and to commit resources to support such subsidiary bank. Under
the source of strength doctrine, the Federal Reserve
may require a bank holding company to make capital injections
into a troubled subsidiary bank and may charge the bank holding
company with engaging in unsafe and unsound practices for
failure to commit resources to such a subsidiary bank. In
addition, the Dodd-Frank Act directs the federal bank regulators
to require that all companies that directly or indirectly
control an insured depository institution serve as a source of
strength for the institution. Under this requirement, in the
future, we could be required to provide financial assistance to
the Bank should the Bank experience financial distress.
A capital injection may be required at times when we do not have
the resources to provide it and therefore we may be required to
borrow the funds. Any loans by a holding company to its
subsidiary bank are subordinate in right of payment to deposits
and to certain other indebtedness of the subsidiary bank. In the
event of a bank holding companys bankruptcy, the
bankruptcy trustee will assume any commitment by the holding
company to a federal bank regulatory agency to maintain the
capital of a subsidiary bank. Moreover, bankruptcy law provides
that claims based on any such commitment will be entitled to a
priority of payment over the claims of the holding
companys general unsecured creditors, including the
holders of its note obligations. Thus, any borrowing that must
be done by the holding company in order to make the required
capital injection becomes more difficult and expensive and will
adversely impact the holding companys cash flows,
financial condition, results of operations and prospects.
The short-term
and long-term impact of the new regulatory capital standards and
the forthcoming new capital rules for non-Basel U.S. banks is
uncertain.
On September 12, 2010, the Group of Governors and Heads of
Supervision, the oversight body of the Basel Committee on
Banking Supervision, announced an agreement to a
26
strengthened set of capital requirements for internationally
active banking organizations in the United States and around the
world, known as Basel III. Basel III increases the
requirements for minimum common equity, minimum Tier 1
capital, and minimum total capital, to be phased in over time
until fully phased in by January 1, 2019.
Various provisions of the Dodd-Frank Act increase the capital
requirements of bank holding companies, such as the Company, and
non-bank financial companies that are supervised by the Federal
Reserve. The leverage and risk-based capital ratios of these
entities may not be lower than the leverage and risk-based
capital ratios for insured depository institutions. In
particular, bank holding companies, many of which have long
relied on trust preferred securities as a component of their
regulatory capital, will no longer be permitted to count trust
preferred securities toward their Tier 1 capital. While the
Basel III changes and other regulatory capital requirements
will likely result in generally higher regulatory capital
standards, it is difficult at this time to predict how any new
standards will ultimately be applied to us and the Bank.
The enactment of
the Dodd-Frank Act may have a material effect on our
operations.
On July 21, 2010, President Obama signed into law the
Dodd-Frank Act, which imposes significant regulatory and
compliance changes. The key effects of the Dodd-Frank Act on our
business are:
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changes to regulatory capital requirements;
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creation of new government regulatory agencies;
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limitation on federal preemption;
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changes to deposit insurance assessments;
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changes in insured depository institution regulations; and
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mortgage loan origination and risk retention.
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In addition, the Dodd-Frank Act creates a new Financial
Stability Oversight Council to oversee systemic risk,
establishes a new system for orderly liquidation of certain
systemically significant financial companies and restricts the
ability of banks to engage in certain proprietary trading or to
sponsor or invest in private equity or hedge funds. The
Dodd-Frank Act also mandates regulation of compensation paid by
certain financial institutions to prohibit excessive
compensation that could lead to inappropriate risk and loss. A
new government entity, the Bureau of Consumer Financial
Protection, will be created within the Federal Reserve with
broad power to develop and enforce rules for bank and non-bank
providers of consumer financial products. The Dodd-Frank Act
also requires a wide range of advisers to private funds to
register with the Securities and Exchange Commission, or SEC,
and includes a number of provisions designed to improve the
management of the SEC. Moreover, the Dodd-Frank Act permanently
raises deposit insurance coverage to $250,000 and creates a new
base for calculating the deposit insurance premium paid by
insured institutions. Consequently, large banks that tend to
employ various funding sources other than deposits will incur
higher deposit premiums.
Some provisions of the Dodd-Frank Act became effective
immediately upon its enactment. Many provisions, however, will
require regulations to be promulgated by various federal
agencies in order to be implemented, some of which have been
proposed by applicable federal agencies. The changes resulting
from the Dodd-Frank Act may impact the profitability of our
business activities, require changes to certain of our business
practices, impose upon us more stringent capital, liquidity and
leverage requirements or otherwise adversely affect our
business. These changes may also require us to invest
significant management attention and resources to evaluate and
make any changes necessary to comply with new statutory and
27
regulatory requirements. Failure to comply with the new
requirements may negatively impact our results of operations and
financial condition. While we cannot predict what effect any
presently contemplated or future changes in the laws or
regulations or their interpretations would have on us, these
changes could be materially adverse to investors in our common
stock. For a more detailed description of the Dodd-Frank Act,
see Supervision and RegulationChanges in Laws,
Regulations, or Policies and the Dodd-Frank Act.
We face a risk of
noncompliance and enforcement action with the Bank Secrecy Act
and other anti-money laundering statutes and
regulations.
The federal Bank Secrecy Act, the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (Patriot Act) and other laws and
regulations require financial institutions, among other duties,
to institute and maintain an effective anti-money laundering
program and file suspicious activity and currency transaction
reports as appropriate. The federal Financial Crimes Enforcement
Network, established by the U.S. Treasury Department to
administer the Bank Secrecy Act, is authorized to impose
significant civil money penalties for violations of those
requirements, and has recently engaged in coordinated
enforcement efforts with the individual federal banking
regulators, as well as the U.S. Department of Justice, Drug
Enforcement Administration, and Internal Revenue Service. There
is also increased scrutiny of compliance with the rules enforced
by the Office of Foreign Assets Control (OFAC). If our policies,
procedures and systems are deemed deficient or the policies,
procedures and systems of the financial institutions that we
have already acquired or may acquire in the future are
deficient, we would be subject to liability, including fines and
regulatory actions such as restrictions on our ability to pay
dividends and the necessity to obtain regulatory approvals to
proceed with certain aspects of our business plan, including our
acquisition plans.
We and certain of
our existing stockholders are required to comply with the
applicable provisions of the FDIC Statement of Policy on
Qualifications for Failed Bank Acquisitions, including a
three-year prohibition on sales or transfers of our securities
until January 25, 2013 without prior FDIC
approval.
The FDIC approved our acquisition of Old Premier by order. The
approval contains a condition that the Bank, the Company and our
founders comply with the applicable provisions of the FDIC
Policy. The FDIC Policy imposes additional restrictions and
requirements on certain institutions and their investors, to the
extent that those institutions acquire a failed bank from the
FDIC. Certain provisions of the FDIC Policy are summarized
below. They include a higher capital requirement for the Bank
and a three-year restriction on the sale or transfer of our
securities by certain investors.
As the agency responsible for resolving failed banks, the FDIC
has discretion to determine whether a party is qualified to bid
on a failed institution. The FDIC adopted the FDIC Policy on
August 26, 2009. The FDIC issued guidance under the FDIC
Policy on January 6, 2010 and April 23, 2010.
For those institutions and investors to which it applies, the
FDIC Policy imposes the following provisions, among others.
First, the institution is required to maintain a ratio of
Tier 1 common equity to total assets of at least 10% for a
period of three years, and thereafter maintain a capital level
sufficient to be well capitalized under regulatory standards
during the remaining period of ownership of the investors. This
amount of capital exceeds that required under otherwise
applicable regulatory requirements. Second, investors that
collectively own 80% or more of two or more depository
institutions are required to pledge to the FDIC their
proportionate interests in each institution to indemnify the
FDIC against any losses it incurs in connection with the failure
of one of the institutions. Third, the institution is prohibited
from extending credit to its investors and to affiliates of its
investors. Fourth, investors may not
28
employ ownership structures that use entities domiciled in bank
secrecy jurisdictions. The FDIC has interpreted this prohibition
to apply to a wide range of
non-U.S. jurisdictions.
In its guidance, the FDIC has required that
non-U.S. investors
subject to the FDIC Policy invest through a U.S. subsidiary
and adhere to certain requirements related to record keeping and
information sharing. Fifth, without FDIC approval, investors are
prohibited from selling or otherwise transferring their
securities in the institution for a three-year period following
the time of certain acquisitions. The transfer restrictions in
the FDIC Policy do not apply to open-ended investment companies
that are registered under the Investment Company Act of 1940, as
amended (Investment Company Act) issue redeemable securities,
and allow investors to redeem on demand. Sixth, investors may
not employ complex and functionally opaque ownership structures
to invest in the institution. Seventh, investors that own 10% or
more of the equity of a failed institution are not eligible to
bid for that failed institution in an FDIC auction. Eighth,
investors may be required to provide information to the FDIC,
such as with respect to the size of the capital fund or funds,
their diversification, their return profiles, their marketing
documents, their management teams, and their business models.
Ninth, the FDIC Policy does not replace or substitute for
otherwise applicable regulations or statutes.
We are subject to
the Community Reinvestment Act and fair lending laws, and
failure to comply with these laws could lead to material
penalties.
The Community Reinvestment Act (CRA), the Equal Credit
Opportunity Act, the Fair Housing Act and other fair lending
laws and regulations impose nondiscriminatory lending
requirements on financial institutions. The Department of
Justice and other federal agencies are responsible for enforcing
these laws and regulations. A successful challenge to an
institutions performance under the CRA or fair lending
laws and regulations could result in a wide variety of
sanctions, including the required payment of damages and civil
money penalties, injunctive relief, imposition of restrictions
on mergers and acquisitions activity, and restrictions on
expansion activity. Private parties may also have the ability to
challenge an institutions performance under fair lending
laws in private class action litigation.
Many of our new
activities and expansion plans require regulatory approvals, and
failure to obtain them may restrict our growth.
We intend to complement and expand our business by pursuing
strategic acquisitions of the assets and assuming the
liabilities of failed banks, banks and other financial
institutions. We must generally receive federal regulatory
approval before we can acquire an institution or business. In
determining whether to approve a proposed acquisition, federal
bank regulators will consider, among other factors, the effect
of the acquisition on the competition, our financial condition,
and our future prospects. The regulators also review current and
projected capital ratios and levels, the competence, experience,
and integrity of management and its record of compliance with
laws and regulations, the convenience and needs of the
communities to be served (including the acquiring
institutions record of compliance under the CRA) and the
effectiveness of the acquiring institution in combating money
laundering activities. Such regulatory approvals may not be
granted on terms that are acceptable to us, or at all. We may
also be required to sell branches as a condition to receiving
regulatory approval, which condition may not be acceptable to us
or, if acceptable to us, may reduce the benefit of any
acquisition.
In addition to the acquisition of financial institutions, as
opportunities arise, we plan to continue de novo
branching as a part of our organic growth strategy. De
novo branching carries with it numerous risks, including the
inability to obtain all required regulatory approvals or the
branch failing to perform as expected. The failure to obtain
regulatory approvals for potential de novo branches or
those branches to perform may impact our business plans and
restrict our growth.
29
Stockholders may
be deemed to be acting in concert or otherwise in control of the
Bank, which could impose prior approval requirements and result
in adverse regulatory consequences for such holders.
We are a bank holding company regulated by the Federal Reserve.
Any entity (including a group composed of natural
persons) owning 25% or more of our outstanding shares of common
stock, or a lesser percentage if such holder or group otherwise
exercises a controlling influence over us, may be
subject to regulation as a bank holding company in
accordance with the Bank Holding Company Act of 1956, as amended
(BHCA). In addition, (1) any bank holding company or
foreign bank with a U.S. presence is required to obtain the
approval of the Federal Reserve Board under the BHCA to acquire
or retain 5% or more of our outstanding shares of common stock
and (2) any person other than a bank holding company may be
required to obtain prior regulatory approval under the Change in
Bank Control Act to acquire or retain 10% or more of our
outstanding shares of common stock. Any stockholder that is
deemed to control the Company for bank regulatory
purposes would become subject to prior approval requirements and
ongoing regulation and supervision. Such a holder may be
required to divest 5% or more of the voting shares of
investments that may be deemed incompatible with bank holding
company status, such as an investment in a company engaged in
non-financial activities. Regulatory determination of
control of a depository institution or holding
company is based on all of the relevant facts and circumstances.
Potential investors are advised to consult with their legal
counsel regarding the applicable regulations and requirements.
Our common stock owned by holders determined by a bank
regulatory agency to be acting in concert would be aggregated
for purposes of determining whether those holders have control
of a bank or bank holding company. Each stockholder obtaining
control would be required to register as a bank holding company.
Acting in concert generally means knowing
participation in a joint activity or parallel action towards the
common goal of acquiring control of a bank or a parent company,
whether or not pursuant to an express agreement. How this
definition is applied in individual circumstances can vary among
the various federal bank regulatory agencies and cannot always
be predicted with certainty. Many factors can lead to a finding
of acting in concert, including where stockholders are: commonly
controlled or managed; the holders are parties to an oral or
written agreement or understanding regarding the acquisition,
voting or transfer of control of voting securities of a bank or
bank holding company; the holders each own stock in a bank and
are also management officials, controlling stockholders,
partners or trustees of another company; or both a holder and a
controlling stockholder, partner, trustee or management official
of the holder own equity in the bank or bank holding company.
Risks Related to
the Offering
There has been no
prior public market for our Class A Common Stock and an
active trading market in our stock may not develop or be
sustained.
Prior to the offering, there has been no public market for our
Class A Common Stock. Although we intend to apply to have
our Class A Common Stock listed on the New York Stock
Exchange, we do not know whether third parties will find our
Class A Common Stock to be attractive or whether firms will
be interested in making a market for our stock and an active
trading market in our Class A Common Stock may not develop
or be sustained after the offering. As a result, stockholders
may be unable to liquidate their investments, or may encounter
considerable delay in selling shares of our Class A Common
Stock.
30
If equity
research analysts do not publish research or reports about our
business or if they issue unfavorable research or downgrade our
Class A Common Stock, the price of our Class A Common
Stock could decline.
The trading market for our Class A Common Stock will rely
in part on the research and reports that equity research
analysts publish about us and our business. We do not control
these analysts. Equity research analysts may elect not to
provide research coverage of our Class A Common Stock,
which may adversely affect the market price of our Class A
Common Stock. If equity research analysts do provide research
coverage of our Class A Common Stock, the price of our
Class A Common Stock could decline if one or more of these
analysts downgrade our Class A Common Stock or if they
issue other unfavorable commentary about us or our business. If
one or more of these analysts ceases coverage of the Company, we
could lose visibility in the market, which in turn could cause
our stock price to decline.
Our Class A
Common Stock price is likely to be highly volatile and the
market price of our Class A Common Stock could drop
unexpectedly.
The initial public offering price for our Class A Common
Stock will be determined through negotiations with the
underwriters and such initial public offering price may vary
from the market price of our Class A Common Stock after the
offering. The market price of our Class A Common Stock
could be subject to wide fluctuations in response to, among
other things, the following factors:
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our lack of any meaningful operating history;
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our limited time running the operations of the banks from which
we have acquired assets and assumed deposits and other
liabilities may make it difficult to predict our future
prospects and financial performance based on the prior
performance of such depository institutions;
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any adverse change in the terms of, or loss of coverage under,
our loss sharing arrangements with the FDIC;
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the rapid growth and evolution of our business which is likely
to continue;
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quarterly variations in our results of operations or the
quarterly financial results of companies perceived to be similar
to us;
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changes in estimates of our financial results or recommendations
by market analysts;
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any announcements by us or our competitors of significant
acquisitions, strategic alliances or joint ventures,
particularly as a result of the highly acquisitive nature of our
business;
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changes in our capital structure, such as future issuances of
securities or the incurrence of debt;
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the use of our Class A Common Stock as consideration in
connection with an acquisition;
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litigation involving us, our general industry or both;
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additions or departures of key personnel;
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investors general perception of us; and
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changes in general economic, industry and market conditions in
the United States, Florida or international markets.
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Many of these factors are beyond our control. If any of the
foregoing occurs, it could cause our stock price to fall and may
expose us to securities class action litigation. Any securities
31
class action litigation could result in substantial costs and
the diversion of managements attention and resources.
A material
weakness in our internal control over financial reporting was
identified for the year ended December 31, 2010. Material
weaknesses in our internal control over financial reporting
could result in material misstatements in our financial
statements and have a material adverse effect on the price of
our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,
as amended, and beginning with our Annual Report on
Form 10-K
for the year ending December 31, 2012, our management will
be required to report on, and our independent registered public
accounting firm will be required to attest to, the effectiveness
of our internal control over financial reporting. The rules
governing the standards that must be met for management to
assess our internal control over financial reporting are complex
and require significant documentation, testing and possible
remediation. We are currently in the process of establishing,
documenting and testing our internal control over financial
reporting. We may encounter problems or delays in completing the
implementation of any changes necessary to make a favorable
assessment of our internal control over financial reporting. In
addition, in connection with the attestation process by our
independent registered public accounting firm, we may encounter
problems or delays in completing the implementation of any
requested improvements and receiving a favorable attestation.
A material weakness in our internal control over financial
reporting was identified in connection with the audit of our
consolidated financial statements for the year ended
December 31, 2010, relating to the determination of fair
value of certain assets acquired and liabilities assumed and
certain related processes, on which we had worked with a
third-party consulting firm whose services have now been
discontinued. Prior to the discovery of these errors in late
2010 and early 2011, management engaged a new consulting firm to
assist in certain valuation and other matters. Management
believes that the engagement and assignment of this new
consulting firm in conjunction with other corrective actions,
including enhancement of policies and procedures and allocation
of additional resources, have assisted the Company in the
remediation of this material weakness. Appropriate adjustments
were made to the balance sheet and income statement of the
Company as of and for the year ended December 31, 2010.
A material weakness is defined by the standards issued by the
Public Company Accounting Oversight Board as a deficiency, or
combination of deficiencies, in internal control over financial
reporting that results in a reasonable possibility that a
material misstatement of our annual or interim financial
statements will not be prevented or detected on a timely basis.
We concluded that as a consequence of the matters described
above, a material weakness existed and our internal control over
financial reporting was not effective at December 31, 2010.
Although we believe that the issues identified have been
remediated, no assurance can be given that our internal control
is sufficient to prevent additional material weaknesses from
occurring in future periods. If additional material weaknesses
are discovered in the future, we may fail to meet our future
reporting obligations in a timely and reliable manner and our
financial statements may contain material misstatements. Any
such failure could also adversely affect the results of our
periodic management evaluations and annual auditor attestation
reports regarding the effectiveness of our internal control over
financial reporting. Further, it could cause our investors to
lose confidence in the financial information we report, which
could adversely affect the price of our common stock.
32
We will retain
broad discretion in using the net proceeds from the offering,
and may not use the proceeds effectively.
Although we expect to use the net proceeds from the offering and
from prior offerings for general working capital purposes and to
implement our business strategy, including the acquisition of
additional depository institutions, we have not designated the
amount of net proceeds we will use for any particular purpose.
Accordingly, our management will retain broad discretion to
allocate the net proceeds of the offering. The net proceeds may
be applied in ways with which you and other investors in the
offering may not agree. Moreover, our management may use the
proceeds for corporate purposes that may not increase our market
value or make us profitable. In addition, until the proceeds are
effectively deployed, our return on equity and earnings per
share may be negatively impacted. In connection with deploying
the funds from the offering or any other funds held by us,
management will consider a variety of factors, including the
availability of attractive assets and the ability for the Bank
to bid for another failed institution in an FDIC auction. There
is no guarantee that we will find an attractive opportunity to
deploy any such funds and the failure to spend the proceeds
effectively or at all could materially and adversely affect our
businesses and our consolidated results of operations and
financial condition.
Purchasers of our
Class A Common Stock in the offering will experience
immediate and substantial dilution.
We expect the initial public offering price of our Class A
Common Stock in the offering will be substantially higher than
the net tangible book value per share of our Class A Common
Stock immediately after the offering. Therefore, if you purchase
our Class A Common Stock in the offering, you will incur an
immediate dilution of $ in net tangible book
value per share from the price you paid, based on an assumed
initial offering price of $ per share (the
midpoint of the range set forth on the cover page of this
prospectus). For a further description of the dilution you will
experience immediately after the offering, see the section
entitled Dilution.
A significant
portion of our total outstanding shares may be sold into the
public market in the near future, which could cause the market
price of our Class A Common Stock to drop.
We are authorized to issue 150,000,000 shares of common
stock and 10,000,000 shares of preferred stock. As of
May 9, 2011, there were 37,011,598 shares of common
stock and no shares of preferred stock issued and outstanding,
which does not include shares of common stock reserved for
issuance upon the exercise of outstanding options or warrants or
shares reserved for issuance under our 2009 Option Plan. As of
May 9, 2011, we had outstanding warrants to purchase
5,452,428 shares of Class A Common Stock,
2,700,501 shares subject to outstanding options and an
aggregate of 1,000,659 additional shares of common stock
reserved for issuance under our 2009 Option Plan that will
become eligible for sale in the public market to the extent
permitted by any applicable vesting requirements, the
lock-up
agreements and Rule 144 and Rule 701 under the
Securities Act of 1933, as amended, or Securities Act. Moreover,
after the offering and the expiration of
180-day
lock-up
agreements, holders of an aggregate of approximately
36,349,512 shares of our common stock as of May 9,
2011 will have rights, subject to some conditions, to require us
to file registration statements covering their shares within
certain time periods after the offering or to include their
shares in registration statements that we may file for ourselves
or other stockholders. We also intend to register all shares of
common stock that we may issue under our 2009 Option Plan.
Once we register these shares, they can be freely sold in the
public market upon issuance, subject to the
lock-up
agreements and the restrictions imposed on our affiliates under
Rule 144. We cannot predict what effect, if any, future
sales of shares of our Class A Common
33
Stock, or the availability of shares for future sale, may have
on the trading price of our Class A Common Stock. Future
sales of shares of our Class A Common Stock by our existing
stockholders and other stockholders or by us, or the perception
that such sales may occur, could adversely affect the market
price of shares of our Class A Common Stock and may make it
more difficult for you to sell your shares of our Class A
Common Stock at a time and price that you determine appropriate.
See Shares Eligible for Future Sale.
In addition, under most circumstances, our Board of Directors
has the right, without stockholder approval, to issue authorized
but unissued and nonreserved shares of our common stock. If a
substantial number of these shares were issued, it would dilute
the existing stockholders ownership and may depress the price of
our Class A Common Stock. In addition, our Board of
Directors has the authority, without stockholder approval, to
create and issue additional stock options, warrants and one or
more series of preferred stock and to determine the voting,
dividend and other rights of the holders of such preferred
stock. Depending on the rights, preferences and privileges
granted when the preferred stock is issued, it may have the
effect of delaying, deferring or preventing a change in control
without further action by the stockholders, may discourage bids
for our Class A Common Stock at a premium over the market
price of the Class A Common Stock and may adversely affect
the market price of and voting and other rights of the holders
of our Class A Common Stock.
To the extent shares of our common stock or preferred stock are
issued, or options or warrants are exercised, investors in our
securities may experience further dilution and the presence of
such derivative securities may make it more difficult to obtain
any future financing. In addition, in the event any future
financing should be in the form of, or be convertible into or
exchangeable for, equity securities, upon the issuance of such
equity securities, investors may experience additional dilution.
Provisions in our
charter documents and under applicable laws may prevent or delay
a change of control of us and could also limit the market price
of our Class A Common Stock.
Certain provisions of Delaware law and applicable regulatory
law, and of our certificate of incorporation and bylaws could
have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to
acquire, control of us, even if such a change in control would
be beneficial to our stockholders or result in a premium for
your shares of our Class A Common Stock.
These provisions may also prevent or frustrate attempts by our
stockholders to replace or remove our management. These
provisions include:
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limitations on the removal of directors;
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the ability of our Board of Directors, without stockholder
approval, to issue preferred stock with terms determined by our
Board of Directors and to issue additional shares of our common
stock;
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the division of our Board of Directors into three classes, with
each class serving for a staggered three-year term, which
prevents stockholders from electing an entirely new board of
directors at an annual meeting;
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vacancies on our Board of Directors, and any newly created
director positions created by the expansion of the Board of
Directors, may be filled only by a majority of remaining
directors then in office;
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actions to be taken by our stockholders may only be effected at
an annual or special meeting of our stockholders and not by
written consent;
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advance notice requirements for stockholder proposals and
nominations;
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34
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the ability of our Board of Directors to make, alter or repeal
our bylaws without stockholder approval; and
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certain regulatory ownership restrictions imposed on holders of
our common stock because we are a bank holding company, as more
fully described in Supervision and RegulationFDIC
Statement of Policy on Qualifications for Failed Bank
Acquisitions.
|
In addition, upon the listing of our Class A Common Stock
on the New York Stock Exchange, we will be subject to the
provisions of Section 203 of the General Corporation Law of
the State of Delaware (DGCL), which limits business combination
transactions with stockholders of 15% or more of our outstanding
voting stock that our Board of Directors has not approved. These
provisions and other similar provisions make it more difficult
for stockholders or potential acquirers to acquire us without
negotiation. These provisions may apply even if some
stockholders may consider the transaction beneficial to them.
Furthermore, banking laws impose notice, approval and ongoing
regulatory requirements on any stockholder or other party that
seeks to acquire direct or indirect control of an
FDIC-insured depository institution. These laws include the BHCA
and the Change in Bank Control Act. These laws could delay or
prevent an acquisition.
These provisions and laws could limit the price that investors
are willing to pay in the future for shares of our Class A
Common Stock. These provisions might also discourage a potential
acquisition proposal or tender offer, even if the acquisition
proposal or tender offer is at a premium over the then current
market price for our Class A Common Stock.
Shares of our
Class A Common Stock will not be an insured
deposit.
An investment in our Class A Common Stock will not be a
bank deposit and will not be insured or guaranteed by the FDIC
or any other government agency. An investment in our
Class A Common Stock will be subject to investment risk,
and each investor must be capable of affording the loss of its
entire investment.
We may issue debt
and equity securities or securities convertible into equity
securities, any of which may be senior to our common stock as to
distributions and in liquidation, which could negatively affect
the value of our Class A Common Stock.
Shares of our Class A Common Stock are equity interests and
do not constitute indebtedness. In the future, we may attempt to
increase our capital resources by entering into debt or
debt-like financing that is unsecured or secured by all or a
substantial portion of our assets, or by issuing additional debt
or equity securities, which could include the issuance of
secured or unsecured commercial paper, medium-term notes, senior
notes, subordinated notes, preferred stock or securities
convertible into or exchangeable for equity securities.
Additionally, we may issue additional debt or equity securities
as consideration for future mergers and acquisitions. Such
additional debt or equity offerings may place restrictions on
our ability to pay dividends on or repurchase our Class A
Common Stock, dilute the holdings of our existing stockholders
or reduce the market price of our Class A Common Stock. In
the event of our liquidation, our lenders and holders of our
debt and preferred securities would receive a distribution of
our available assets before distributions to the holders of our
common stock. Because our decision to incur debt and issue
securities in our future offerings will depend on market
conditions and other factors beyond our control, we cannot
predict or estimate the amount, timing or nature of our future
offerings and debt financings. Furthermore, market conditions
could require us to accept less favorable terms for the issuance
of our securities in the future.
35
USE OF
PROCEEDS
We estimate that the net proceeds to us from the sale of our
Class A Common Stock in the offering will be approximately
$ million, or approximately
$ million if the underwriters
over-allotment option is exercised in full, assuming an initial
public offering price of $ per share, the
midpoint of the range set forth on the cover page of this
prospectus. This assumes the deduction of estimated offering
expenses of $ million in addition to
underwriting discounts and commissions. Each $1.00 increase
(decrease) in the assumed initial public offering price of
$ per share, the midpoint of the price range
set forth on the cover of this prospectus, would increase
(decrease) the net proceeds to us of the offering by
$ million, or $ million if the
underwriters over-allotment option is exercised in full,
assuming the number of shares offered by us, as set forth on the
cover of this prospectus, remains the same and after deducting
estimated underwriting discounts and commissions and estimated
offering expenses. See Underwriting for additional
information regarding offering expenses and underwriting
commissions and discounts.
We intend to use the net proceeds from the offering for general
corporate purposes, including the acquisition of depository
institutions through traditional open bank and failed bank
acquisitions with the FDIC, as well as through selective
acquisitions of assets, deposits and branches that we believe
present attractive risk-adjusted returns or provide a strategic
benefit to our growth strategy.
36
DIVIDEND
POLICY
We have never paid a cash dividend on our common stock, and we
do not anticipate paying any cash dividends in the foreseeable
future. We intend to retain any earnings to help fund our
growth. We anticipate continuing the policy of retaining
earnings to fund growth for the foreseeable future.
We are a bank holding company and accordingly, any dividends
paid by us are subject to various federal and state regulatory
limitations and also may be subject to the ability of our
subsidiary depository institution(s) to make distributions or
pay dividends to us. The ability of the Company to pay dividends
is limited by minimum capital and other requirements prescribed
by law and regulation. In addition, the OCC Agreement prohibits
the Bank from paying a dividend to us prior to January 25,
2013. After January 25, 2013, the OCC Agreement imposes
other restrictions on the Banks ability to pay dividends
to us, including requiring prior approval from the OCC before
any such dividends are paid. The relevant banking regulators
have authority to impose additional limits on dividends and
distributions by the Company and its subsidiaries. Certain
restrictive covenants in future debt instruments, if any, may
also limit our ability to pay dividends or the Banks
ability to make distributions or pay dividends to us. See
Supervision and RegulationRegulatory Limits on
Dividends and Distributions.
37
CAPITALIZATION
The following table sets forth our capitalization as of
December 31, 2010. Our capitalization is presented on an
actual basis and on an as adjusted basis as if the offering had
been completed as of December 31, 2010 and assuming:
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net proceeds to us in the offering, at an assumed initial public
offering price of $ per share (the midpoint of
the range set forth on the cover page of this prospectus) after
deducting underwriting discounts and commissions and estimated
offering expenses payable by us in the offering of
$ million; and
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the underwriters over-allotment option is not exercised.
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The following should be read in conjunction with Use of
Proceeds, Selected Consolidated Financial
Data, Managements and Analysis of Financial
Condition and Results of Operations and our consolidated
financial statements and related notes that are included in this
prospectus.
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|
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As of December 31, 2010
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Actual
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|
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As Adjusted (1)
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($ in thousands)
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Long Term Debt
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Stockholders Equity
|
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|
|
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Preferred stock, par value $0.001; 10,000,000 shares
authorized; zero shares issued and outstanding
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Common stock, par value $0.001 per share;
100,000,000 shares of Class A Common Stock authorized
and 50,000,000 shares of Class B Common stock
authorized; 32,548,906 shares of Class A Common Stock
issued and outstanding and 4,462,692 shares of Class B
Common Stock issued and outstanding
(actual); shares of Class A Common Stock
issued and outstanding and 4,462,692 shares of Class B
Common Stock issued and outstanding (adjusted) (2)
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37
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Additional Paid In Capital
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709,536
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Retained Earnings
|
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19,972
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Accumulated Other Comprehensive, Net Loss
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|
|
(842
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)
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Total Stockholders Equity
|
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|
728,703
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|
|
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|
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|
|
|
|
|
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Total Capitalization
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1,457,406
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(1)
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Each $1.00 increase (decrease) in
the assumed initial public offering price of
$ per share, the midpoint of the price range
set forth on the cover of this prospectus, would increase
(decrease) total stockholders equity and total
capitalization by $ million, or
$ million if the underwriters
over-allotment option is exercised in full, assuming, the number
of shares offered by us, as set forth on the cover of this
prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses.
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(2)
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Excludes the following:
(a) 3,310,428 shares of Class A Common Stock
issuable upon the exercise of outstanding warrants with an
expiration date of November 12, 2016 at exercise prices of
$24.24, $26.18 and $28.28 per share, each for one-third of such
shares; (b) 2,142,000 shares of Class A Common
Stock issuable upon the exercise of outstanding warrants with an
expiration date of August 13, 2017 at an exercise price of
between $26.45 and $35.99 per share (depending on the date of
exercise); (c) 1,354,599 shares of Class A Common
Stock issuable upon the exercise of outstanding stock options
granted under our 2009 Option Plan at a weighted average
exercise price of $20.15 per share; (d) an aggregate of
2,346,561 shares of common stock reserved for future
issuance under our 2009 Option Plan; and (e) any shares
that may become issuable by the Company to the FDIC pursuant to
the value appreciation instruments (as described more fully in
BusinessAcquisitions).
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38
DILUTION
If you invest in shares of our Class A Common Stock in the
offering, your ownership interest in us will be diluted to the
extent of the differences between the initial public offering
price per share and net tangible book value per share after the
offering. Our net tangible book value as of December 31, 2010 is
determined by subtracting the total amount of our liabilities as
of December 31, 2010 from the total amount of our tangible
assets as of December 31, 2010. Our net tangible book value
per share as of December 31, 2010 is determined by dividing
our net tangible book value as of December 31, 2010 by the
number of shares of common stock outstanding as of
December 31, 2010. Our net tangible book value as of
December 31, 2010 was $ million, or
$ per share, calculated as described above.
After giving effect to the issuance in the offering
of shares of Class A Common Stock by us
at an assumed initial price to the public of
$ per share, which is the mid-point of the
price range set forth on the cover page of this prospectus, and
the application of our estimated net proceeds therefrom, and
after deducting underwriting discounts and commissions and our
estimated offering expenses, and the payment of the deferred
portion of the placement agent fees to Deutsche Bank Securities
Inc. from our 2009 and 2010 private placements of equity
interests, our net tangible book value as of December 31,
2010 would have been an aggregate of $ million,
or $ per common share. This amount represents
an immediate increase of $ per share to our
existing stockholders and an immediate dilution of
$ per share from the assumed initial price to
the public of $ per share to new investors
purchasing shares in the offering. The table below illustrates
this per share dilution:
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Assumed initial price to the public per share
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$
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Net tangible book value per share as of December 31, 2010
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$
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Increase in net tangible book value per share attributable to
the offering
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As adjusted net tangible book value per share after the offering
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Dilution per share to new investors
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$
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A $1.00 increase (or decrease) in the assumed initial offering
price of $ per share, which is the midpoint of
the price range set forth on the cover page of this prospectus,
would increase (or decrease) the net tangible book value as of
December 31, 2010 by approximately
$ million, or $ per share of
Class A Common Stock and the dilution per share to new
investors by $ assuming the number of shares
offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting the assumed
underwriting discounts and commissions and our estimated
offering expenses.
The table below sets forth, as of December 31, 2010, the
number of our shares of Class A Common Stock issued, the
total consideration paid and the average price per share paid by
our existing stockholders and our new investors, after giving
effect to the issuance of shares of
Class A Common Stock in the offering at an assumed initial
price to the public of
39
$ per share, which is the mid-point of the
price range set forth on the cover page of this prospectus:
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Shares Issued
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Total Consideration
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Average Price
|
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Number
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Percent (1)
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Amount
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Percent
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per Share
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Existing stockholders before the offering
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%
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$
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%
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$
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New investors
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%
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%
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Totals
|
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%
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$
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100
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%
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(1)
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To the extent the underwriters
exercise their over-allotment option in full, the number of
shares of common stock held by the existing stockholders will
be shares, or % of the total
number of shares of common stock to be issued after the
offering, and the number of shares of common stock held by the
new investors will increase to shares,
or % of the total number of shares of common
stock to be issued after the offering. This does not include any
shares that may become issuable by the Company to the FDIC
pursuant to those certain value appreciation instrument
agreements (as described more fully in
BusinessAcquisitions) and does not include an
aggregate of up to shares of common stock
comprised of:
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up to shares of Class A Common Stock
issuable by us upon exercise of the underwriters
over-allotment option;
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3,310,428 shares of Class A Common Stock issuable upon
the exercise of outstanding warrants with an expiration date of
November 12, 2016 at exercise prices of $24.24, $26.18 and
$28.28 per share, each for one-third of such shares;
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2,142,000 shares of Class A Common Stock issuable upon
the exercise of outstanding warrants with an expiration date of
August 13, 2017 at an exercise price of between $26.45 and
$35.99 per share (depending on the date of exercise);
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1,354,599 shares of Class A Common Stock issuable upon
the exercise of outstanding stock options granted under the 2009
Option Plan with a weighted average exercise price of $20.15 per
share; and
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an aggregate of 2,346,561 shares of common stock reserved
for future issuance under the 2009 Option Plan.
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Excludes 4,462,692 shares of Class B Common Stock
outstanding
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40
SELECTED
CONSOLIDATED FINANCIAL DATA
The following table sets forth certain of our historical
consolidated financial data. You should read this information in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations,
Capitalization and the consolidated financial
statements and the related notes thereto included elsewhere in
this prospectus. The selected historical consolidated financial
information set forth below at and for the year ended
December 31, 2010 is derived from our audited consolidated
financial statements included elsewhere in this prospectus. The
historical results shown below and elsewhere in this prospectus
are not necessarily indicative of our future performance.
On January 22, 2010, January 29, 2010 and
June 25, 2010, we consummated the acquisition of certain
assets and assumed certain liabilities, including substantially
all deposits, of Old Premier, Old FCB and Old Peninsula,
respectively, from the FDIC, as receiver. Although we were
formed in April 2009, our activities prior to our first
Acquisition consisted solely of organizational, capital raising
and related activities and activities related to identifying and
analyzing potential acquisition candidates. We did not engage in
any substantive operations (including banking operations) prior
to our first Acquisition.
Our results of operations for the post-acquisition periods of
each of the Old Banks are not comparable to the results of
operations of those Old Banks for the pre-acquisition periods
mainly due to the fact that the loss sharing arrangements have
completely altered the risks associated with the loans and
foreclosed real estate of the Old Banks, making historical
financial information of the Old Banks immaterial to an
understanding of our present and planned future operations. In
addition, our business since January 22, 2010 and for the
immediate future relies heavily on our acquisition activities
and our loss share resolution businesses and on the income
generated from the remediation and disposal of assets we
acquired from the FDIC and is fundamentally different from the
business of the Old Banks. Consequently, such information with
respect to the pre-acquisition periods has not been presented.
Results of operations for the post-acquisition periods reflect,
among other things, the acquisition method of accounting,
accretion of the loss-share indemnification asset and accretion
of accretable discounts on loans acquired.
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Year Ended
|
|
|
|
December 31, 2010
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|
|
|
($ in thousands)
|
|
|
Selected Results of Operations Data
|
|
|
|
|
Interest income
|
|
$
|
46,573
|
|
Interest expense
|
|
|
14,848
|
|
|
|
|
|
|
Net interest income
|
|
|
31,725
|
|
Provision for loan losses
|
|
|
9,862
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|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
21,863
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|
|
|
|
|
|
Noninterest income
|
|
|
64,074
|
|
Noninterest expenses
|
|
|
68,111
|
|
|
|
|
|
|
Income before income tax benefit
|
|
|
17,826
|
|
Income tax benefit
|
|
|
3,807
|
|
|
|
|
|
|
Net income
|
|
$
|
21,633
|
|
|
|
|
|
|
41
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2010
|
|
|
|
($ in thousands)
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|
|
Per Share Data
|
|
|
|
|
Earnings
|
|
|
|
|
Basic
|
|
$
|
0.77
|
|
Diluted
|
|
$
|
0.77
|
|
Tangible book value
|
|
$
|
19.51
|
|
Weighted average shares outstanding
|
|
|
|
|
Basic
|
|
|
28,247,986
|
|
Diluted
|
|
|
28,247,986
|
|
Performance Ratios
|
|
|
|
|
Return on average assets
|
|
|
1.2
|
%
|
Return on average equity
|
|
|
4.0
|
%
|
Net interest margin
|
|
|
2.4
|
%
|
Interest rate spread
|
|
|
2.1
|
%
|
Efficiency ratio (1) (Bank level)
|
|
|
66.7
|
%
|
Average interest-earning assets to average interest-bearing
liabilities
|
|
|
122.5
|
%
|
Average loans receivable to average deposits
|
|
|
39.2
|
%
|
Cost of interest-bearing liabilities
|
|
|
1.3
|
%
|
Asset Quality
|
|
|
|
|
Nonperforming loans to loans receivable (2)
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|
|
|
|
Covered under loss sharing agreements with the FDIC
|
|
|
24.5
|
%
|
Not covered under loss sharing agreements with the FDIC
|
|
|
0.2
|
%
|
Nonperforming assets to total assets (3)
|
|
|
|
|
Covered under loss sharing agreements with the FDIC
|
|
|
6.2
|
%
|
Not covered under loss sharing agreements with the FDIC
|
|
|
0.0
|
%
|
Allowance for loan losses to total gross loans (4)
|
|
|
1.7
|
%
|
Allowance for loan losses to non-performing loans
|
|
|
7.0
|
%
|
Capital Ratios
|
|
|
|
|
Average equity to average total assets
|
|
|
31.1
|
%
|
Tier 1 leverage ratio
|
|
|
29.4
|
%
|
Tier 1 risk-based capital ratio
|
|
|
104.1
|
%
|
Total risk-based capital ratio
|
|
|
105.4
|
%
|
Tangible common equity ratio
|
|
|
29.5
|
%
|
|
|
|
(1)
|
|
Non interest expense over (net
interest income plus non interest income).
|
|
(2)
|
|
Non-performing loans includes loans
or pools of loans that are considered impaired but retain
accrual status and loans in non-accrual status.
|
|
(3)
|
|
Non-performing assets includes
loans or pools of loans that are considered impaired but retain
accrual status and loans in non-accrual status and OREO.
|
|
(4)
|
|
Gross loans are net of unearned
discounts.
|
42
|
|
|
|
|
|
|
As of
|
|
|
December 31, 2010
|
|
|
($ in thousands)
|
|
Selected Balance Sheet Data
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
43,412
|
|
Investment securities
|
|
|
1,643,657
|
|
Loans receivable
|
|
|
|
|
Not covered under FDIC loss sharing agreements
|
|
|
8,679
|
|
Covered under FDIC loss sharing agreements, net
|
|
|
506,642
|
|
FDIC indemnification asset
|
|
|
162,596
|
|
OREO
|
|
|
|
|
Covered under FDIC loss sharing agreements, net
|
|
|
23,219
|
|
Other intangible assets, net
|
|
|
6,423
|
|
Other assets
|
|
|
59,033
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,453,661
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,514,259
|
|
Advances from Federal Home Loan Bank
|
|
|
176,689
|
|
Other liabilities
|
|
|
34,010
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,724,958
|
|
|
|
|
|
|
Stockholders equity
|
|
|
728,703
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,453,661
|
|
|
|
|
|
|
43
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with the Selected Consolidated Financial
Data and our consolidated financial statements and related
notes included elsewhere in this prospectus. This discussion and
analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Certain risks, uncertainties and
other factors, including but not limited to those set forth
under Cautionary Note Regarding Forward-Looking
Statements, Risk Factors and elsewhere in this
prospectus, may cause actual results to differ materially from
those projected in the forward-looking statements.
Overview and
History
We are a bank holding company headquartered in Miami, Florida
with one wholly-owned national bank subsidiary, Premier American
Bank, National Association, which we refer to as the Bank.
Through the Bank, we provide, under the names Premier American
Bank, N.A., Florida Community Bank (a division of Premier
American Bank, N.A.) and Sunshine State Community Bank (a
division of Premier American Bank, N.A.), a wide range of
commercial and retail banking and related financial services to
locally owned businesses, professional firms, real estate
developers and individuals in Florida.
We formed Bond Street Holdings LLC in April 2009 as a Delaware
limited liability company for the purpose of becoming a bank
holding company and acquiring primarily multiple failed bank
asset and liability pools in Florida from the FDIC, as receiver.
In late 2009, we raised approximately $440 million from
investors in a private placement of our common equity. Since
receiving its national bank charter in January 2010, the Bank
has acquired certain of the assets and assumed certain of the
liabilities of seven failed banks from the FDIC, including three
acquisitions in 2010 and four acquisitions in 2011 which are
collectively referred to as the Acquisitions.
Between August and November 2010, we raised approximately an
additional $300 million in a private placement of our
common equity. In October 2010, we converted from a Delaware
limited liability company to a corporation, Bond Street
Holdings, Inc.
Before our initial acquisition on January 22, 2010, our
principal activities related to the organization of the Company
and the Bank, including the filing of an application with the
OCC to obtain a shelf charter and contemporaneous applications
with the FDIC for deposit insurance and the Federal Reserve for
bank holding company approval, performing due diligence on
potential failed bank acquisition targets and conducting our
private placement financing. The organizational costs incurred
during the period from our inception in April 2009 through
December 31, 2009 related primarily to legal and consulting
fees and totaled $1.6 million. During 2009, neither the
Company nor the Bank had any other substantive operations. On
January 22, 2010, the Bank completed its initial
acquisition of certain of the assets and assumption of certain
liabilities of a failed bank from the FDIC, as receiver. In
connection with that acquisition, the OCC granted the Bank final
approval of its national bank charter, the FDIC approved deposit
insurance and the Federal Reserve approved the Companys
bank holding company status to complete the acquisition. Because
we did not commence banking operations until after our initial
acquisition in 2010, a comparison of the years ended
December 31, 2009 and December 31, 2010 would not be
meaningful and, therefore, is not presented.
We completed three acquisitions in 2010 and four acquisitions to
date in 2011. We intend to continue our acquisition strategy by
selectively identifying, acquiring and integrating depository
institutions through traditional privately negotiated failed
bank acquisitions with the FDIC, bank transactions. In addition,
we may acquire deposits and branches which we believe present
attractive risk-adjusted returns or provide a strategic benefit
to our growth strategy.
44
Our current asset mix (which is comprised primarily of
government agency and investment grade securities and the legacy
loan portfolios that were acquired from the FDIC), loan quality
and allowances are not representative of our anticipated future
asset mix, loan quality and allowances, which may change
materially as we commence meaningful organic origination and
banking activities and grow through future acquisitions. Our
significant cash reserves and liquid securities portfolio, which
result in large part from the proceeds of our 2009 and 2010
private placement financings and cash payments from the FDIC in
connection with both FDIC-assisted and FDIC-unassisted failed
bank acquisition transactions, are not necessarily
representative of our future cash position. Our cost structure
and capital expenditure requirements during the transitional
periods for which financial information is available are not
reflective of our anticipated cost structure and capital
spending as we integrate future acquisitions and continue to
grow our organic banking platform. All of the loan portfolios
and OREO acquired from six of the seven acquisitions are covered
under loss sharing arrangements with the FDIC. Given the FDIC
loss share protection for our covered loans, our business model
since our initial acquisition on January 22, 2010 and for
the future relies heavily on our loss share resolution business
and on the income generated from the remediation and disposal of
the assets we acquired from the FDIC, rather than interest
earned on loans and other assets.
As a result of the Acquisitions, the Bank has a network of 39
branches located throughout Florida in a geographic footprint
that extends from Miami to Daytona Beach on the East Coast of
Florida, from Naples to Sarasota, and further to Brooksville on
the west coast of Florida and Orlando in central Florida. In
addition to traditional lending and deposit gathering
capabilities, we offer a comprehensive range of traditional
banking products and services to individuals, small and medium
sized businesses, and other local organizations and entities in
our market areas. As of December 31, 2010, we had total
stockholders equity of $728.7 million. Upon
completion of our latest Acquisition, we had consolidated assets
of approximately $3.2 billion and customer deposits of
approximately $2.1 billion.
Acquisitions
Asset, Liability
and Loss-Share Agreements Information
(As of Respective Date of Acquisition)
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Old
|
|
Old
|
|
Old
|
|
Old
|
|
Old
|
|
Old
|
|
Old
|
|
Total
|
|
|
Premier
|
|
FCB
|
|
Peninsula
|
|
Sunshine
|
|
FNBCF
|
|
Cortez
|
|
Coastal
|
|
Acquisitions
|
|
|
(January 22,
|
|
(January 29,
|
|
(June 25,
|
|
(February 11,
|
|
(April 29,
|
|
(April 29,
|
|
(May 6,
|
|
|
|
|
2010)
|
|
2010)
|
|
2010)
|
|
2011)
|
|
2011)
|
|
2011)
|
|
2011)
|
|
|
|
Loans acquired
|
|
$
|
287,223
|
|
|
$
|
263,565
|
|
|
$
|
392,165
|
|
|
$
|
83,585
|
|
|
$
|
246,537
|
|
|
$
|
44,100
|
|
|
$
|
95,232
|
|
|
$
|
1,412,407
|
|
Covered loans
|
|
|
287,223
|
|
|
|
263,565
|
|
|
|
388,521
|
|
|
|
|
|
|
|
231,387
|
|
|
|
42,703
|
|
|
|
95,232
|
|
|
|
1,308,631
|
|
Covered Assets
|
|
|
293,116
|
|
|
|
299,031
|
|
|
|
425,554
|
|
|
|
|
|
|
|
246,930
|
|
|
|
46,874
|
|
|
|
104,074
|
|
|
|
1,415,579
|
|
Total assets acquired
|
|
|
298,264
|
|
|
|
525,330
|
|
|
|
622,626
|
|
|
|
115,002
|
|
|
|
346,030
|
|
|
|
68,774
|
|
|
|
130,534
|
|
|
|
2,106,560
|
|
Total deposits assumed
|
|
|
262,793
|
|
|
|
588,368
|
|
|
|
604,503
|
|
|
|
110,514
|
|
|
|
293,452
|
|
|
|
59,902
|
|
|
|
122,452
|
|
|
|
2,041,984
|
|
Total liabilities assumed
|
|
|
263,040
|
|
|
|
643,100
|
|
|
|
655,956
|
|
|
|
117,312
|
|
|
|
324,715
|
|
|
|
67,106
|
|
|
|
122,815
|
|
|
|
2,194,044
|
|
Net assets acquired (liabilities assumed)
|
|
$
|
35,224
|
|
|
$
|
(117,770
|
)
|
|
$
|
(33,330
|
)
|
|
$
|
(2,310
|
)
|
|
$
|
21,315
|
|
|
$
|
1,668
|
|
|
$
|
7,719
|
|
|
$
|
(87,484
|
)
|
Subject to loss-share agreements
|
|
|
Yes
|
|
|
|
Yes
|
|
|
|
Yes
|
|
|
|
No
|
|
|
|
Yes
|
|
|
|
Yes
|
|
|
|
Yes
|
|
|
|
N/A
|
|
Percentage of Covered Assets to total assets
|
|
|
98.3%
|
|
|
|
56.9%
|
|
|
|
68.3%
|
|
|
|
0.0%
|
|
|
|
71.4%
|
|
|
|
68.2%
|
|
|
|
79.7%
|
|
|
|
67.2%
|
|
Loss threshold
|
|
$
|
94,000
|
|
|
$
|
141,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
$
|
80,000
|
|
|
|
N/A
|
|
|
$
|
29,000
|
|
|
|
N/A
|
|
Loss-share coverage below loss threshold
|
|
|
80.0%
|
|
|
|
80.0%
|
|
|
|
80.0%
|
|
|
|
0.0%
|
|
|
|
80.0%
|
|
|
|
80.0%
|
|
|
|
80.0%
|
|
|
|
N/A
|
|
Loss-share coverage above loss threshold
|
|
|
95.0%
|
|
|
|
95.0%
|
|
|
|
80.0%
|
|
|
|
0.0%
|
|
|
|
50.0%
|
|
|
|
80.0%
|
|
|
|
50.0%
|
|
|
|
N/A
|
|
45
The above information has been derived solely from the pro forma
schedules issued by the FDIC with respect to the acquisitions of
such failed banks by the Bank and does not include fixed assets
and other property that have been purchased at fair market value
in the periods following the closure of the respective failed
banks. Neither does it include fair value adjustments recognized
in conjunction with purchase accounting.
2010
Acquisitions
Old
Premier
On January 22, 2010, the Florida Office of Financial
Regulation closed Old Premier and appointed the FDIC as
receiver. That same day, the Bank assumed $262.8 million of
Old Premiers deposits and acquired $298.3 million of
Old Premiers assets from the FDIC under a whole-bank
purchase and assumption agreement with loss sharing. Pursuant to
the terms of the Old Premier loss sharing agreement which covers
approximately $293.1 million of Old Premiers assets,
the FDIC will cover 80% of losses on the first $94 million
of losses and cover 95% of losses exceeding $94 million on
all Old Premier Covered Assets. Recoveries on the Old Premier
Covered Assets are shared with the FDIC on the same percentage
basis as losses. The loss sharing arrangements for commercial
and other assets and single family residential loans are in
effect for five years and 10 years, respectively, and the
loss recovery provisions are in effect for eight years and
10 years, respectively, from the acquisition date. At the
time of acquisition, the Bank recorded an indemnification asset
from the FDIC of $82.5 million, which represented the
estimated fair value of the FDICs portion of the losses
that we expected to be incurred and reimbursed to us as of that
date. The loss share indemnification asset is accreted into
noninterest income using the level yield method over the
estimated life of the indemnification asset.
Accounting standards prohibit carrying over an allowance for
loan losses for impaired loans purchased in the acquisition of
Old Premier. On the January 22, 2010 acquisition date, the
estimate of the contractually required principal and interest
payments receivable for all impaired loans acquired from Old
Premier was $308.3 million, and the estimated fair value of
those loans was $174.5 million. At the acquisition date, we
established a credit risk discount (non-accretable difference)
of $115.3 million on the loans, representing amounts not
expected to be collected from the customer or from the
liquidation of collateral. In our estimate of estimated cash
flows for the loans of Old Premier, we also recorded an
accretable discount of $28.3 million relating to the loans,
which represents the undiscounted cash flows expected to be
collected in excess of the estimated fair value of the acquired
loans. This accretable discount is accreted into interest income
on a method that approximates level yield over the estimated
life of the related loans.
As a result of the loss sharing arrangements, the risks
associated with the loans and foreclosed real estate of Old
Premier have been completely altered, making historical
financial information of Old Premier immaterial to an
understanding of our present and planned future operations. In
addition, our business of the Company since January 22,
2010 and for the immediate future relies heavily on our
acquisition activities and our loss share resolution businesses
and on the income generated from the remediation and disposal of
assets we acquired from the FDIC and is fundamentally different
from the business of Old Premier. In light of the foregoing, we
have determined that Old Premier is not the predecessor entity
of the Company because we did not succeed to substantially all
of the business of Old Premier in the acquisition, and we have
therefore omitted historical financial statements of Old Premier
in this prospectus.
Old FCB
On January 29, 2010, the Florida Office of Financial
Regulation closed Old FCB and appointed the FDIC as receiver.
That same date, the Bank assumed $588.4 million of Old
FCBs
46
deposits and $525.3 million of Old FCBs assets from
the FDIC (certain other assets of Old FCB were kept by the FDIC
and did not pass to the Bank) under a modified whole-bank
purchase and assumption agreement with loss sharing. Pursuant to
the terms of the Old FCB loss sharing agreement which covers
$299.0 million of Old FCBs assets, the FDIC will
cover 80% of losses on the first $141 million of losses and
cover 95% of losses exceeding $141 million on all Old FCB
Covered Assets. Recoveries on the Old FCB Covered Assets are
shared with the FDIC on the same percentage basis as losses. The
loss sharing arrangements for commercial and other assets and
single family residential loans are in effect for five years and
10 years, respectively, and the loss recovery provisions
are in effect for eight years and 10 years, respectively,
from the acquisition date. At the time of acquisition, the Bank
recorded an indemnification asset from the FDIC of
$86.5 million, which represented the estimated fair value
of the FDICs portion of the losses that we expected to be
incurred and reimbursed to us as of that date. The loss share
indemnification asset is accreted into noninterest income using
the level yield method over the estimated life of the
indemnification asset.
Accounting standards prohibit carrying over an allowance for
loan losses for impaired loans purchased in the acquisition of
Old FCB. On the January 29, 2010 acquisition date, the
estimate of the contractually required principal and interest
payments receivable for all impaired loans acquired from Old FCB
was $282.3 million, and the estimated fair value of those
loans was $176.1 million. At the acquisition date, we
established a credit risk discount (non-accretable difference)
of $95.0 million on the loans, representing amounts not
expected to be collected from the customer or from the
liquidation of collateral. In our estimate of estimated cash
flows for the loans of Old FCB, we also recorded an accretable
discount of $25.1 million relating to the loans, which
represents the undiscounted cash flows expected to be collected
in excess of the estimated fair value of the acquired loans.
This accretable discount is accreted into interest income on a
method that approximates level yield over the estimated life of
the related loans.
As a result of the loss sharing agreements with the FDIC,
similar to Old Premier, the risks associated with the loans and
foreclosed real estate of Old FCB have been completely altered,
making historical financial information of Old FCB immaterial to
an understanding of our present and planned future operations
and financial results. In addition, our business since
January 22, 2010 and for the immediate future relies
heavily on our acquisition activities and our loss share
resolution businesses and on the income generated from the
remediation and disposal of assets we acquired from the FDIC and
it is fundamentally different from the businesses of both Old
Premier and Old FCB. In light of the foregoing, we have
determined that Old FCB is not the predecessor entity of the
Company because we did not succeed to substantially all of the
business of Old FCB in the acquisition, and we have therefore
omitted historical financial statements of Old FCB in this
prospectus and our audited consolidated financial statements.
Old
Peninsula
On June 25, 2010, the Florida Office of Financial
Regulation closed Old Peninsula and appointed the FDIC as
receiver. That same date, the Bank assumed $604.5 million
of Old Peninsulas deposits and acquired
$622.6 million of Old Peninsulas assets from the FDIC
under a whole-bank purchase and assumption agreement with loss
sharing. Pursuant to the terms of the Old Peninsula loss sharing
agreement which covers $425.6 million of Old Peninsula
assets, the FDIC will cover 80% of losses on all Old Peninsula
Covered Assets. Recoveries on the Old Peninsula Covered Assets
are shared with the FDIC on the same percentage basis as losses.
The loss sharing arrangements for commercial and other assets
and single family residential loans are in effect for five years
and 10 years, respectively, and the loss recovery
provisions are in effect for eight years and 10 years,
respectively, from the respective acquisition dates. At the time
of acquisition, the Bank recorded an indemnification asset from
the FDIC of $135.8 million, which represented the estimated
fair value of the FDICs portion of the losses
47
that we expected to be incurred and reimbursed to us as of that
date. The loss share indemnification asset is accreted into
noninterest income using the level yield method over the
estimated life of the indemnification asset.
Accounting standards prohibit carrying over an allowance for
loan losses for impaired loans purchased in the acquisition of
Old Peninsula. On the June 25, 2010 acquisition date, the
estimate of the contractually required principal and interest
payments receivable for all impaired loans acquired from Old
Peninsula was $437.8 million, and the estimated fair value
of those loans was $239.8 million. At the acquisition date,
we established a credit risk discount (non-accretable
difference) of $182.4 million on the loans, representing
amounts not expected to be collected from the customer or from
the liquidation of collateral. In our estimate of estimated cash
flows for the loans of Old Peninsula, we also recorded an
accretable discount of $32.4 million relating to the loans,
which represents the undiscounted cash flows expected to be
collected in excess of the estimated fair value of the acquired
loans. This accretable discount is accreted into interest income
on a method that approximates level yield over the estimated
life of the related loans.
2011
Acquisitions
Old
Sunshine
On February 11, 2011, the Florida Office of Financial
Regulation closed Old Sunshine and appointed the FDIC as
receiver. That same date, the Bank assumed $110.5 million
of Old Sunshines deposits and $115.0 million of Old
Sunshines assets from the FDIC under a whole-bank purchase
and assumption agreement. Unlike the first three acquisitions,
the Bank did not enter into a loss sharing agreement in
connection with the purchase of Old Sunshine assets.
Accounting standards prohibit carrying over an allowance for
loan losses for impaired loans purchased in the acquisition of
Old Sunshine. On the February 11, 2011 acquisition date,
the estimate of the contractually required principal and
interest payments receivable for all impaired loans acquired
from Old Sunshine was $107.5 million, and the estimated
fair value of those loans was $64.4 million. At the
acquisition date, we established a credit risk discount
(non-accretable difference) of $30.5 million on the loans,
representing amounts not expected to be collected from the
customer or from the liquidation of collateral. In our estimate
of estimated cash flows for the loans of Old Sunshine, we also
recorded an accretable discount of $12.6 million relating
to the loans, which represents the undiscounted cash flows
expected to be collected in excess of the estimated fair value
of the acquired loans. This accretable discount is accreted into
interest income on a method that approximates level yield over
the estimated life of the related loans.
Old
FNBCF
On April 29, 2011, the OCC closed Old FNBCF and appointed
the FDIC as receiver. That same date, the Bank assumed
$293.5 million of Old FNBCFs deposits and
$346.0 million of Old FNBCFs assets from the FDIC
under a whole-bank purchase and assumption agreement with loss
sharing. Pursuant to the terms of the Old FNBCF loss sharing
agreement which covers $246.9 million of Old FNBCFs
assets, the FDIC will cover 80% of losses on the first
$80 million of losses and cover 50% of losses exceeding
$80 million on all Old FNBCF Covered Assets. The loss
sharing arrangements for commercial and other assets and single
family residential loans are in effect for five years and
10 years, respectively, and the loss recovery provisions
are in effect for eight years and 10 years, respectively,
from the respective acquisition dates.
Old
Cortez
On April 29, 2011, the Florida Office of Financial
Regulation closed Old Cortez and appointed the FDIC as receiver.
That same date, the Bank assumed $59.9 million of Old
Cortezs
48
deposits and acquired $68.8 million of Old Cortezs
assets from the FDIC under a whole bank purchase and assumption
agreement with loss sharing. Pursuant to the terms of the Old
Cortez loss sharing agreement which covers $46.9 million of
Old Cortezs assets, the FDIC will cover 80% of losses on
all Old Cortez Covered Assets. The loss sharing arrangements for
commercial and other assets and single family residential loans
are in effect for 5 years and 10 years, respectively,
and the loss recovery provisions are in effect for eight years
and 10 years, respectively, from the respective acquisition
dates.
Old
Coastal
On May 6, 2011, the Office of Thrift Supervision closed Old
Coastal and appointed the FDIC as receiver. That same date, the
Bank assumed $122.5 million of Old Coastals deposits
and $130.5 million of Old Coastals assets from the
FDIC under a whole-bank purchase and assumption agreement with
loss sharing. Pursuant to the terms of the Old Coastal loss
sharing agreement which covers $104.1 million of Old
Coastals assets, the FDIC will cover 80% of losses on the
first $29.0 million of losses and cover 50% of losses
exceeding $29.0 million on all Old Coastal Covered Assets.
The loss sharing arrangements for commercial and other assets
and single family residential loans are in effect for five years
and 10 years, respectively, and the loss recovery
provisions are in effect for eight years and 10 years,
respectively, from the respective acquisition dates.
Summary of
Acquisition and Loss Share Accounting
We determined current fair value accounting estimates of the
acquired assets and liabilities for the acquisitions in
accordance with accounting requirements for fair value
measurement and acquisition transactions as promulgated in FASB
Accounting Standards Codification (ASC) Topic
310-30,
Loans and Debt Securities Acquired with Deteriorated Credit
Quality, (AICPA
SOP 03-3),
FASB ASC Topic No. 805, Business Combinations,
(formerly Statement of Financial Accounting Standards
No. 141(R), Business Combinations) and FASB ASC
Topic 820, Fair Value Measurements and Disclosures,
(formerly Statements of Financial Accounting Standards
No. 157, Fair Value Measurements). We recorded
identifiable intangible assets, including core deposit
intangible assets, at fair value. Because the fair value of
assets acquired and intangible assets created as a result of our
acquisitions through December 31, 2010 exceeded the fair
value of liabilities assumed in the acquisitions, we recorded a
gain in our consolidated statements of income.
Management is currently in the process of determining the fair
values associated with the Old FNBCF, Old Cortez and Old Coastal
acquisitions. We believe that our non-accretable difference
(discounts representing amounts that are not expected to be
collected from the customer and liquidation of collateral)
represents probable losses on the loan portfolio at the time of
acquisition and we expect that non-accretable difference to
cover our estimated losses on the acquired loans. Nonetheless,
to the extent that additional impairment occurs on these assets,
we will recognize a provision for loan losses related to the
probable loss associated with the impaired pool of loans or
specific loan. If the loan is covered under loss sharing
agreements, then the Bank will recognize in earnings an
offsetting income on indemnification asset resulting from
impairment of covered loans equal to the FDIC share of the loss
under the specific loss sharing agreement covering the impaired
loans. Furthermore, we expect to have accretable discounts
(discounts representing the excess of a loans cash flows
expected to be collected over the initial investment in the
loan) to provide for market yields on the covered loans. We
recorded both the purchased assets and the liabilities assumed
at their respective acquisition date fair values.
The loss sharing agreements will have a material effect on our
cash flows and operating results in both the short term and the
long term. In the short term, we believe it is likely that a
significant amount of the covered loans will become delinquent
and there will be inadequate
49
collateral to repay the loans upon liquidation of the
collateral. Management believes that it has established
sufficient non-accretable discounts on Covered Assets
representing the expected losses compared to their acquired
contractual payment amounts. As a result, our operating results
would only be adversely affected by loan losses on Covered
Assets to the extent that those losses exceed the expected
losses reflected in the fair value of the Covered Assets at the
acquisition date or if we lose FDIC loss share protection.
The effects of the loss sharing agreements on cash flows and
operating results in the long term will be similar to the
short-term effects described above. The long-term effects will
depend primarily on the ability of borrowers to make required
payments over time. As the loss sharing agreements cover up to a
10-year
period (five years for loans other than single family
residential mortgage loans), changing economic conditions will
likely affect the timing of future charge-offs and the resulting
reimbursements from the FDIC. Management believes that any
recapture of interest income and recognition of cash flows from
borrowers or amounts received from the FDIC (as part of the
indemnification asset) may be recognized unevenly over this
period, as we exhaust our collection efforts under our normal
practices.
In the income statement, the covered expenses incurred to manage
and dispose of Covered Assets are fully expensed as noninterest
expense and the 80% (or 50% or 95%, as applicable) reimbursed by
the FDIC under the applicable loss sharing agreement is
recognized as noninterest income, resulting in a 20% (or 50% or
5%, as applicable) net effect to earnings. We include these
covered expenses in our quarterly reporting to the FDIC, and the
FDIC reimburses us for them under the terms of the loss sharing
agreements.
FDIC Loss Share
Indemnification Asset
The majority of our loan and other real estate assets are
covered under loss sharing agreements with the FDIC in which the
FDIC has agreed to reimburse us for between 50%, 80% and 95% of
all losses incurred in connection with those assets. We
estimated the amount that we will receive from the FDIC under
the loss sharing agreements that will result from losses
incurred as we dispose of covered loans and other real estate
assets, and we recorded the estimate as an indemnification asset
from the FDIC.
The loss share indemnification asset for loss sharing agreements
is measured separately from the related Covered Assets because
it is not contractually embedded in the assets and is not
transferable if we sell the assets. We estimated the fair value
of the FDIC indemnification asset using the present value of
cash flows related to the loss sharing agreements based on the
expected reimbursements for losses and the applicable loss
sharing percentages. These cash flows were then discounted using
a risk-free yield curve plus a premium reflecting the
uncertainty related to the timing and receipt of such cash
flows. The amount ultimately collected for this asset is
dependent upon the performance of the underlying Covered Assets,
the passage of time and claims submitted to the FDIC. We will
review and update the fair value of the FDIC indemnification
asset prospectively as loss estimates related to covered loans
and OREO change. Subsequent decreases in the amount expected to
be collected result in a provision for loan and lease losses, an
increase in the allowance for loan and lease losses (ALLL), and
a proportional adjustment to the FDIC indemnification asset for
the estimated amount to be reimbursed. Subsequent increases in
the amount expected to be collected result in the reversal of
any previously-recorded provision for loan and lease losses and
related ALLL and adjustments to the FDIC indemnification asset,
or prospective adjustment to the accretable discount if no
provision for loan and lease losses had been recorded. As a
result, the value of the FDIC indemnification asset will
continue to fluctuate over time based upon the continued
performance of the loans and as the Bank receives payments from
the FDIC under the loss sharing agreements. Realized losses in
excess of acquisition date estimates will result in an increase
in the FDIC indemnification asset. Conversely, if realized
losses are less than acquisition date estimates, the FDIC
indemnification asset for loss sharing agreements will be
reduced.
50
Based on our due diligence review for each of the Acquisitions,
including estimates of the timing of cash flow receipts and the
disposition of nonperforming assets, we were able to estimate
the acquisition date fair value of the FDIC indemnification
asset. We discounted the FDIC indemnification asset for the
expected timing and receipt of these cash flows using a risk
free rate plus a premium for risk. The ultimate realization of
the FDIC indemnification asset depends on the performance of the
underlying Covered Assets, the passage of time and claims paid
by the FDIC. The accretion of the FDIC indemnification asset is
recorded into noninterest income using the level yield method
over the estimated life of the FDIC indemnification asset.
The loss share indemnification asset will be reduced as claims
submissions are filed with the FDIC and collected. Decreases in
expected reimbursements from the FDIC resulting from an
improvement in the expected cash flows of covered loans are
recognized in earnings prospectively consistent with the
approach taken to recognize increases in cash flows on covered
loans. Increases in expected reimbursements from the FDIC are
recognized in earnings in the same period that the allowance for
credit losses for the related loans is recognized. Furthermore,
the resolution of Covered Assets for a value in excess of the
estimated value of the asset will result in a decrease of the
loss share indemnification asset equal to the loss share
percentage of the loss not incurred. Conversely, losses in
excess of estimates at the time of the loss will result in an
increase in the loss share indemnification asset. The loss
sharing agreements with the FDIC contain provisions under which
the Bank will be reimbursed for a portion of certain expenses
associated with Covered Assets. The Bank recognizes an increase
to the loss share indemnification asset through a credit to non
interest income related to the loss share percentage of expenses
incurred.
The following table presents the components of the loss share
indemnification asset at January 22, 2010, January 29,
2010, and June 25, 2010, the various acquisition dates of
Old Premier, Old FCB and Old Peninsula, respectively (in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Old Premier
|
|
Old FCB
|
|
Old Peninsula
|
|
Total
|
|
Estimated portion of gross losses subject to FDIC
indemnification:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial assets
|
|
$
|
81,173
|
|
|
$
|
76,605
|
|
|
$
|
134,292
|
|
|
$
|
292,070
|
|
1-4 single family residential assets
|
|
|
5,632
|
|
|
|
13,967
|
|
|
|
5,171
|
|
|
|
24,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated portion of gross losses subject to FDIC
indemnification:
|
|
|
86,805
|
|
|
|
90,572
|
|
|
|
139,463
|
|
|
|
316,840
|
|
Fair value discount
|
|
|
(4,296
|
)
|
|
|
(4,087
|
)
|
|
|
(3,678
|
)
|
|
|
(12,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss share indemnification asset at acquisition dates
|
|
$
|
82,509
|
|
|
$
|
86,485
|
|
|
$
|
135,785
|
|
|
$
|
304,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the loss share indemnification asset for the period
from the acquisition of Old Premier through December 31,
2010 were as follows (in thousands).
|
|
|
|
|
|
|
Amount
|
|
Balance as of January 1, 2010
|
|
$
|
|
|
Additions to loss share indemnification asset resulting from
acquisitions
|
|
|
304,779
|
|
Reimbursable expenses and charged-off interest
|
|
|
13,983
|
|
Accretion
|
|
|
5,302
|
|
Income resulting from impairments of covered assets
|
|
|
7,793
|
|
Loss resulting from dispositions of covered assets
|
|
|
(7,636
|
)
|
Reductions for claims submitted to FDIC
|
|
|
(161,623
|
)
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
162,596
|
|
|
|
|
|
|
51
The loss sharing agreements also contain a potential obligation
to remit a portion of the cash received from the FDIC during the
Acquisitions. The amount payable to the FDIC is based on an
established formula included in the various loss sharing
agreements. The Bank has recognized in other liabilities an
estimate, representing managements projections on the
expected amount that will be payable to the FDIC. That liability
is recognized using a discounted cash flow model at a market
rate, inclusive of the Banks credit risk. As of
December 31, 2010, the Bank has included in other
liabilities approximately $9.3 million related to the
potential future obligation to the FDIC under the loss sharing
agreements.
In general, our earnings are significantly affected by changes
to the indemnification asset. A loss or expenses in Covered
Assets will result in an increase to the indemnification asset
recognized through a credit to earnings, while gains and
recoveries on Covered Assets will result in reductions to the
indemnification asset recognized through a charge to earnings.
The following table summarizes the components of the gains and
losses associated with Covered Assets, plus the provision for
loan losses on non-covered loans and income from resolution of
troubled non-covered loans, along with the related additions to
or (reductions in) the amounts recoverable from the FDIC under
the loss sharing agreements (included in other non interest
expenses), as reflected in the consolidated income statement for
the year ended December 31, 2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
|
|
Transaction
|
|
|
Loss Share
|
|
|
Impact to
|
|
|
|
Income
|
|
|
Indemnification
|
|
|
Pre-tax
|
|
|
|
(Loss)
|
|
|
Income (Loss)
|
|
|
Earnings
|
|
|
Provision for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans
|
|
$
|
(9,772
|
)
|
|
$
|
7,793
|
|
|
$
|
(1,979
|
)
|
Non-covered loans
|
|
|
(90
|
)
|
|
|
|
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(9,862
|
)
|
|
|
7,793
|
|
|
|
(2,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from resolution of troubled assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans
|
|
|
1,309
|
|
|
|
(994
|
)
|
|
|
315
|
|
Non-covered loans
|
|
|
185
|
|
|
|
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,494
|
|
|
|
(994
|
)
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursement of expenses on Covered Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Eligible expenses
|
|
|
(17,701
|
)
|
|
|
13,983
|
|
|
|
(3,718
|
)
|
Non-eligible expenses
|
|
|
(111
|
)
|
|
|
|
|
|
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(17,812
|
)
|
|
|
13,983
|
|
|
|
(3,829
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of covered OREO
|
|
|
8,293
|
|
|
|
(6,642
|
)
|
|
|
1,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(17,887
|
)
|
|
$
|
14,140
|
|
|
$
|
(3,747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary Factors
Used to Evaluate Our Business
As a financial institution, we manage and evaluate various
aspects of both our results of operations and our financial
condition. We evaluate the levels and trends of the line items
included in our balance sheet and income statement, as well as
various financial ratios that are commonly used in our industry.
We analyze these ratios and financial trends against our own
historical performance, our budgeted performance and the
financial condition and performance of comparable financial
institutions in our region and nationally.
Comparison of our financial performance against other financial
institutions is impacted by the application of the acquisition
method of accounting and the accounting for loans acquired
52
with evidence of deterioration in credit quality as well as
assets subject to loss sharing agreements with the FDIC.
Results of
Operations
Our results of operations depend substantially on net interest
income, which is the difference between interest income on
interest-earning assets, consisting primarily of loans
receivable, including the accretion of fair value discounts on
acquired loans, securities and other short-term investments, and
interest expense on interest-bearing liabilities, consisting
primarily of deposits and borrowings. Our results of operations
are also dependent upon our generation of non interest income,
consisting of income from banking service fees, increases to the
loss share indemnification asset resulting from reimbursement of
expenses, reimbursement of losses and charged-off interest as
well as reductions to the loss share indemnification asset
resulting gains on resolution on troubled assets and,
recoveries. Other factors contributing to our results of
operations include our provisions for loan losses, gains or
losses on sales of securities and income taxes, as well as the
level of our non interest expenses, such as compensation and
benefits, occupancy and equipment and other miscellaneous
operating expenses.
Net Interest
Income
Net interest income represents interest income less interest
expense. We generate interest income from interest, dividends
and fees received on interest-earning assets, including loans
and investment securities we own. We incur interest expense from
interest paid on interest-bearing liabilities, including
interest-bearing deposits, and borrowings. Net interest income
is a significant contributor to our revenues and net income. To
evaluate net interest income, we measure and monitor
(1) yields on our loans and other interest-earning assets,
(2) the costs of our deposits and other funding sources,
(3) our net interest spread, (4) our net interest
margin and (5) our provisions for loan and lease losses.
Net interest spread is the difference between rates earned on
interest-earning assets and rates paid on interest-bearing
liabilities. Net interest margin is calculated as the annualized
net interest income divided by average interest-earning assets.
Because noninterest-bearing sources of funds, such as
noninterest-bearing deposits and stockholders equity, also
fund interest-earning assets, net interest margin includes the
benefit of these noninterest-bearing sources.
We also recognize income from the accretion of discounts
associated with the purchase of interest earning assets. Because
of our business model, we derive a significant portion of our
interest income from the accretion of discounts on acquired
loans. This accretion will continue to have a significant impact
on our net interest income as long as loans acquired with
evidence of credit deterioration at acquisition represent a
significant portion of our interest earning assets.
Changes in the market interest rates and interest rates we earn
on interest-earning assets or pay on interest-bearing
liabilities, as well as the volume and types of interest-earning
assets, interest-bearing and noninterest-bearing liabilities and
stockholders equity, are usually the largest drivers of
periodic changes in net interest spread, net interest margin and
net interest income. In addition, our interest income includes
the accretion of the fair value discounts on our acquired loan
portfolios, which will also affect our net interest spread, net
interest margin and net interest income. We measure net interest
income before and after provision for loan and lease losses
required to maintain our allowance for loan and lease losses at
acceptable levels.
53
Non interest Income
Our non interest income includes the following:
|
|
|
|
|
Service charges and fees;
|
|
|
|
Accretion of discount on loss share indemnification asset;
|
|
|
|
Reimbursement of expenses on assets covered by loss sharing
agreements;
|
|
|
|
Income from resolution of troubled assets;
|
|
|
|
Bargain purchase gains on FDIC-assisted transactions; and
|
|
|
|
Net gains and losses from the sale of OREO assets and investment
securities.
|
For the year ended December 31, 2010, the majority of our
non interest income resulted from the gains on FDIC
assisted transaction, the reimbursement of expenses subject to
loss sharing agreements, gains on sales of OREO and gains on
sale of securities and the accretion of the discount on the FDIC
indemnification asset. Typically, the primary components of
non-interest income of financial institutions are service
charges and fees and gains and losses related to the sale or
valuation of investment securities, loans and other assets.
Non interest Expense
Our non interest expense includes the following:
|
|
|
|
|
Salaries and employee benefits;
|
|
|
|
Occupancy and equipment expenses;
|
|
|
|
Other real estate and troubled assets resolution related
expenses;
|
|
|
|
Professional services; and
|
|
|
|
Other.
|
Financial
Condition
The primary factors we use to evaluate and manage our financial
condition include liquidity, asset quality and capital.
Liquidity
We manage liquidity based upon factors that include the amount
of core deposits as a percentage of total deposits, the level of
diversification of our funding sources, the allocation and
amount of our deposits among deposit types, the short-term
funding sources used to fund assets, the amount of non-deposit
funding used to fund assets, the availability of unused funding
sources, off-balance sheet obligations, the availability of
assets to be readily converted into cash without undue loss, the
amount of cash and liquid securities we hold, and the re-pricing
characteristics and maturities of our assets when compared to
the re-pricing characteristics of our liabilities, the ability
to securitize and sell certain pools of assets and other factors.
Asset Quality
We manage the diversification and quality of our assets based
upon factors that include the level, distribution, severity and
trend of problem, classified, delinquent, non-accrual,
nonperforming and restructured assets, the adequacy of our ALLL,
discounts and reserves for unfunded loan commitments, the
diversification and quality of loan and investment portfolios,
the extent of counterparty risks and credit risk concentrations.
54
In monitoring asset quality, we consider the results of our
internal credit risk rating process and certain key ratios
including the ratio of nonperforming loans to total loans,
nonperforming assets to total assets, portfolio delinquency and
charge-off trends, among other factors. Comparison of these
metrics at a carry balance basis to those reported by other
financial institutions and to historical metrics of the Old
Banks is difficult because of the impact of the revaluation of
the acquired loans and of Purchase Credit-Impaired, or PCI, loan
accounting. Our nonperforming asset ratios as well as the ratio
of the allowance for loan losses to total loans and to
nonperforming loans are lower as a result of acquisition
accounting and PCI loan accounting. PCI loans accounted for in
pools are not reflected as nonaccrual loans even though they may
be contractually delinquent due to continuing discount accretion
because these pools are performing substantially as expected at
the time of the Acquisition.
We recognize that developing and maintaining a strong credit
culture is paramount to the success of our Company. We have
established a credit risk management framework and put in place
an experienced team to lead the workout and recovery process for
our portfolios.
Loan performance is monitored by our credit, workout and
recovery and loan review departments. Commercial and commercial
real estate loans are regularly subjected to loan review
process. We utilize an asset risk classification system as part
of our efforts to monitor and improve commercial asset quality.
Borrowers with credit weaknesses that may jeopardize
collectability will likely demonstrate one or more of the
following: payment defaults, frequent overdrafts, operating
losses, increasing balance sheet leverage, inadequate cash flow,
project cost over-runs, unreasonable construction delays,
exhausted interest reserves, past due real estate taxes or
declining collateral values. Generally, a loan with one or more
of these identified weaknesses will be classified substandard.
Loans that have credit weaknesses that render collection or
liquidation in full highly questionable or improbable based on
current circumstances are classified doubtful. Loans
exhibiting potential credit weaknesses that deserve
managements close attention and that if left uncorrected
may result in deterioration of the repayment capacity of the
borrower are categorized as special mention.
The following table summarizes changes to the portfolio of loans
acquired for the period from each respective acquisition to
December 31, 2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collections,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and
|
|
|
|
|
|
|
|
|
Balance as of
|
|
|
|
Balance
|
|
|
Other, Net of
|
|
|
Charge-
|
|
|
Transfers to
|
|
|
December 31,
|
|
|
|
Acquired
|
|
|
Advances
|
|
|
Offs (1)
|
|
|
OREO
|
|
|
2010
|
|
|
Loans acquired from Old Premier
|
|
$
|
287,223
|
|
|
$
|
(24,770
|
)
|
|
$
|
(36,087
|
)
|
|
$
|
(6,585
|
)
|
|
$
|
219,781
|
|
Loans acquired from Old FCB
|
|
|
263,565
|
|
|
|
(36,960
|
)
|
|
|
(36,796
|
)
|
|
|
(4,199
|
)
|
|
|
185,610
|
|
Loans acquired from Old Peninsula
|
|
|
392,165
|
|
|
|
(10,021
|
)
|
|
|
(93,102
|
)
|
|
|
(1,752
|
)
|
|
|
287,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
942,953
|
|
|
$
|
(71,751
|
)
|
|
$
|
(165,985
|
)
|
|
$
|
(12,536
|
)
|
|
$
|
692,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Included in charge-offs are
charge-offs taken by the Old Banks between the bid date and the
date of closing (window period charge-offs). Window period
charge-offs for Old Premier, Old FCB and Old Peninsula amount to
$5.7 million, $3.6 million and $33.7 million,
respectively for a total of $43.0 million.
|
Capital
We manage capital based upon factors that include the level and
quality of capital and overall financial condition of the
Company, the trend and volume of problem assets, the adequacy of
discounts and reserves, the level and quality of earnings, the
risk exposures in our balance sheet, the levels of Tier 1
(core), risk-based and tangible equity capital, the ratios of
55
Tier 1 (core), risk-based and tangible equity capital to
total assets and risk-weighted assets and other factors.
Key
Metrics
The primary metrics we use to evaluate and manage our financial
results are described below. Although we believe these metrics
are meaningful in evaluating our results and financial
condition, they may not be directly comparable to similar
metrics used by other financial services companies and may not
provide an appropriate basis to compare our results or financial
condition to the results or financial condition of our
competitors. The following table sets forth the metrics we use
to evaluate the success of our business and our resulting
financial position and operating performance.
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
December 31, 2010
|
|
|
Performance metrics
|
|
|
|
|
Yield on interest-earning assets
|
|
|
3.4
|
%
|
Cost of interest-bearing liabilities
|
|
|
1.3
|
%
|
Net interest spread
|
|
|
2.10
|
%
|
Net interest margin
|
|
|
2.35
|
%
|
Return on average assets
|
|
|
1.2
|
%
|
Return on average equity
|
|
|
4.0
|
%
|
Efficiency ratio (1) (Bank level)
|
|
|
66.7
|
%
|
Credit quality ratios
|
|
|
|
|
Nonperforming assets as % of total assets
|
|
|
1.0
|
%
|
ALLL as % of total loans
|
|
|
1.7
|
%
|
Covered loans as a % of total loans
|
|
|
98.3
|
%
|
Capital ratios
|
|
|
|
|
Tier 1 leverage ratio (bank level)
|
|
|
13.5
|
%
|
Tier 1 leverage ratio
|
|
|
29.4
|
%
|
Tier 1 risk based capital ratio (bank level)
|
|
|
51.2
|
%
|
Tier 1 risk based capital ratio
|
|
|
104.1
|
%
|
Total risk based capital ratio (bank level)
|
|
|
52.5
|
%
|
Total risk based capital ratio
|
|
|
105.4
|
%
|
Tangible common equity ratio
|
|
|
29.5
|
%
|
Average equity to average total assets
|
|
|
31.1
|
%
|
Deposit metrics
|
|
|
|
|
Total core deposits as % of total deposits
|
|
|
67.1
|
%
|
Non-core funding dependency (2)
|
|
|
39.9
|
%
|
|
|
|
(1)
|
|
Non interest expense over (net
interest income plus non interest income).
|
|
(2)
|
|
Non-core funding dependence is
defined as (non-core liabilities minus short-term investments)
divided by long-term assets.
|
Results of
Operations
We reported net income of $21.6 million for the year ended
December 31, 2010.
56
Net Interest
Income
The following table presents, for the period indicated,
information about (i) average balances, the total dollar
amount of interest income from interest earning assets and the
resultant average yields; (ii) average balances, the total
dollar amount of interest expense on interest-bearing
liabilities and the resultant average rates; (iii) net
interest income; (iv) the interest rate spread; and
(v) the net interest margin. Nonaccrual and restructured
loans are included in the average balances presented in this
table; however, interest income foregone on nonaccrual loans is
not included. Yields have been calculated on a pre-tax basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
December 31, 2010
|
|
|
|
|
Interest
|
|
Average
|
|
|
Average
|
|
Income/
|
|
Yield/
|
|
|
Balance (1)
|
|
Expense
|
|
Rate (2)
|
|
|
($ in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
$
|
383,125
|
|
|
$
|
33,908
|
|
|
|
8.9
|
%
|
Investment securities
|
|
|
833,814
|
|
|
|
12,631
|
|
|
|
1.5
|
%
|
Interest due from banks
|
|
|
135,849
|
|
|
|
34
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
1,352,788
|
|
|
|
46,573
|
|
|
|
3.4
|
%
|
Loan share indemnification assets (3)
|
|
|
164,444
|
|
|
|
|
|
|
|
|
|
Non-interest-earning assets
|
|
|
239,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,756,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction accounts
|
|
$
|
24,371
|
|
|
|
79
|
|
|
|
0.3
|
%
|
Savings and money market
|
|
|
181,270
|
|
|
|
2,120
|
|
|
|
1.2
|
%
|
Time deposits
|
|
|
772,104
|
|
|
|
11,218
|
|
|
|
1.5
|
%
|
FHLB advances and other borrowings
|
|
|
126,352
|
|
|
|
1,431
|
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
1,104,097
|
|
|
|
14,818
|
|
|
|
1.3
|
%
|
Non interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest-bearing demand deposits
|
|
|
71,817
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
34,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,210,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
546,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,756,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
$
|
31,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
2.10
|
%
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
2.35
|
%
|
|
|
|
(1)
|
|
During the year, we have
successfully integrated accounting records that were kept on
different platforms. In the process of integrating the
platforms, certain data related to daily average balances was
not carried over. As a result management believes that the
determination of average balances on a daily basis is
impracticable and consequently average balances are presented as
the simple average of the month ending balances for the year
ended December 31, 2010.
|
|
(2)
|
|
Annualized for the applicable
period.
|
|
(3)
|
|
Includes non-accruing loans.
|
57
Net interest income was $31.7 million for the year ended
December 31, 2010. Interest income was approximately
$46.6 million for the year ended December 31, 2010, of
which approximately, $32.2 million related to accretion of
accretable discounts on loans acquired. We also recognized
approximately $12.6 million of interest income related to
investment securities held by the Company. Interest expense was
approximately $14.8 million for the year ended
December 31, 2010. We recognized $13.4 million
associated with interest on customer deposits. We also
recognized approximately $1.4 million in interest expense
related to advances from the FHLB.
Rate/Volume
Analysis
Net interest income can be analyzed in terms of the impact of
changing interest rates and changing volume. Due to 2010 being
the first year of banking operations, all interest income and
expense is attributable to the volume of interest-earning assets
and interest-bearing liabilities, respectively. Therefore, we
have omitted a table analyzing changes in net interest income as
it would not be meaningful.
Provision for
Loan Losses
For the year ended December 31, 2010, we recorded
provisions for loan losses of $9.9 million, most of which
relate to specific impairments identified on pools of loans
acquired from Old Peninsula. The effect of this impairment in
the Old Peninsula loans was offset by the recognition of income
on indemnification asset resulting from impairment of
approximately $7.8 million representing the FDICs
share of the expected lost cash flows related to the
aforementioned impairments.
Noninterest
Income
The following table summarizes the components of noninterest
income for the year ended December 31, 2010 (in thousands).
|
|
|
|
|
Service charges and fees
|
|
$
|
2,620
|
|
Accretion of discount on loss share indemnification asset
|
|
|
5,302
|
|
Reimbursement of expenses and charged-off interest subject to
loss share indemnification
|
|
|
13,983
|
|
Income from resolution of troubled assets
|
|
|
1,494
|
|
Gain on FDIC-assisted transactions
|
|
|
26,188
|
|
Gain on sales of assets
|
|
|
8,293
|
|
Gain on sales of investment securities
|
|
|
6,194
|
|
|
|
|
|
|
Total noninterest income
|
|
$
|
64,074
|
|
|
|
|
|
|
Service charges and fees represent fees charged to customers on
their deposit accounts, and includes, but it is not limited to,
maintenance fees, insufficient fund fees, overdraft protection
fees, wire transfer fees and other.
The accretion of discount on loss share indemnification asset
represents the amount of income recognized for the current year
share related to the accretion of the aforementioned discount on
the loss share indemnification asset through its expected life
to an amount equal to the expected cash flows associated with
the reimbursement of losses, expenses and other items subject to
loss sharing agreements. During the year the Company recognized
in earnings approximately $5.3 million of accretion of the
loss share indemnification asset.
In connection with the loss sharing agreements with the FDIC,
the Bank will be reimbursed for a portion of certain expenses
associated with Covered Assets. The Company also recognizes
income from reimbursement of expenses associated with qualifying
expenses on
58
loans that have not been charged-off but for which a charge-off
is expected. During the year ended December 31, 2010, the
Bank recognized $17.6 million of expenses subject to
reimbursement under the loss sharing agreement and
$14.0 million of reimbursement income associated with such
expenses. Included in the $14.0 million, the Bank has
recognized approximately $5.0 million related to expenses
incurred during the period ended December 31, 2010, which
are expected to be filed for reimbursement with the FDIC in
future periods as charge-offs occur in the related loans.
We recognize gains on the resolution of troubled assets when we
collect recoveries on balances charged-off prior to the
acquisition, or when we collect a recovery on loans previously
charged-off when the charge-off was recognized as a reduction of
the non-accretable difference and did not affect the allowance
for loan losses. Recoveries recognized on these conditions
amounted to approximately $1.5 million and were recognized
through earnings as collected.
We recognize bargain purchase gains or a gain on FDIC-assisted
transactions when the fair value of assets acquired from
FDIC-assisted transaction (including proceeds received from or
paid to the FDIC) exceed the amount of liabilities assumed. The
following table summarizes the recognition of gains bargain
purchase on FDIC-assisted transactions for the year ended
December 31, 2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Old
|
|
|
|
Old
|
|
|
|
|
Premier
|
|
Old FCB
|
|
Peninsula
|
|
Total
|
|
Cost basis on assets (liabilities) prior to acquisition
|
|
$
|
35,224
|
|
|
$
|
(117,770
|
)
|
|
$
|
(33,329
|
)
|
|
$
|
(115,875
|
)
|
Net consideration received from FDIC
|
|
|
24,858
|
|
|
|
173,405
|
|
|
|
78,593
|
|
|
|
276,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired before fair value adjustments
|
|
|
60,082
|
|
|
|
55,635
|
|
|
|
45,264
|
|
|
|
160,981
|
|
Adjustments to fair value of assets acquired and liabilities
assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
(112,730
|
)
|
|
|
(87,415
|
)
|
|
|
(152,383
|
)
|
|
|
(352,528
|
)
|
Loss share indemnification asset
|
|
|
82,509
|
|
|
|
86,485
|
|
|
|
135,785
|
|
|
|
304,779
|
|
OREO
|
|
|
(2,948
|
)
|
|
|
(26,599
|
)
|
|
|
(23,701
|
)
|
|
|
(53,248
|
)
|
Intangible assets
|
|
|
1,350
|
|
|
|
3,002
|
|
|
|
2,243
|
|
|
|
6 ,595
|
|
Other assets
|
|
|
68
|
|
|
|
(2,225
|
)
|
|
|
(1,502
|
)
|
|
|
(3,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments to assets
|
|
|
(31,751
|
)
|
|
|
(26,752
|
)
|
|
|
(39,558
|
)
|
|
|
(98,061
|
)
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
1,309
|
|
|
|
7,681
|
|
|
|
2,569
|
|
|
|
11,559
|
|
Borrowings
|
|
|
|
|
|
|
1,830
|
|
|
|
98
|
|
|
|
1,928
|
|
Deferred tax liabilities
|
|
|
9,514
|
|
|
|
5,561
|
|
|
|
137
|
|
|
|
15,212
|
|
Other liabilities
|
|
|
1,787
|
|
|
|
4,053
|
|
|
|
2,193
|
|
|
|
8,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments to liabilities
|
|
|
12,610
|
|
|
|
19,125
|
|
|
|
4,997
|
|
|
|
36,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments to acquired assets
|
|
|
(44,361
|
)
|
|
|
(45,877
|
)
|
|
|
(44,555
|
)
|
|
|
(134,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on FDIC-assisted transactions
|
|
$
|
15,721
|
|
|
$
|
9,758
|
|
|
$
|
709
|
|
|
$
|
26,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our results of operations are also dependent upon our generation
of non interest income resulting from the sale of assets,
primarily investment securities and OREO. We recognize gains on
sales of OREO and gains on sales of securities when the proceeds
of the sale exceed the carrying value of the asset being sold.
Investment sales and portfolio activity have been at relatively
higher levels due to a change in investment policy to
shorter-term investments as well
59
as a significant level of maturities and callable actions by
issuers. Other non interest income for the period ended
December 31, 2010 includes $8.3 million of gains
related to OREO sales and $6.2 million of gains from the
sales of available for sale (AFS) investment securities related
to sales of OREO and investment securities of approximately
$22.4 million and $5.9 billion, respectively.
Non interest
Expense
The following table summarizes the components of
non interest expense for the year ended December 31,
2010 (in thousands).
|
|
|
|
|
Salaries and employee benefits
|
|
$
|
21,651
|
|
Occupancy and equipment expenses
|
|
|
4,985
|
|
Other real estate and troubled assets resolution related expenses
|
|
|
17,590
|
|
Professional services
|
|
|
12,498
|
|
Other
|
|
|
11,387
|
|
|
|
|
|
|
Total non interest expense
|
|
$
|
68,111
|
|
|
|
|
|
|
As is typical for financial institutions, salaries and employee
benefits represent the single largest component of recurring
non interest expense. For the year ended December 31,
2010, salaries and employee benefits amounted to approximately
$21.7 million. These costs include non-recurring costs that
resulted in part from continued enhancement of our management
team and other personnel subsequent to the Acquisitions.
Employee compensation and benefits also included
$2.3 million for the year ended December 31, 2010,
related to stock option plans.
We lease premises and equipment under cancelable and
non-cancelable leases, some of which contain renewal options
under various terms. We use the leased properties primarily for
banking purposes. During the year ended December 31, 2010
we recognized approximately $5.0 million related to rental
expense on operating leases, depreciation and maintenance of
equipment and other occupancy and equipment related expenses.
OREO and troubled asset resolution related expenses are
comprised mainly of the expenses of holding and maintaining OREO
properties for sale, such as real estate taxes and insurance,
legal fees and other foreclosure expenses and other expenses
associated with the sale of troubled assets. The expenses, which
are eligible for reimbursement under our loss sharing agreements
with the FDIC to the extent that a loss or charge-off has
occurred, have remained at high levels since the Acquisitions
due to active workout of the acquired portfolios. As of
December 31, 2010, substantially all loan and OREO
properties were covered by the loss sharing agreements with the
FDIC and the loss share administration expenses are
substantially offset by non interest income related to the
FDIC loss share indemnification asset.
For the year ended December 31, 2010 we recognized
$12.5 million in expenses related to professional fees that
include investment banking, capital markets, regulatory and
legal advisory, accounting advisory and consulting as we
continue to build a foundation to support our strategic growth.
The primary components of other non interest expense are
advertising and promotion, the cost of regulatory assessments
and general operating expenses.
60
Financial
Condition
Loan
Concentrations
We refer to our loans covered under loss sharing agreements with
the FDIC as covered loans. We refer to all other
loans as non-covered loans. The current
concentrations in our loan portfolio may not be indicative of
concentrations in our loan portfolio in the future. We plan to
maintain a relatively diversified loan portfolio to help reduce
the risk inherent in concentration in certain types of
collateral.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
Covered
|
|
|
Non-Covered
|
|
|
Total
|
|
|
% of
|
|
|
|
Loans (1)
|
|
|
Loans
|
|
|
Amount
|
|
|
Total
|
|
|
|
($ in thousands)
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
59,018
|
|
|
$
|
1,161
|
|
|
$
|
60,179
|
|
|
|
11.3
|
%
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential (2)
|
|
|
54,309
|
|
|
|
2,654
|
|
|
|
56,963
|
|
|
|
10.7
|
|
Commercial
|
|
|
381,994
|
|
|
|
2,457
|
|
|
|
384,451
|
|
|
|
72.3
|
|
Construction
|
|
|
22,925
|
|
|
|
|
|
|
|
22,925
|
|
|
|
4.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
459,228
|
|
|
|
5,111
|
|
|
|
464,339
|
|
|
|
87.3
|
%
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer and other
|
|
|
4,849
|
|
|
|
2,497
|
|
|
|
7,346
|
|
|
|
1.4
|
%
|
Total loans receivable
|
|
|
523,095
|
|
|
|
8,769
|
|
|
|
531,864
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned discounts, net
|
|
|
(7,520
|
)
|
|
|
|
|
|
|
(7,520
|
)
|
|
|
|
|
Lessallowance for loan losses
|
|
|
(8,933
|
)
|
|
|
(90
|
)
|
|
|
(9,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
506,642
|
|
|
$
|
8,679
|
|
|
$
|
515,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Loans acquired with evidence of
credit deterioration at acquisition are presented net of
discounts.
|
|
(2)
|
|
Real Estate-Residential loans are
the only type of loan covered by the Single Family Loss
Agreements, which is a loss sharing agreement that covers
single-family residential mortgage loans; all other loan classes
are covered by the Commercial Loss Agreements, which is a loss
sharing agreement that covers construction, commercial real
estate and commercial and industrial loans, OREO and other
commercial assets.
|
Loan Portfolio
Maturities and Interest Rate Sensitivity
The following summarizes the loan maturity distribution by type
and related interest rate characteristics for the year ended
December 31, 2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After One But
|
|
|
|
|
|
|
|
|
|
One Year
|
|
|
Within
|
|
|
After Five
|
|
|
|
|
|
|
or Less
|
|
|
Five Years
|
|
|
Years
|
|
|
Total
|
|
|
Real estate
|
|
$
|
229,329
|
|
|
$
|
185,637
|
|
|
$
|
49,373
|
|
|
$
|
464,339
|
|
Commercial
|
|
|
25,072
|
|
|
|
31,998
|
|
|
|
3,109
|
|
|
|
60,179
|
|
Consumer and other
|
|
|
3,781
|
|
|
|
2,937
|
|
|
|
628
|
|
|
|
7,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross loans
|
|
|
258,182
|
|
|
|
220,572
|
|
|
|
53,110
|
|
|
|
531,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities and repricing of loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed interest rates
|
|
|
156,069
|
|
|
|
113,596
|
|
|
|
15,959
|
|
|
|
285,624
|
|
Floating or adjustable interest rates
|
|
|
102,114
|
|
|
|
106,976
|
|
|
|
37,150
|
|
|
|
246,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
258,182
|
|
|
|
220,572
|
|
|
$
|
53,109
|
|
|
$
|
531,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
The expected life of our loan portfolio will differ from
contractual maturities because borrowers may have the right to
curtail or prepay their loans with or without prepayment
penalties. Because a significant portion of the portfolio is
accounted for under the provisions of FASB Accounting Standards
Codification (ASC)
310-30
(originally issued as AICPA Statement of Position
No. 03-3,
Accounting for Certain Loans or Debt Securities Acquired in a
Transfer), the carrying value is significantly affected by
estimates and it is impracticable to allocate scheduled payments
for those loans based on those estimates. Consequently, the
table above includes information limited to contractual
maturities of the underlying loans.
Balance Sheet
Analysis
Investments
Total investments held by the Company increased from
$112.7 million as of January 31, 2010, to
$1.6 billion As of December 31, 2010. Our investment
securities portfolio of $1.6 billion consists of the
securities acquired in the Acquisitions and those purchased by
us subsequent to the Acquisitions. We primarily invested excess
cash and capital in U.S. government agencies notes,
U.S. government agencies mortgage-backed securities and
other high quality investments throughout the year ended
December 31, 2010. The average balance of the securities
portfolio for the period totaled $833 million. The
portfolio yielded 1.51% for 2010.
No securities were determined to be
other-than-temporarily
impaired during the year ended December 31, 2010. As of
December 31, 2010, securities in unrealized loss positions
included U.S. government agency and other securities with
total unrealized losses of $842,000, net of taxes of $508,000.
All of these securities had been in unrealized loss positions
for less than 12 months as of December 31, 2010.
The timely repayment of principal and interest on the
U.S. government agencies mortgage-backed securities is
either explicitly or implicitly guaranteed by the full faith and
credit of the U.S. government.
The following table summarizes our investment securities
portfolio, excluding bank stock as of December 31, 2010 (in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
Fair
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
Value
|
|
|
|
|
|
Investment Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agencies and sponsored enterprises obligations
|
|
$
|
1,414,061
|
|
|
|
87.5
|
%
|
|
$
|
1,412,682
|
|
|
|
87.5
|
%
|
U.S. government agencies and sponsored enterprises
mortgage-backed securities
|
|
|
80,765
|
|
|
|
5.0
|
%
|
|
|
80,431
|
|
|
|
5.0
|
%
|
State, county and municipal obligations
|
|
|
1,439
|
|
|
|
0.1
|
%
|
|
|
1,423
|
|
|
|
0.1
|
%
|
Corporate bonds and other investments
|
|
|
120,333
|
|
|
|
7.4
|
%
|
|
|
120,748
|
|
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,616,598
|
|
|
|
100
|
%
|
|
$
|
1,615,284
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
The following table shows contractual maturities and yields on
our investments as of December 31, 2010. Expected
maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations with or
without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agencies and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government
|
|
|
Sponsored
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agencies and
|
|
|
Enterprises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsored Enterprises
|
|
|
Mortgage-Backed
|
|
|
State, County and
|
|
|
|
|
|
|
|
|
|
Obligations
|
|
|
Securities
|
|
|
Municipal Securities
|
|
|
Other Investments
|
|
|
|
Amount
|
|
|
Yield
|
|
|
Amount
|
|
|
Yield
|
|
|
Amount
|
|
|
Yield
|
|
|
Amount
|
|
|
Yield
|
|
|
|
($ in thousands)
|
|
|
Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One year or less
|
|
$
|
762,661
|
|
|
|
0.42
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
$
|
3,654
|
|
|
|
2.09
|
%
|
After one year through five years
|
|
|
646,382
|
|
|
|
0.63
|
%
|
|
|
30
|
|
|
|
0.01
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
120,228
|
|
|
|
1.07
|
%
|
After five years through 10 years
|
|
|
|
|
|
|
0.00
|
%
|
|
|
38
|
|
|
|
1.49
|
%
|
|
|
1,423
|
|
|
|
4.19
|
%
|
|
|
|
|
|
|
0.00
|
%
|
After 10 years
|
|
|
505
|
|
|
|
2.4
|
%
|
|
|
80,363
|
|
|
|
2.13
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,409,548
|
|
|
|
|
|
|
$
|
80,431
|
|
|
|
|
|
|
$
|
1,423
|
|
|
|
|
|
|
$
|
123,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a member institution of the FHLB of Atlanta and the Federal
Reserve Bank, or FRB, the Bank is required to own capital stock
in the FHLB and the FRB. As of December 31, 2010, the Bank
held approximately $28.4 million in FHLB, FRB and other
bank stock. No market exists for this stock, and the Banks
investment can be liquidated only through repurchase by the FHLB
or FRB. Such repurchases have historically been at par value. We
monitor our investment in FHLB and FRB stock for impairment
through review of recent financial results, dividend payment
history and information from credit agencies. As of
December 31, 2010, management did not identify any
indicators of impairment of FHLB and FRB stock.
Except for securities issued by U.S government agencies or
U.S. government sponsored enterprises, including certain
mortgage backed securities, we do not have any concentrations
where the total outstanding balances issued by a single issuer
exceed 10% of our stockholders equity as of
December 31, 2010.
Analysis of the
Allowance for Loan Losses
The allowance for loan losses at dates subsequent to the
applicable Acquisition relates to (i) loans originated
since the applicable Acquisition, (ii) estimated additional
losses arising on non-Covered Assets subsequent to the
applicable Acquisition, and (iii) additional impairment
recognized as a result of decreases in expected cash flows on
PCI loans due to further credit deterioration. As of
December 31, 2010, our allowance includes elements related
to (i) and (iii) above. The impact of any additional
provision for losses on covered loans is significantly mitigated
by an increase in the FDIC indemnification asset.
For PCI loans, a valuation allowance is established when
periodic evaluations of expected cash flows reflect a decrease
from the level of cash flows that were estimated to be collected
at Acquisition plus any additional expected cash flows arising
from revisions in those estimates. Our first analysis of
expected cash flows for PCI loans occurred during the fourth
quarter of 2010.
63
The following table summarizes the activity related to our
allowance for loan losses related to our loans for year ended
December 31, 2010.
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31, 2010
|
|
|
|
($ in thousands)
|
|
|
Allowance for loan losses at January 1, 2010
|
|
$
|
|
|
Provision for loan losses on covered loans
|
|
|
9,772
|
|
Provision for loan losses on non-covered loans
|
|
|
90
|
|
Provisions for loan losses
|
|
|
9,862
|
|
Charge-offs
|
|
|
|
|
Commercial
|
|
|
(42
|
)
|
Real estate
|
|
|
(670
|
)
|
Consumer
|
|
|
(127
|
)
|
|
|
|
|
|
Total charge-offs
|
|
|
(839
|
)
|
Recoveries
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
9,023
|
|
|
|
|
|
|
Ratio of net charge-offs to average loans outstanding during the
period
|
|
|
0.0
|
%
|
Allocation of
Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
% of Loans in Each
|
|
|
|
|
|
|
Category of Total
|
|
Balance at the End of Period Applicable to:
|
|
Amount
|
|
|
Loans
|
|
|
|
($ in thousands)
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$
|
634
|
|
|
|
11.3
|
%
|
Real Estate
|
|
|
|
|
|
|
|
|
Residential
|
|
|
294
|
|
|
|
10.7
|
%
|
Commercial
|
|
|
7,860
|
|
|
|
72.3
|
%
|
Construction
|
|
|
|
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
8,154
|
|
|
|
87.3
|
%
|
Consumer
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
234
|
|
|
|
1.4
|
%
|
Unallocated
|
|
|
1
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses
|
|
$
|
9,023
|
|
|
|
|
|
Total allowance for non-covered loans
|
|
|
90
|
|
|
|
1.0
|
%
|
Total allowance for covered loans
|
|
$
|
8,933
|
|
|
|
99.0
|
%
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses
|
|
$
|
9,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
Nonperforming
Assets
The following table provides our nonperforming covered and
non-Covered Assets as of December 31, 2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered
|
|
|
Non-Covered
|
|
|
Total
|
|
|
|
Assets
|
|
|
Assets
|
|
|
Amount
|
|
|
Nonaccrual loans
|
|
$
|
1,605
|
|
|
$
|
|
|
|
$
|
1,605
|
|
Accruing loans 90 days or more past due
|
|
|
126,929
|
|
|
|
1,265
|
|
|
|
128,194
|
|
Troubled debt restructurings not included in above
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
|
128,534
|
|
|
|
1,265
|
|
|
|
129,799
|
|
OREO
|
|
|
23,219
|
|
|
|
|
|
|
|
23,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming assets
|
|
$
|
151,753
|
|
|
$
|
1,265
|
|
|
$
|
153,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming loans to total loans
|
|
|
24.5
|
%
|
|
|
0.2
|
%
|
|
|
24.8
|
%
|
Nonperforming assets to total assets
|
|
|
6.2
|
%
|
|
|
0.0
|
%
|
|
|
6.2
|
%
|
Our policies related to when loans are placed on nonaccrual
status conform to guidelines prescribed by bank regulatory
authorities. Loans are placed on nonaccrual status when it is
probable that principal or interest is not fully collectible, or
generally when principal or interest becomes 90 days past
due, whichever occurs first. Certain loans past due 90 days
or more may remain on accrual status if management determines
that it does not have concern over the collectability of
principal and interest because the loan is adequately
collateralized and in the process of collection. When loans are
placed on nonaccrual status, interest receivable is reversed
against interest income in the current period. Interest payments
received thereafter are applied as a reduction to the remaining
principal balance unless management believes that the ultimate
collection of the principal is likely, in which case payments
are recognized in earnings on a cash basis. Loans and leases are
removed from nonaccrual status when they become current as to
both principal and interest and concern no longer exists as to
the collectability of principal and interest.
Generally, a nonaccrual loan that is restructured remains on
nonaccrual for a period of six months to demonstrate the
borrower can meet the restructured terms. However, performance
prior to the restructuring, or significant events that coincide
with the restructuring, are considered in assessing whether the
borrower can meet the new terms and may result in the loan being
returned to accrual status after a shorter performance period.
If the borrowers ability to meet the revised payment
schedule is not reasonably assured, the loan remains classified
as a nonaccrual loan.
65
Certain loans have been classified as impaired based on the
Companys expected inability to collect all amounts due
under the contractual terms of the loan. The following table
shows the Companys investment in impaired and
nonperforming loans as of and for the 12 months ended
December 31, 2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific
|
|
|
Average
|
|
|
Interest
|
|
|
|
Impaired
|
|
|
Impaired
|
|
|
Allowance
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Loans in
|
|
|
Loans in
|
|
|
Allocated to
|
|
|
Investment in
|
|
|
Recognized
|
|
|
|
Accrual
|
|
|
Non-accrual
|
|
|
Impaired
|
|
|
Impaired
|
|
|
on Impaired
|
|
|
|
Status
|
|
|
Status
|
|
|
Loans
|
|
|
Loans
|
|
|
Loans
|
|
|
Real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
97,663
|
|
|
$
|
1,254
|
|
|
$
|
7,832
|
|
|
$
|
16,486
|
|
|
$
|
4,340
|
|
1-4 single family residential
|
|
|
12,225
|
|
|
|
|
|
|
|
256
|
|
|
|
2,037
|
|
|
|
326
|
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
210
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
|
109,888
|
|
|
|
1,464
|
|
|
|
8,088
|
|
|
|
18,558
|
|
|
|
4,666
|
|
Other loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
17,041
|
|
|
|
141
|
|
|
|
616
|
|
|
|
2,847
|
|
|
|
594
|
|
Consumer
|
|
|
1,265
|
|
|
|
|
|
|
|
247
|
|
|
|
211
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
18,306
|
|
|
|
141
|
|
|
|
863
|
|
|
|
3,058
|
|
|
|
665
|
|
Impaired loans held in portfolio, net
|
|
$
|
128,194
|
|
|
$
|
1,605
|
|
|
$
|
8,951
|
|
|
$
|
21,616
|
|
|
$
|
5,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in impaired loans in accrual status are PCI loans that
are being accounted for as pools and for which impairment is
evaluated on the cumulative cash flows of the pools. PCI loans
are classified as accruing loans due to discount accretion. In
addition, the total carrying value of PCI loans accounted for as
pools that are past due in excess of 90 days for either
principal, interest or both, amounts to $136.0 million as
of December 31, 2010.
Deposits
Deposits will be our primary funding source. Throughout the year
ended December 31, 2010, we have worked towards optimizing
our deposit mix and lowering our cost of deposits by reducing
rate sensitive time deposits as well as re-pricing certain
deposit products that are at above market rates. In the future,
we expect commercial core deposits will drive core deposit
growth. At January 31, 2010, approximately 73.8% of total
deposits were concentrated in time deposits, with total deposits
of $863.8 million. As of December 31, 2010, total
deposit balances were $1.5 billion. Cost of deposits
averaged 1.2% for the year ended December 31, 2010,
decreasing from 1.3% for the month-ended February 28, 2010,
to 0.9%, as of December 31, 2010.
Excluding the impact of accretion from fair value adjustments
due to acquisition accounting, the average rate paid on deposits
for the year ended December 31, 2010 was 1.9%.
We added $1.5 billion of total deposits directly as a
result of the acquisitions made in 2010. However, approximately
$ of the time deposits acquired were non-core
wholesale deposits (e.g. Quikrate) that have been strategically
run-off and not renewed. Approximately $80 million of these
wholesale deposits have run-off since acquisition over the year
ended December 31, 2010. Organic deposit growth in
2010 net of Quikrate run-off totaled $127 million.
66
The following table shows the average balance amounts and the
average rates paid on deposit held by us for the year ended
December 31, 2010 and balances outstanding as of
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
Balance
|
|
|
Balance
|
|
|
Rate Paid
|
|
|
|
($ in thousands)
|
|
|
Noninterest-bearing demand deposits
|
|
$
|
86,196
|
|
|
$
|
71,817
|
|
|
|
0.0
|
%
|
Interest-bearing demand deposits
|
|
|
30,827
|
|
|
|
24,371
|
|
|
|
0.1
|
%
|
Savings and money market accounts
|
|
|
263,428
|
|
|
|
181,270
|
|
|
|
0.9
|
%
|
Time deposits
|
|
|
1,133,808
|
|
|
|
772,104
|
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
1,514,259
|
|
|
$
|
1,049,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The maturity distribution of our time deposits of $100,000 or
more as of December 31, 2010 was as follows:
|
|
|
|
|
|
|
($ in thousands)
|
|
|
Three months or less
|
|
$
|
49,558
|
|
Over three through six months
|
|
|
199,113
|
|
Over six though 12 months
|
|
|
152,546
|
|
Over 12 months
|
|
|
96,433
|
|
|
|
|
|
|
Total
|
|
$
|
497,650
|
|
|
|
|
|
|
Borrowed
Funds
In addition to deposits, we utilize advances from the FHLB as a
supplementary funding source to finance our operations. FHLB
advances are secured by stock in the FHLB required to be
purchased in proportion to outstanding advances and qualifying
first mortgage, commercial real estate, home equity loans and
investment securities.
The following table sets forth information regarding our
short-term borrowings, consisting of securities sold under
agreements to repurchase, advances from the FHLB and other
borrowings, as of the date and for the period, indicated ($ in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
|
|
|
|
|
End
|
|
|
|
Ending
|
|
|
Interest
|
|
|
|
Balance
|
|
|
Rates
|
|
|
|
($ in thousands)
|
|
|
Maturing on the year ended December 31, 2010
|
|
|
|
|
|
|
|
|
2011
|
|
$
|
40,000
|
|
|
|
0.6% - 4.6%
|
|
2012
|
|
|
115,316
|
|
|
|
0.5% - 4.1%
|
|
2014
|
|
|
20,000
|
|
|
|
3.8%
|
|
|
|
|
|
|
|
|
|
|
Advances from FHLB
|
|
|
175,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value adjustment
|
|
|
1,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
176,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Critical
Accounting Policies
The Notes to Consolidated Financial Statements contain a summary
of our significant accounting policies, including discussions on
recently issued accounting pronouncements, our adoption of them
and the related impact of their adoption. We believe that
certain of these policies, along with various estimates that we
are required to make in recording our financial
67
transactions, are important to have a complete picture of our
financial position. In addition, these estimates require us to
make complex and subjective judgments, many of which include
matters with a high degree of uncertainty. The following is a
discussion of these critical accounting policies and significant
estimates. Additional information about these policies can be
found in Note 2 of the Consolidated Financial Statements.
See Risk Factors beginning on page 11 for a
discussion of information that should be considered in
connection with an investment in our securities.
Business
Combinations
The Company accounts for transactions that meet the definition
of a purchase business combination by recording the assets
acquired and liabilities assumed at their fair value upon
acquisition. Intangible assets, indemnification contracts and
contingent consideration are identified and recognized
individually. If the fair value of the assets acquired exceeds
the purchase price plus the fair value of the liabilities
assumed, a bargain purchase gain is recognized. Conversely, if
the purchase price plus the fair value of the liabilities
assumed exceeds the fair value of the assets acquired, goodwill
is recognized.
Fair Value
Measurement
The Company uses estimates of fair value in applying various
accounting standards for its consolidated financial statements.
Under GAAP, fair value measurements are used in one of four ways:
1. In the consolidated balance sheet with changes in fair
value recorded in the consolidated statements of operations and
other comprehensive income (loss),
2. In the consolidated balance sheets with changes in fair
value recorded in the accumulated other comprehensive loss
section of the consolidated statements of changes in
stockholders equity,
3. In the consolidated balance sheet for instruments
carried at lower of cost or fair value with impairment charges
recorded in the consolidated statements of operations and other
comprehensive income (loss) and
4. In the notes to the consolidated financial statements.
Fair value is defined as the price to sell an asset or transfer
a liability in an orderly transaction between willing and able
market participants. In general, the Companys policy in
estimating fair values is to first look at observable market
prices for identical assets and liabilities in active markets,
where available. When these are not available, other inputs are
used to model fair value such as prices of similar instruments,
yield curves, volatilities, prepayment speeds, default rates and
credit spreads (including for the Companys liabilities),
relying first on observable data from active markets. Depending
on the availability of observable inputs and prices, different
valuation models could produce materially different fair value
estimates. The values presented may not represent future fair
values and may not be realizable.
Accounting Standards Codification (ASC) Topic 825,
Financial Instruments, allows the Company an
irrevocable option for measurement of eligible financial assets
or financial liabilities at fair value on an instrument by
instrument basis (the fair value option). Subsequent to the
initial adoption of ASC Topic 825, the Company may elect to
account for eligible financial assets and financial liabilities
at fair value. Such an election may be made at the time an
eligible financial asset, financial liability or firm commitment
is recognized or when certain specified reconsideration events
occur. The Company has not elected the fair value option for any
eligible financial instrument as of December 31, 2010.
68
Investment
Securities
The Company determines the classification of investment
securities at the time of purchase. If the Company has the
intent and the ability at the time of purchase to hold
securities until maturity, they are classified as
held-to-maturity.
Investment securities
held-to-maturity
are stated at amortized cost. Securities to be held for
indefinite periods of time, but not necessarily to be
held-to-maturity
or on a long-term basis, are classified as available for sale
and carried at estimated fair value with unrealized gains or
losses reported as a separate component of stockholders
equity in accumulated other comprehensive loss, net of
applicable income taxes. Interest income and dividends on
securities are recognized in interest income on an accrual
basis. Premiums and discounts on debt securities are amortized
as an adjustment to interest income over the period to maturity
or call of the related security using the effective interest
method. Realized gains or losses on the sale of securities, if
any, are determined using the specific identification method.
If a decline in the fair value of a security below its amortized
cost is judged by management to be other than temporary, the
cost basis of the security is written down to its fair value and
the amount of the write-down is included in earnings. In order
to determine if a decline in fair value is other than temporary,
management considers several factors, including the length of
time and extent to which the fair value has been less than the
amortized cost basis, the financial condition and near-term
prospects of the security (considering factors such as adverse
conditions specific to the security and ratings agency actions)
and the intent and ability to retain the investment in order to
allow for an anticipated recovery in fair value. If the
impairment is not other than temporary, the portion of the
impairment related to credit losses is recorded in earnings and
the impairment related to other factors is recorded in other
comprehensive income.
Investments in Federal Home Loan Bank (FHLB) and other bank
stock are carried at cost because they can only be redeemed at
par and are required investments based on measurements of the
Companys assets
and/or
borrowing levels. Investments are held to provide liquidity and
to serve as a source of income.
Loans
Receivable
The Companys accounting methods for loans differ depending
on whether the loans are originated or purchased, and for
purchased loans, whether the loans were acquired as a result of
a business acquisition or purchased at a discount as a result of
credit deterioration since the date of origination.
Originated
Loans
Loans that management has the intent and ability to hold for the
foreseeable future are reported at their outstanding principal
balances net of any unearned income, charge-offs, unamortized
fees and costs on originated loans and unamortized premiums or
discounts. The net amount of nonrefundable loan origination fees
and certain direct costs associated with the lending process are
deferred and amortized to interest income over the contractual
lives of the loans using methods which approximate the level
yield method. Discounts and premiums are amortized or accreted
to interest income over the estimated life of the loans using
methods that approximate the level yield method. Commercial
loans and substantially all installment loans accrue interest on
the unpaid balance of the loans.
The Company classifies loans as past due when the payment of
principal and interest based upon contractual terms is greater
than 30 days delinquent. In cases where a borrower
experiences financial difficulties and the Company may make
certain concessionary modifications to contractual terms, the
loan is classified as a restructured loan. Modifications are
intended to minimize the economic loss and to avoid foreclosure
or repossession of
69
collateral. The allowance for credit losses on restructured
loans is determined by discounting the restructured cash flows
by the original effective rate of the loan.
The Companys policies related to when loans are placed on
nonaccrual status conform to guidelines prescribed by regulatory
authorities. Loans are placed on nonaccrual status when it is
probable that principal or interest is not fully collectible, or
generally when principal or interest becomes 90 days past
due, whichever occurs first. Certain loans past due 90 days
or more may remain on accrual status if management determines
that it does not have concern over the collectability of
principal and interest because the loan is adequately
collateralized and in the process of collection. When loans are
placed on nonaccrual status, interest receivable is reversed
against interest income in the current period. Interest payments
received thereafter are applied as a reduction to the remaining
principal balance unless management believes that the ultimate
collection of the principal is likely, in which case payments
are recognized in earnings on a cash basis. Loans and leases are
removed from nonaccrual status when they become current as to
both principal and interest and concern no longer exists as to
the collectability of principal and interest.
Generally, a nonaccrual loan that is restructured remains on
nonaccrual for a period of six months to demonstrate the
borrower can meet the restructured terms. However, performance
prior to the restructuring, or significant events that coincide
with the restructuring, are considered in assessing whether the
borrower can meet the new terms and may result in the loan being
returned to accrual status after a shorter performance period.
If the borrowers ability to meet the revised payment
schedule is not reasonably assured, the loan remains classified
as a nonaccrual loan.
Purchased
Loans
Loans acquired in a business combination are recorded at their
fair value at the acquisition date. Credit discounts are
included in the determination of fair value; therefore, an
allowance for loan losses is not recorded at the acquisition
date. The Company aggregates purchased loans into pools of loans
with common characteristics in order to determine fair value on
acquisition date. The Company reviews each loan at acquisition
to determine if it should be accounted for as a loan that has
experienced credit deterioration and it is probable that at
acquisition, the Company will not be able to collect all the
contractual principal and interest due from the borrower. The
Company considers all loans acquired via FDIC assisted
transactions to meet the criteria of loans acquired with
evidence of impairment, unless the loan type is specifically
excluded from the scope of
ASC 310-30
Loans and Debt Securities acquired with deteriorated credit
quality. This policy is based on the following general
themes surrounding an FDIC assisted transaction: there is a high
degree of uncertainty surrounding the quality of underwriting of
the failed institutions that made the original loan, management
of the Company has limited due diligence time prior to deal
execution and in many instances loans were made in geographical
areas that have experienced significant economic hardships as
well as significant deterioration in collateral values. Loans
acquired with evidence of impairment are classified as Purchased
Credit Impaired, or PCI, loans.
The Company makes an estimate of the loans contractual
principal and contractual interest payments as well as the total
cash flows it expects to collect from the pools of loans, which
include undiscounted expected principal and interest. The excess
of contractual amounts over the total cash flows expected to be
collected from the loans is referred to as non-accretable
difference, which is not accreted into income. The excess of the
expected undiscounted cash flows over the fair value of the
loans is referred to as accretable discount. Accretable discount
is recognized as interest income on a level-yield basis over the
life of the loans. Judgmental prepayment assumptions are applied
to both contractually required payments and cash flows expected
to be collected at acquisition.
70
The Company continues to estimate cash flows expected to be
collected over the life of the loans. Subsequent increases in
total cash flows expected to be collected are recognized as an
adjustment to the accretable discount with the amount of
periodic accretion adjusted over the remaining life of the
loans. Subsequent decreases in cash flows expected to be
collected over the life of the loans are recognized as
impairment in the current period through the allowance for loan
losses.
Allowance for
Loan Losses
The Companys allowance for loan losses (ALL) is
established for both performing loans and non-performing loans.
The Companys ALL is the amount considered adequate to
absorb probable losses within the portfolio based on
managements evaluation of the size and current risk
characteristics of the loan portfolio. Such evaluation considers
numerous factors including, but not limited to, internal risk
ratings, loss forecasts, collateral values, geographic location,
borrower FICO scores, delinquency rates, non-performing and
restructured loans, origination channels, product mix,
underwriting practices, industry conditions, economic trends and
net charge-off trends.
For PCI loans, a valuation allowance is established when it is
probable that the Company will be unable to collect all of the
cash flows expected at acquisition plus additional cash flows
expected to be collected arising from changes in estimate after
acquisition. A specific allowance is established when subsequent
evaluations of expected cash flows from PCI loans reflect a
decrease in those estimates. For all other loans, specific
allowances for loan losses are established for large commercial,
corporate and commercial real estate impaired loans that are
evaluated on an individual basis. The specific allowance
established for these loans is based on a thorough analysis of
the most probable source of repayment, including the present
value of the loans expected future cash flows, the
loans estimated market value or the estimated fair value
of the underlying collateral less costs of disposition.
General allowances are established for loans grouped based on
similar characteristics. In this process, general allowance
factors established are based on an analysis of historical loss
trends in the industry and expected loss given default rates
derived from the Companys internal risk rating process.
Other adjustments for qualitative factors may be made to the
allowance for the pools after an assessment of internal and
external influences on credit quality and loss severity that are
not fully reflected in the historical loss or risk rating data.
For these measurements, the Company uses assumptions and
methodologies that are relevant to estimating the level of
impairment and probable losses in the loan portfolio. To the
extent that the data supporting such assumptions has
limitations, managements judgment and experience play a
key role in recording the allowance estimates.
Additions to the ALL are made by provisions charged to earnings.
The allowance is decreased by charge-offs due to losses and
increased by recoveries. Losses on unsecured consumer loans are
recognized at 90 days past due. Residential real estate
loans and secured consumer loans are typically charged-off when
they become 120 to 180 days past due, depending on the
collateral type. Secured loans may be written-down to the
collaterals fair value less estimated disposition costs,
with previously accrued unpaid interest reversed. Subsequent
charge-offs may be required as a result of changes in the fair
value of collateral or other repayment prospects. The Company
reports recoveries on a cash basis at the time received.
Recoveries on loans that have been previously charged-off
through a reduction of the non-accretable difference are
recognized in earnings as income from resolution of troubled
assets and do not affect the allowance for loan losses.
71
Loss-share
Indemnification Asset
The loss-share indemnification asset is measured separately from
the covered assets acquired as it is not contractually embedded
in any of the covered assets. The fair value of the loss-share
indemnification asset represents the present value of the
estimated cash payments expected to be received from the FDIC
for future losses on covered assets, based on the credit
adjustment estimated for each covered asset and the loss sharing
percentages. These cash flows were then discounted using a
risk-free yield curve plus a premium reflecting the uncertainty
related to the timing and receipt of such cash flows. The amount
ultimately collected for this asset is dependent upon the
performance of the underlying covered assets, the passage of
time and claims submitted to the FDIC.
The loss-share indemnification asset will be reduced as claims
submissions are filed with the FDIC and collected. Decreases in
expected reimbursements from the FDIC resulting from an
improvement in the expected cash flows of covered loans are
recognized in earnings prospectively consistent with the
approach taken to recognize increases in cash flows on covered
loans. Increases in expected reimbursements from the FDIC are
recognized in earnings in the same period that the allowance for
credit losses for the related loans is recognized. Furthermore,
the resolution of covered assets for a value in excess of the
estimated value of the asset will result in a decrease of the
loss-share indemnification asset equal to the loss-share
percentage of the loss not incurred. Conversely, losses in
excess of estimates at the time of the loss will result in an
increase in the loss-share indemnification asset.
The loss sharing agreements with the FDIC contain provisions
under which the Bank will be reimbursed for a portion of certain
expenses associated with covered assets. The Bank recognizes an
increase to the loss-share indemnification asset through a
credit to non interest income related to the loss-share
percentage of expenses incurred. The loss sharing agreements
also contain a potential obligation to remit a portion of the
cash received from the FDIC during the Acquisitions. The amount
payable to the FDIC is based on an established formula included
in the various Purchase and Assumption Agreements. The Bank has
recognized in other liabilities an estimate, representing
managements projections on the expected amount that will
be payable to the FDIC. That liability is recognized using a
discounted cash flow model at a market rate, inclusive of the
Banks credit risk.
OREO
Real estate properties acquired through, or in lieu of,
foreclosure or in connection with the Acquisitions, are to be
sold or rented and are recorded at the fair value less
disposition costs at the date of acquisition, establishing a new
cost basis. OREO is subsequently carried at the lesser of cost
or fair value less disposition costs. The Company periodically
performs a valuation of the property held; any excess of cost
over fair value less disposition costs is charged to earnings as
impairment. Routine maintenance costs, declines in market value
and net losses on disposal are included in earnings for the
period.
Recent
Accounting Pronouncements
During April 2011, the FASB issued Accounting Standards Update
(ASU)
2011-02, A
Creditors Determination of Whether a Restructuring Is a
Troubled Debt Restructuring, the ASU requires a creditor to
evaluate whether a restructuring constitutes a troubled debt
restructuring, by separately concluding that both (1) the
restructuring constitutes a concession and (2) the debtor
is experiencing financial difficulties. The update is effective
for the Company for annual periods ending on or after
December 15, 2012, including interim periods within those
annual periods.
In December 2010, the FASB issued guidance to provide further
clarification regarding the acquisition date that should be used
for reporting the pro forma financial information
72
disclosures when comparative financial statements are presented.
This statement also requires entities to provide a description
of the nature and amount of material, non-recurring pro forma
adjustments that are directly attributable to the business
combination. This statement is effective prospectively for
business combinations occurring after December 31, 2010.
The impact of this statement will depend on the nature and
timing of any potential future business combinations.
In July 2010, the FASB issued new guidance to improve
transparency about an entitys allowance for credit losses
and the credit quality of its financing receivables. The update
is intended to provide additional information to assist
financial statement users in assessing an entitys credit
risk exposures and evaluating the adequacy of their allowance
for credit losses. This guidance is effective for the first
annual reporting year ending after December 15, 2010. The
adoption of this guidance did not have a significant impact on
the financial position of the Company.
In March 2010, the FASB issued new guidance impacting
receivables. The new guidance clarifies that a modification to a
loan that is part of a pool of loans that were acquired with
deteriorated credit quality should not result in the removal of
the loan from the pool. This guidance is effective for any
modifications of loans accounted for within a pool in the first
annual reporting period ending after July 15, 2010. The
adoption of this guidance did not have a material impact on the
Companys financial position, results of operations or cash
flows.
In January 2010, the FASB issued new guidance to improve
disclosures regarding fair value measurements and disclosures.
Fair value measurements and disclosures were enhanced to require
additional information regarding transfers to and from
Level 1 and Level 2, the reasons for the transfers and
a gross presentation of activity within the roll-forward of
Level 3. The guidance clarifies existing disclosure
requirements on the level of disaggregation of classes of assets
and liabilities. In addition, enhanced disclosure is required
concerning inputs and valuation techniques used to determine
Level 2 and Level 3 measurements. This guidance is
generally effective for interim and annual reporting periods
beginning after December 15, 2009; however, requirements to
separately disclose purchases, sales, issuances and settlements
in the Level 3 reconciliation are effective for fiscal
years beginning after December 15, 2010. The adoption of
this guidance did not have a material impact on our financial
position, results of operations or cash flows.
Significant
Accounting Estimates
The Notes to Consolidated Financial Statements contain a summary
of our significant accounting policies, including discussions on
recently issued accounting pronouncements, our adoption of them
and the related impact of their adoption. We believe that
certain of these policies, along with various estimates that we
are required to make in recording our financial transactions,
are important to have a complete picture of our financial
position. In addition, these estimates require us to make
complex and subjective judgments, many of which include matters
with a high degree of uncertainty. The following is a discussion
of these significant estimates. Additional information about
these policies can be found in Note 1 of the Consolidated
Financial Statements. See Risk Factors beginning on
page 11 for a discussion of information that should be
considered in connection with an investment in our securities.
Our financial reporting and accounting policies conform to GAAP.
The preparation of financial statements in conformity with GAAP
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.
73
Material estimates subject to change include the carrying value
of loans, the allowance for loan losses, the carrying value of
the loss share indemnification asset, the carrying value of
other real estate owned, the carrying value of intangible
assets, contingent consideration liability, the determination of
fair value for financial instruments, acquisition-related fair
value computations and their impact in earnings and the
realization of deferred tax assets.
Capital
Resources
To date, stockholders equity has been influenced primarily
by equity capital raised during 2009 and 2010, and to a lesser
extent, earnings and changes in the unrealized gains, net of
taxes, on investment securities available for sale.
Stockholders equity increased $308.2 million, or
73.4%, mainly driven by the capital raise of $285.8 million
executed during 2010, retention of earnings and increase in
unrealized losses on available for sale investment securities.
Pursuant to the Federal Deposit Insurance Corporation
Improvement Act, or FDICIA, the OCC and FDIC have adopted
regulations setting forth a five-tier system for measuring the
capital adequacy of the financial institutions they supervise.
As of December 31, 2010, we had capital levels that
exceeded the well-capitalized guidelines. In addition, the
operating agreement of the Bank entered into by the Bank at the
time of the initial acquisition requires the Bank to maintain
minimum capital ratios. The following table shows the required
capital ratios of the Bank under the operating agreement and the
Banks actual regulatory capital ratios for the period
presented.
|
|
|
|
|
|
|
|
|
|
|
Ratios Required
|
|
|
|
|
Under Operating
|
|
Bank as of
|
|
|
Agreement
|
|
December 31, 2010
|
|
Tier 1 leverage ratio
|
|
|
10.0
|
%
|
|
|
13.5
|
%
|
Tier 1 risk-based capital ratio
|
|
|
11.0
|
%
|
|
|
51.2
|
%
|
Total risk-based capital ratio
|
|
|
12.0
|
%
|
|
|
52.5
|
%
|
As of December 31, 2010, the Companys Tier 1
leverage ratio was 29.4%, its Tier 1 risk-based capital
ratio was 104.1% and its total risk-based capital ratio was
105.4%.
Liquidity and
Liability Management
Liquidity involves our ability to raise funds to support asset
growth or reduce assets to meet deposit withdrawals and other
borrowing needs, to maintain reserve requirements and to
otherwise operate the Company on an ongoing basis. The
Banks liquidity needs are primarily met by its cash
position, growth in core deposits, cash flow from its amortizing
investment and loan portfolios, and reimbursements under the
loss sharing agreements. For additional information regarding
our operating, investing, and financing cash flows, see
Consolidated Financial StatementsConsolidated
Statements of Cash Flows.
If necessary, the Bank has the ability to raise liquidity. The
Bank has access to additional borrowing through secured FHLB
advances, unsecured borrowing lines from correspondent banks,
and a repurchase agreement. In addition, subsequent to
December 31, 2010, the Bank established a borrowing line at
the Federal Reserve Bank. Our asset/liability policy has
established several measures of liquidity, including liquid
assets (defined as cash and cash
74
equivalents, and pledgeable securities) to total assets. The
following table summarizes our liquidity ratios as of
December 31, 2010.
|
|
|
|
|
|
|
|
|
Ratio
|
|
Policy Limit
|
|
|
Actual
|
|
|
Primary Liquidity Ratio Net
|
|
|
> = 10
|
%
|
|
|
52
|
%
|
Short-Term Non-Core Funding Dependence
|
|
|
< = 20
|
%
|
|
|
0
|
%
|
Net Loans to Deposits
|
|
|
< = 90
|
%
|
|
|
27
|
%
|
Pledged Securities to Total Investments
|
|
|
< = 50
|
%
|
|
|
23
|
%
|
Net Loans to Assets
|
|
|
< = 80
|
%
|
|
|
21
|
%
|
Brokered Deposits to Total Deposits
|
|
|
< = 10
|
%
|
|
|
0
|
%
|
Fed Funds Purchased as % of Assets
|
|
|
< = 10
|
%
|
|
|
0
|
%
|
CDs >100M as a % of Assets
|
|
|
< = 20
|
%
|
|
|
20
|
%
|
FHLB borrowings and Repurchase Agreements as % of Assets
|
|
|
< = 30
|
%
|
|
|
7
|
%
|
As of December 31, 2010, the Banks FHLB advances
totaled $175.3 million with additional credit capacity of
$446.8 million. The Bank has additional correspondent bank
borrowing capacity of $55.0 million (unsecured) and a
repurchase agreement (secured); no amounts have been drawn
against these facilities and no additional collateral has been
pledged.
As a holding company, we are a corporation separate and apart
from our subsidiary, the Bank, and therefore, we provide for our
own liquidity. Our main sources of funding include operating
cash available, management fees and dividends paid by our
subsidiaries when applicable, and access to capital markets.
There are regulatory limitations that affect the ability of the
Bank to pay dividends to us. See Dividend Policy and
Supervision and RegulationRegulatory Limits on
Dividends and Distributions. Management believes that such
limitations will not impact our ability to meet our ongoing
short-term cash obligations.
We expect that after consummation of the offering, our cash and
liquidity requirements will be generated by operations,
including reimbursements under the loss sharing agreements, and
proceeds from our capital raises, including the offering, and we
intend to satisfy our capital requirements over the next
12 months through these sources of liquidity.
Off Balance Sheet
and Other Financing Arrangements
We have limited off-balance sheet arrangements that have not or
are not reasonably likely to have a current or future material
effect on our financial condition, revenues, expenses, results
of operations, liquidity, capital expenditures or capital
resources.
In the normal course of business, we enter into various
transactions, which, in accordance with GAAP, are not included
in our consolidated balance sheets. We enter into these
transactions to meet the financing needs of our customers. These
transactions include commitments to extend credit and standby
letters of credit, which involve, to varying degrees, elements
of credit risk and interest rate risk in excess of the amounts
recognized in its consolidated balance sheets.
We enter into contractual loan commitments to extend credit,
normally with fixed expiration dates or termination clauses, at
specified rates and for specific purposes. Substantially all of
our commitments to extend credit are contingent upon customers
maintaining specific credit standards until the time of loan
funding. We decrease our exposure to loss under these
commitments by subjecting them to credit approval and monitoring
procedures. We assess the credit risk associated with certain
commitments to extend credit and establish a liability for
probable credit losses.
Standby letters of credit are written conditional commitments
issued by us to guarantee the performance of a customer to a
third party. In the event the customer does not perform in
accordance with the terms of the agreement with the third party,
we would be required to fund
75
the commitment. The maximum potential amount of future payments
we could be required to make is represented by the contractual
amount of the commitment. If the commitment is funded, we would
be entitled to seek recovery from the customer. Our policies
generally require that standby letter of credit arrangements
contain security and debt covenants similar to those contained
in loan agreements.
The following table summarizes commitments as of
December 31, 2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered
|
|
|
Not Covered
|
|
|
Total
|
|
|
Commitments to fund loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
2,434
|
|
|
$
|
|
|
|
$
|
2,434
|
|
Commercial and commercial real estate
|
|
|
1,206
|
|
|
|
492
|
|
|
|
1,698
|
|
Construction
|
|
|
234
|
|
|
|
|
|
|
|
234
|
|
Unfunded commitments under lines of credit
|
|
|
19,636
|
|
|
|
4,855
|
|
|
|
24,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments to fund loans
|
|
|
23,510
|
|
|
|
5,347
|
|
|
|
28,857
|
|
Commercial and standby letters of credit
|
|
|
|
|
|
|
6,628
|
|
|
|
6,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,510
|
|
|
$
|
11,975
|
|
|
$
|
35,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
Obligations
The following table summarizes aggregated information about our
outstanding contractual obligations and other long-term
liabilities as of December 31, 2010 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
More than
|
|
|
|
Total
|
|
|
Less than 1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
Advances from the FHLB
|
|
$
|
175,316
|
|
|
$
|
40,000
|
|
|
$
|
115,316
|
|
|
$
|
20,000
|
|
|
$
|
|
|
Operating Lease Obligations
|
|
|
11,151
|
|
|
|
1,453
|
|
|
|
2,203
|
|
|
|
1,525
|
|
|
|
5,970
|
|
Estimated clawback liability to the FDIC associated with loss
sharing agreements
|
|
|
9,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
195,720
|
|
|
$
|
41,453
|
|
|
$
|
117,519
|
|
|
$
|
21,525
|
|
|
$
|
15,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate
Sensitivity
The principal component of our risk of loss arising from adverse
changes in the fair value of financial instruments, or market
risk, is interest rate risk. The primary objective of our
asset/liability management activities is to maximize net
interest income, while maintaining acceptable levels of interest
rate risk. Our Asset Liability Committee, or ALCO, is
responsible for establishing policies to limit exposure to
interest rate risk, and to ensure procedures are established to
monitor compliance with these policies. The guidelines
established by ALCO are reviewed and approved by our Board of
Directors. However, assets and liabilities with similar
repricing characteristics may not reprice at the same time or to
the same degree.
Consistent with industry practices, we primarily measure
interest rate risk by utilizing the concept of Economic Value of
Equity, or EVE. EVE is the intrinsic value of assets, less the
intrinsic value of liabilities. EVE analysis provides a fair
value of the balance sheet in alternative interest rate
scenarios. The EVE does not take into account management
intervention and assumes the new rate environment is constant
and the change is instantaneous. Further, as this framework
evaluates risks to the current balance sheet only, changes to
the volumes and pricing of new business opportunities that can
be expected in the different interest rate outcomes are not
incorporated in this analytical framework. In addition,
76
we further evaluate and consider the impact of other business
factors in a separate income simulation analysis, which is
designed to capture not only the potential of all assets and
liabilities to mature or reprice, but also the probability that
they will do so. Income simulation also attends to the relative
interest rate sensitivities of these items, and projects their
behavior over an extended period of time. Finally, income
simulation permits management to access the probable effects on
the balance sheet not only of changes in interest rates, but
also of proposed strategies for responding to them. We use a
third party proprietary income simulation model to evaluate our
interest rate risk.
Management continually reviews and refines its interest rate
risk management process in response to the changing economic
climate. Currently, our model projects a minus 100, plus 100,
plus 200 and plus 300 basis point change as well as
modified scenarios to evaluate our interest rate sensitivity and
to determine whether specific action is needed to improve the
current structure, either through economic hedges and matching
strategies or by utilizing derivative instruments. Our ALCO
policy has established specific limits for changes to net
interest income and to the capital based on the aforementioned
models as follows:
|
|
|
|
|
|
|
|
|
|
|
Loss in Income per
|
|
|
For an Interest Rate
|
|
the Simulation Model
|
|
Loss to Equity in EVE
|
Shock of
|
|
is not to Exceed
|
|
is not to Exceed
|
|
-100 bps
|
|
|
5.0
|
%
|
|
|
10.0
|
%
|
+100 bps
|
|
|
5.0
|
%
|
|
|
10.0
|
%
|
+200 bps
|
|
|
10.0
|
%
|
|
|
20.0
|
%
|
+300 bps
|
|
|
15.0
|
%
|
|
|
30.0
|
%
|
In the event the model indicates an unacceptable level of risk,
based on current circumstances and events, we could undertake a
number of actions that would reduce this risk, including the
sale of a portion of our available for sale investment portfolio
or the use of risk management strategies such as interest rate
swaps and caps. As of December 31, 2010, we were in
compliance with all of our limits except the minus 100 bps
shock. Management believes that the likelihood of this scenario
occurring is remote and does not consider that at this point a
change of its current portfolio is deemed necessary. The
remaining forecasts are within an acceptable level of interest
rate risk per the policies established by ALCO.
Many assumptions were used by the Company to calculate the
impact of changes in interest rates, including the change in
rates. Actual results may not be similar to those derived from
our model due to several factors including the timing and
frequency of rate changes, market conditions and the shape of
the yield curve. Actual results may also differ due to our
actions, if any, in response to the changing rates and other
changes in our business.
77
BUSINESS
Our
Company
We are a bank holding company with one wholly-owned national
bank subsidiary, Premier American Bank, National Association
(whose name will be changed to Florida Community Bank, National
Association, which name change is anticipated to occur in July
2011), headquartered in Miami, Florida. The Bank currently
operates 39 full-service retail bank branches in Florida under
three trade names: Premier American Bank, National Association,
Florida Community Bank (a division of Premier American Bank,
N.A.) and Sunshine State Community Bank (a division of Premier
American Bank, N.A.). We were formed in April 2009 with the goal
of building a leading regional banking franchise. Since that
time, we have raised an aggregate of approximately
$740 million of equity capital and acquired certain of the
assets and assumed certain liabilities (including substantially
all deposits) of seven failed banks in Florida from the FDIC,
including three acquisitions in 2010 and four acquisitions in
2011. Since our first acquisition, our operational focus has
been on the stabilization of our deposit base and on the
workout, collection and sale of loan and real estate assets
acquired in the Acquisitions. We intend to continue our
acquisition strategy by selectively identifying, acquiring and
integrating depository institutions through traditional
privately negotiated failed bank acquisitions with the FDIC. In
addition, we may acquire deposits and branches which we believe
present attractive risk-adjusted returns or provide a strategic
benefit to our growth strategy. As of December 31, 2010, we
had total stockholders equity of approximately
$728.7 million. As of May 10, 2011, we had completed
three of the Acquisitions and we held consolidated assets of
approximately $3.1 billion and customer deposits of
approximately $2.1 billion.
We offer a comprehensive range of traditional banking products
and services to individuals, small and medium sized businesses,
and other local organizations and entities in our market areas.
Our target commercial customers engage in a wide variety of
industries including healthcare and professional services,
retail and wholesale trade, tourism, agricultural services,
farming, fuel distribution, technology, automotive, building
materials and commercial real estate. Our primary market extends
from Naples to Sarasota, and further to Brooksville on the west
coast of Florida, from Miami to Daytona Beach on the east coast
of Florida and Orlando in central Florida. Over time, we expect
to expand our branch network in Florida and may look to expand
to other areas in the Southeastern United States through
FDIC-assisted bank acquisition transactions, traditional bank
acquisitions without FDIC assistance, and through selective
acquisitions of assets, deposits and branches.
Since our first acquisition, our operational focus has been on
the stabilization of our deposit base and on the workout,
collection, and sale of loan and real estate assets acquired in
our acquisitions of the Old Banks. All of the Covered Assets
(loan portfolios and OREO) acquired from six of the seven
acquisitions are covered under loss sharing arrangements with
the FDIC. The FDIC bears a substantial portion of any risk of
loss on Covered Assets. As of December 31, 2010, the
Covered Assets of our three then completed Acquisitions had an
aggregate book value of $529.9 million and a total UPB of
$692.7 million. In addition, we have integrated the
operations of Old Premier, Old FCB and Old Peninsula and
completed the conversion of their core operating systems onto a
common operating platform. The operational integration of Old
Sunshine, acquired in February 2011, onto our core operating
system is scheduled to occur in July 2011. The operational
integration of Old FNBCF and Old Cortez, acquired in April 2011,
and Old Coastal, acquired in May 2011, onto our core operating
78
system is anticipated to occur later in 2011. With respect to
our organic growth, we have substantially built out our
commercial loan origination platform in our strategic Florida
markets and built out our mortgage loan origination platform. We
have also begun to originate mortgage loans, repositioned our
community banking platform, implemented our treasury services,
begun originating commercial loans, and continued to otherwise
position the Bank for future growth.
Our Market
Areas
Our current market extends from Naples to Sarasota, and further
to Brooksville on the west coast of Florida, from Miami to
Daytona Beach on the east coast of Florida and Orlando in
central Florida. According to estimates from SNL Financial, as
of June 30, 2010, Florida had a total population of
approximately 18.9 million, median household income of
$49,910 and approximately 800,000 active businesses. In
addition, as of such date, in our top three MSAs:
|
|
|
|
|
Miami-Fort Lauderdale-Pompano
Beach-Homestead had a total population of approximately
5.5 million, median household income of $51,835 and
approximately 260,000 active businesses;
|
|
|
|
Orlando-Kissimmee-Sanford had a total population approximately
2.1 million, median household income of $53,598 and
approximately 95,000 active businesses; and
|
|
|
|
Cape Coral-Fort Myers had a total population of
approximately 630,000, median household income of $51,699 and
approximately 30,000 active businesses.
|
Recently, numerous banking institutions in Florida have
experienced severe distress. Many operate under regulatory
orders, are undercapitalized, have elevated levels of
nonperforming loans or have reduced their lending to customers
in our markets. As of April 30, 2011, 49 banks in excess of
approximately $30 billion in combined assets have failed
since 2008 in Florida.
We believe the general dislocation in our markets provides an
opportunity for us to grow market share through additional
acquisitions and organic growth in what we believe are some of
the most attractive markets in the Florida. Over time, we expect
to expand our branch network in Florida and may look to expand
to other areas in the Southeastern United States.
Our Competitive
Strengths
We believe the following are our competitive strengths:
|
|
|
|
|
Experienced and Talented Management
Team. Our senior management team has
substantial experience with regional banking franchises,
including those of North Fork Bancorporation, Bank One, and the
Florida operations of Fifth Third Bank and Wachovia Bank. We
have recruited to the Bank a substantial number of seasoned
commercial bankers, including three banking veterans each with
more than 25 years of experience as senior officers. Over
all, 80 of the approximately 180 professionals at the Bank have
been hired by our senior management team (versus retained from
the Old Banks). In addition, apart from their prior experience,
most of our senior management team has worked together since
late 2009 to successfully identify, execute, and integrate
acquisitions (both FDIC-assisted and unassisted) of banking
businesses in Florida.
|
|
|
|
Extensive Target Evaluation Capabilities and Successful
Acquisition Completion and Integration
Experience. We believe that we have
demonstrated our ability to effectively identify, analyze,
acquire and integrate acquisitions of banking businesses in
Florida. Since January 2010, our senior management team has
engaged in extensive diligence and analysis of a number of
potential acquisition targets and, as described herein, has
successfully acquired seven such institutions on what we believe
were
|
79
|
|
|
|
|
attractive terms. Given this experience, as well as their
experience working with regulators, we believe our senior
management team is well positioned to execute on our strategy of
acquiring and consolidating banking platforms in our market
areas in conjunction with pursuing organic lending opportunities.
|
|
|
|
|
|
Seasoned Loan Workout Team. As we
continue to grow, we expect that the collection/workout of
acquired loans will continue to be a significant source of
income and. We have assembled a management team with extensive
experience evaluating nonperforming assets and the subsequent
workout of those assets. Since our first acquisition in January
2010, we have hired 17 employees, including five
experienced senior loan workout officers, each with significant
asset workout experience in our relevant markets to assist with
the workout of the legacy loan portfolios and real
estate acquired in the Acquisitions. This group now consists of
34 full time employees with responsibility for the ongoing
credit management and strategic workout of acquired loan
portfolios.
|
|
|
|
Full-Service Scalable Banking
Platform. Since our first Acquisition, we
have invested in our infrastructure and technology to create an
efficient, scalable platform to support future growth, support
our risk management activities and enhance lending and fee
income opportunities through a full suite of traditional banking
products and services. We believe that our 39-branch network,
operating structure and scalable technology platform will enable
us to grow as expansion opportunities, including acquisition
opportunities, arise while also maintaining expense and credit
discipline.
|
|
|
|
Robust Commercial Business Platform. We
have substantially built out our commercial banking in our
strategic Florida markets, and we have repositioned our
community banking platform and implemented our new treasury
services. All of those efforts are now substantially complete,
and we have begun originating commercial loans, with
approximately $150 million of such loans closed in the
first quarter of 2011. We have staffed our credit origination
team with six senior commercial underwriters recruited from
large regional and national banking platforms, each of which
possesses proven commercial and industrial expertise
underwriting middle market and corporate banking clients
throughout the state of Florida, and intend to hire senior
credit personnel in all of our key Florida markets that intend
to hire over the next several months, to support our organic
loan growth.
|
|
|
|
Strong Capital Position. We believe
our strong capital position affords us the opportunity to pursue
our growth strategy. As of December 31, 2010, our Tier 1
leverage ratio was 29.4%, our Tier 1 risk-based capital ratio
was 104.1%, our Total risk-based capital ratio was 105.4% and
our tangible common equity ratio was 29.5%. As of December 31,
2010, the Banks Tier 1 leverage ratio was 13.5%, Tier 1
risk-based capital ratio was 51.20%, Total risk-based capital
ratio was 52.5% and tangible common equity ratio was 13.6%.
|
|
|
|
Liquidity Position. We believe our
significant cash reserves and liquid securities portfolio
position us well for future growth. As of December 31, 2010, we
held investment securities of approximately $1.6 billion,
primarily in U.S. government agencies and U.S. government
sponsored enterprises obligations. The remaining investment
portfolio is comprised of highly liquid investment-grade
corporate securities.
|
|
|
|
Limited Credit Risk. As of December 31,
2010, in excess of 95% of our loan portfolio was covered by loss
sharing arrangements with the FDIC resulting in limited credit
risk exposure for our Covered Assets. In addition, our credit
team is led by a Chief Credit Officer with more than
20 years of in-market senior credit administration and
wholesale platform leadership experience and is comprised of
commercial bankers with local market knowledge and strong
relationships in their communities. In addition, we have
|
80
|
|
|
|
|
adopted what we believe are conservative credit standards and
disciplined underwriting requirements to maintain proper credit
risk management over assets not covered by our loss sharing
arrangements.
|
Our Growth
Strategies
We intend to build a leading regional banking franchise by
growingboth through acquisitions and
organicallywithin our existing markets, as well as other
attractive markets that may complement our current footprint.
Our primary market extends from Naples to Sarasota, and further
to Brooksville on the west coast of Florida, from Miami to
Daytona Beach on the east coast of Florida and Orlando in
central Florida. Over time, we expect to expand our branch
network in Florida and may look to expand to other areas in the
Southeastern United States. We intend to pursue the following
growth strategies:
|
|
|
|
|
Pursue Acquisition Opportunities. Over
the next several years, we intend to acquire other banking
institutions or their assets and deposits to meet our growth
objectives.
|
|
|
|
Expansion of Commercial Lending
Business. We intend to continue to expand our
commercial lending business through the build out and staffing
of our commercial banking platform. The staffing of the
commercial banking platform includes the hiring of experienced
commercial bankers in each of our metro markets, including five
senior commercial relationship managers; an enhancement of our
community banking platform with an experienced leader in the
industry and hired 12 other community and business bankers in
each of our Florida markets; and the implementation of
full-scale treasury services led by a seasoned treasury services
sales veteran, three treasury services sales officers and a
treasury services implementation and servicing team. There are
now approximately 75 professionals working in our commercial
banking operation to support loan origination, credit and
underwriting, servicing, and risk management functions. We
believe these efforts will help increase our loan origination
and associated revenue and attract new deposits that are focused
on transactional accounts that provide a lower cost of funds.
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Expansion of Residential Mortgage Lending
Business. We continue intend to build out our
residential mortgage loan origination platform. We have hired a
team of an experienced mortgage origination leader, four
mortgage loan originators covering our key markets and a
mortgage loan processing and underwriting staff. We have
contracted with a third-party mortgage origination and servicing
platform to provide the necessary compliance and servicing
functionality for our mortgage business. We may elect to retain
a significant portion of the mortgage loans we originate and
expect to seek to sell these assets to third parties as
opportunities arise. These efforts are designed to increase
mortgage lending revenue as well as expand our existing suite of
services which will attract new deposits.
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Attract and Retain Retail Deposits. The
Bank has developed and deployed a successful branded conversion
strategy, titled Stronger Than Ever, to support
stabilization of our customer and deposit base. Through
December 31, 2010, the Bank has experienced deposit growth
following the acquisition of each of the Old Banks acquired
before that date, which we believe is attributable to
recapturing deposits that may have left during the period
immediately before the related Old Banks closing, as well
as deepening existing relationships and improving our deposit
product mix to a higher percentage of transaction accounts.
Specifically, since such acquisitions, total deposits within
those platforms from the date of each acquisition to
December 31, 2010 have grown % in the
aggregate, net of additional run off of certain CDs and the
addition of our uninvested cash held at the Bank. We intend to
continue pursuing these
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strategies with respect to future acquisitions with the goal of
continuing to attract and retain key customers and core deposits
as we have done in the past.
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Building the Systems and Product Suite Necessary for
a Leading Regional Banking Franchise. We have
integrated and significantly upgraded the core operating systems
previously utilized by Old Premier, Old FCB and Old Peninsula.
The conversion of the core operating systems is scheduled to
occur later in 2011. Our core operating system enables us to
provide a full suite of high quality products and services to
our customers, which include integrated payables and receivables
and
e-banking
services, as well as treasury services such as remote deposit
capture, account lock box services, fraud prevention
capabilities, zero balance accounts, mobile banking and
automatic cash sweeps.
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Acquisitions
We were established with the goal of creating a leading regional
banking franchise initially by participating in and being the
successful bidder in failed bank auctions conducted by the FDIC.
Since January 22, 2010, we have acquired certain assets and
assumed certain liabilities (including substantially all of the
deposits) of a total of seven failed banks. In six of the seven
Acquisitions, we entered into loss sharing agreements with the
FDIC under which the FDIC will bear a substantial portion of the
risk of loss of all of the Covered Assets (loan assets and OREO)
acquired in the Acquisitions. As of December 31, 2010, we
had acquired certain of the assets and assumed certain of the
liabilities of three of the Old Banks, and the acquired Covered
Assets therefrom had an aggregate book value of
$529.9 million. The total UPB of all the covered loans as
of December 31, 2010 was $692.7 million.
2010
Acquisitions
Old
Premier
On January 22, 2010, the Bank assumed substantially all of
the non-brokered deposits and acquired certain assets and
liabilities of Old Premier from the FDIC, as receiver, under the
terms of a purchase and assumption agreement between the Bank
and the FDIC dated January 22, 2010 (the Premier
Agreement). With the acquisition of Old Premier, we gained
an initial presence in South Florida with a four-branch
footprint in Miami-Dade County, consistent with our strategy of
establishing and building a regional banking franchise initially
in the South Florida market.
Terms of the Premier Agreement. Under the
terms of the Premier Agreement, we assumed approximately
$262.8 million of deposits and acquired approximately
$298.3 million of the assets of Old Premier, including
$287.2 million in loans, and $5.9 million of other
real estate with a discount of $112.7 million and
$2.9 million of fair value adjustments, respectively. The
assets acquired also included $30.0 million of cash and
cash equivalents, securities, and other assets, including
$24.8 million in cash received from the FDIC to balance the
assets acquired and liabilities assumed. The FDIC retained
approximately $18.0 million of Old Premiers
liabilities, consisting of brokered CDs and certain subordinated
debt.
In connection with the acquisition, we conducted due diligence
on Old Premiers loan portfolio with a focus on determining
loss expectations on both the largest credits and the worst
performing credits in the Old Premier loan portfolio. We also
reviewed other loans in the portfolio to determine default
frequency and loss severity factors for various asset classes to
determine expected losses on the remainder of the portfolio. We
then forecasted volume, duration and pace of resolution of
nonperforming assets to determine estimated carrying costs and
expenses. We also estimated the cost of administering the
portfolio. Based on this due diligence, we submitted a negative
bid to the FDIC to purchase the assets of Old Premier at a
discount of $60.1 million. We expect both the combination
of the negative bid and the
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reimbursements under the loss sharing agreements (described
below) to be adequate to absorb the probable losses and expenses
relating to Old Premiers loan and other real estate
portfolios, expected carrying costs for the nonperforming assets
and the costs to manage the portfolios. Our judgment as to the
adequacy of our negative bid is based on a number of assumptions
about future events that we believe to be reasonable but which
may not prove to be accurate, and any such inaccuracies may be
material.
Loss Sharing Agreements. In connection
with the acquisition of Old Premier, the Bank entered into two
loss sharing agreements with the FDIC that collectively cover
approximately $293.1 million of the acquired assets,
including 100% of the acquired loans and other real estate. The
first type of loss sharing agreement covers single-family
residential mortgage loans (the Single Family Loss
Agreement) and the second type of loss sharing agreement
covers construction, commercial real estate and commercial and
industrial loans, OREO and other commercial assets (the
Commercial Loss Agreement). These loss sharing
agreements with the FDIC afford the Bank significant protection
against future losses on the acquired loans and OREO.
Under the terms of the loss sharing agreements for Old Premier,
the FDICs obligation to reimburse us for losses with
respect to Covered Assets begins with the first dollar of loss
incurred. The FDIC agreed to assume 80% of losses and share 80%
of loss recoveries on the first $94.0 million of losses on
the acquired loans and OREO, and assume 95% of losses and share
95% of loss recoveries on losses exceeding $94.0 million.
The loss sharing agreements cover losses on single-family
residential mortgage loans for 10 years and all other
losses for five years (eight years for recoveries on
non-residential loans). The reimbursable losses from the FDIC
are based on the book value of the relevant loans as determined
by the FDIC at the date of the transaction. The loss sharing
agreements do not cover new loans made after that date. In
addition to the $115.7 million of fair value discounts on
Covered Assets, at the time of the acquisition, the Bank
recorded an indemnification asset from the FDIC of
$82.5 million, which represented the estimated fair value
of the FDICs portion of the losses that we expected to be
incurred and reimbursed to us as of that date.
Equity Appreciation Agreement. In
connection with the acquisition of Old Premier, we entered into
an equity appreciation agreement with the FDIC pursuant to
which, upon the occurrence of a qualified initial public
offering or a sale of all or substantially all of our assets
(where the aggregate sale price exceeds the aggregate amount of
all the capital invested by our equity holders), the FDIC has
the one time right to receive a payment in cash equal to the
applicable value of 50,000 shares of Class A Common
Stock (subject to certain adjustments for stock splits or other
similar transactions), depending on whether the triggering event
is an initial public offering or sale event. The equity
appreciation agreement further provides that in no event shall
the payment by the Company to the FDIC be less than
$1 million or more than $3.5 million. The FDIC has
sixty days following receipt of written notice from the Company
regarding the occurrence of a triggering event to exercise its
right to receive payment under the equity appreciation
agreement, provided that in no event shall the FDICs right
to receive payment continue beyond January 22, 2020. We
believe that the offering will be a qualified initial public
offering under the equity appreciation agreement.
Old
FCB
Terms. On January 29, 2010, we
assumed substantially all of the non-brokered deposits and
acquired a portion of the assets and liabilities of Old FCB
under the terms of a purchase and assumption agreement between
the Bank and the FDIC dated January 29, 2010, which
agreement is similar to the Premier Agreement. Under the
purchase and assumption agreement for Old FCB, we assumed
approximately $588.4 million of Old FCBs
$788.5 million of deposits and acquired approximately
$525.3 million of Old FCBs $790.0 million in
total assets, including $263.6 million in loans, and
$35.5 million of other real estate with a discount of
$87.4 million and $26.6 million of fair value
adjustments, respectively. The assets acquired
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also included $226.2 million of cash and cash equivalents,
securities, and other assets owned by Old FCB and an additional
$173.4 million in cash received from the FDIC to balance
the assets acquired and liabilities assumed from Old FCB. With
the acquisition of Old FCB, we added 11 branches and established
our initial presence on the west coast of South Florida.
In connection with the acquisition, we conducted due diligence
on Old FCBs loan portfolio similar to the due diligence
conducted in connection with the acquisition of Old Premier.
Based on this due diligence, we submitted a negative bid of
$55.6 million to the FDIC for the acquired assets of Old
FCB. We expect both the combination of the negative bid and the
reimbursements under the loss sharing agreements to be adequate
to absorb the probable losses and expenses relating to Old
FCBs loan and other real estate portfolios, expected
carrying costs for the nonperforming assets and the costs to
manage the portfolios. Our judgment as to the adequacy of our
negative bid is based on a number of assumptions about future
events that we believe to be reasonable but which may not prove
to be accurate, and any such inaccuracies may be material.
Loss Sharing Agreements. The Bank
entered into a Single Family Loss Agreement and Commercial Loss
Agreement with the FDIC on approximately $299.0 million of
Old FCBs assets, including 100% of the acquired loans and
other real estate, similar to the loss sharing agreements
described above in connection with the transaction relating to
Old Premier. The FDIC agreed to assume 80% of losses and share
80% of loss recoveries on the first $141.0 million of
losses on the acquired loans and OREO, and assume 95% of losses
and share 95% of loss recoveries on losses exceeding
$141.0 million. In addition to the $114.0 million of
fair value discounts on loans and OREO, at the time of
acquisition, the Bank recorded an indemnification asset from the
FDIC of $86.5 million, which represented the estimated fair
value of the FDICs portion of the losses that we expected
to be incurred and reimbursed to us as of that date.
Equity Appreciation Agreement. In
connection with the acquisition of Old FCB, we entered into an
equity appreciation agreement with the FDIC pursuant to which,
upon the occurrence of a qualified initial public offering or a
sale of all or substantially all of our assets (where the
aggregate sale price exceeds the aggregate amount of all the
capital invested by our equity holders), the FDIC has the one
time right to receive a payment in cash equal to the applicable
value of 65,000 shares of Class A Common Stock
(subject to certain adjustments for stock splits or other
similar transactions), depending on whether the triggering event
is an initial public offering or sale event. The equity
appreciation agreement further provides that in no event shall
the payment by the Company to the FDIC be less than
$1.3 million or more than $4.6 million. The FDIC has
sixty days following receipt of written notice from the Company
regarding the occurrence of a triggering event to exercise its
right to receive payment under the equity appreciation
agreement, provided that in no event shall the FDICs right
to receive payment continue beyond January 29, 2020. We
believe that the offering will be a qualified initial public
offering under the equity appreciation agreement.
Old
Peninsula
Terms. On June 25, 2010, we
assumed substantially all of the deposits and acquired certain
assets and liabilities of Old Peninsula under the terms of a
purchase and assumption agreement between the Bank and the FDIC
dated June 25, 2010, which agreement is similar to the
Premier Agreement. Under the purchase and assumption agreement
for Old Peninsula, we assumed approximately $604.5 million
of deposits and acquired approximately $622.6 million of
the assets of Old Peninsula, including $392.2 million in
loans, and $37.0 million of other real estate with a
discount of $152.4 million and $23.7 million of fair
value adjustments, respectively. The assets acquired also
included $273.8 million of cash and cash equivalents,
securities, and other assets, including $80.4 million in
cash received from the FDIC to balance the assets acquired and
liabilities assumed. With the acquisition of Old Peninsula, we
further
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grew our regional presence by adding 13 branches to our
footprint on both the east and west coasts of South Florida.
In connection with the acquisition, we conducted due diligence
on Old Peninsulas loan portfolio similar to the due
diligence conducted in connection with earlier acquisitions.
Based on this due diligence, we submitted a negative bid of
$45.3 million to the FDIC for the acquired assets of Old
Peninsula. We expect both the combination of the negative bid
and the reimbursements under the loss sharing agreements to be
adequate to absorb the probable losses and expenses relating to
Old Peninsulas loan and other real estate portfolios,
expected carrying costs for the nonperforming assets and the
costs to manage the portfolios. Our judgment as to the adequacy
of our negative bid is based on a number of assumptions about
future events that we believe to be reasonable but which may not
prove to be accurate, and any such inaccuracies may be material.
Loss Sharing Agreements. The Bank
entered into a Single Family Loss Agreement and Commercial Loss
Agreement with the FDIC on approximately $425.6 million of
Old Peninsulas assets, including 100% of the acquired
loans (with the exception of consumer loans) and other real
estate, similar to the loss sharing agreements described above
in connection with the transaction relating to Old Premier. The
FDIC agreed to assume 80% of losses and share 80% of loss
recoveries on the acquired loans and OREO. In addition to the
$176.1 million of fair value discounts on loans and OREO,
at the time of acquisition, the Bank recorded an indemnification
asset from the FDIC of $135.8 million, which represented
the estimated fair value of the FDICs portion of the
losses that we expected to be incurred and reimbursed to us as
of that date.
Value
Appreciation Instrument Agreement
In connection with the acquisition of Old Peninsula, we entered
into a value appreciation instrument agreement with the FDIC
pursuant to which, upon the occurrence of a qualified public
offering or sale of all or substantially all of our assets
(where the aggregate sale price exceeds the aggregate amount of
all the capital invested by our equity holders), the FDIC has
the right, which right may be exercised in whole or in part, to
receive a payment in cash or in stock in respect of up to
65,000 shares of Class A Common Stock (subject to
certain adjustments for stock splits or other similar
transactions) as follows: (i) if payment in cash is
elected, the payment shall be equal to the product of
(X) the applicable value per share minus $20.00 and
(Y) the number of shares of Class A Common Stock in
respect of which the FDICs right is being exercised; and
(ii) if payment in stock is elected, the payment shall be
the number of shares of Class A Common Stock equal to
(X) the product of (a) the number of shares of
Class A Common Stock in respect of which the FDICs
right is being exercised and (b) the applicable value per
share minus $20.00, divided by (Y) the applicable
value per share.
The term of the agreement ends on the earlier to occur of the
first anniversary of a triggering event or June 25, 2012.
In the event that a triggering event does not occur prior to the
expiration of the term (or if the FDIC does not otherwise fully
exercise its right to receive payment under the agreement), then
upon the expiration of the term we must pay to the FDIC a
cash fee equal to the product of (i) the number of shares
of Class A Common Stock attributable to the unexercised
payment right of the FDIC and (ii) the per share price
equal to (x) the product of (A) the Companys
tangible book value (as defined in the agreement) per common
share as of the most recent quarter prior to the expiration of
the term and (B) the prevailing average price to tangible
book multiple of the components underlying the Nasdaq Bank Index
at such date, (y) minus $20.00. We believe that the
offering will be a qualified public offering under the value
appreciation instrument agreement.
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2011
Acquisitions
Old
Sunshine
Terms. On February 11, 2011, we
assumed substantially all of the deposits and acquired certain
assets and liabilities of Old Sunshine under the terms of a
purchase and assumption agreement between the Bank and the FDIC
dated February 11, 2011, which agreement is similar to the
Premier Agreement. Under the purchase and assumption agreement
for Old Sunshine, we assumed approximately $110.5 million
of deposits and acquired approximately $115.0 million of
the assets of Old Sunshine, including $83.6 million in
loans, and $7.1 million of other real estate with a
discount of $16.4 million and $2.3 million of fair
value adjustments, respectively. The assets acquired also
included $58.5 million of cash and cash equivalents,
securities, and other assets, including $34.2 million in
cash received from the FDIC to balance the assets acquired and
liabilities assumed. With the acquisition of Old Sunshine, we
further grew our regional presence by adding five branches on
the northeast coast of Florida, with one of the branches closed
shortly after the acquisition, to maximize cost efficiency.
Unlike the other six failed bank acquisitions, we did not enter
into loss sharing agreements with the FDIC in connection with
the purchase of Old Sunshines assets. In connection with
the acquisition, we conducted due diligence on Old
Sunshines loan portfolio similar to the due diligence
conducted in connection with earlier acquisitions. Based on this
due diligence, we submitted a negative bid of $31.9 million
to the FDIC for the acquired assets of Old Sunshine. We expect
that the negative bid will be adequate to absorb the probable
losses and expenses relating to Old Sunshines loan and
other real estate portfolios, expected carrying costs for the
nonperforming assets and the costs to manage the portfolios. Our
judgment as to the adequacy of our negative bid, and to acquire
Old Sunshine without FDIC assistance, is based on a number of
assumptions about future events that we believe to be reasonable
but which may not prove to be accurate.
Value
Appreciation Instrument Agreement
In connection with the acquisition of Old Sunshine, we entered
into a value appreciation instrument agreement with the FDIC
pursuant to which, upon the occurrence of a qualified public
offering or sale of all or substantially all of our assets
(where the aggregate sale price exceeds the aggregate amount of
all the capital invested by our equity holders), the FDIC has
the right, which right may be exercised in whole or in part, to
receive a payment in cash or in stock in respect of up to
25,000 shares of Class A Common Stock (subject to
certain adjustments for stock splits or other similar
transactions) as follows: (i) if payment in cash is
elected, the payment shall be equal to the product of
(X) the applicable value per share minus $19.86 and
(Y) the number of shares of Class A Common Stock in
respect of which the FDICs right is being exercised; and
(ii) if payment in stock is elected, the payment shall be
the number of shares of Class A Common Stock equal to
(X) the product of (a) the number of shares of
Class A Common Stock in respect of which the FDICs
right is being exercised and (b) the applicable value per
share minus $19.86, divided by (Y) the applicable
value per share.
The term of the agreement ends on the earlier to occur of the
first anniversary of a triggering event or February 11,
2013. In the event that a triggering event does not occur prior
to the expiration of the term (or if the FDIC does not otherwise
fully exercise its right to receive payment under the
agreement), then upon the expiration of the term we must pay to
the FDIC a cash fee equal to the product of (i) the number
of shares of Class A Common Stock attributable to the
unexercised payment right of the FDIC and (ii) the per
share price equal to (x) the product of (A) the
Companys tangible book value (as defined in the agreement)
per common share as of the most recent quarter prior to the
expiration of the term and (B) the prevailing average price
to tangible book multiple of the components underlying the
Nasdaq
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Bank Index at such date, (y) minus $19.86. We believe that
the offering will be a qualified public offering under the value
appreciation instrument agreement.
Old
FNBCF
Terms. On April 29, 2011, we
assumed substantially all of the deposits and acquired certain
assets and liabilities of Old FNBCF under the terms of a
purchase and assumption agreement between the Bank and the FDIC
dated April 29, 2011, which agreement is similar to the
Premier Agreement. Under the purchase and assumption agreement
for Old FNBCF, we assumed approximately $293.5 million of
Old FNBCFs deposits and acquired approximately
$346.0 million of Old FNBCFs total assets, including
$246.5 million in loans, and $15.5 million of other
real estate. The assets acquired also included
$84.0 million of cash and cash equivalents, securities, and
other assets owned by Old FNBCF. With the acquisition of Old
FNBCF, we added six branches and established our initial
presence in Orlando, Florida.
In connection with the acquisition, we conducted due diligence
on Old FNBCFs loan portfolio similar to the due diligence
conducted in connection with earlier acquisitions. Based on this
due diligence, we submitted a negative bid of $12.6 million
to the FDIC for the acquired assets of Old FNBCF. We expect both
the combination of the negative bid and the reimbursements under
the loss sharing agreements to be adequate to absorb the
probable losses and expenses relating to Old FNBCFs loan
and other real estate portfolios, expected carrying costs for
the nonperforming assets and the costs to manage the portfolios.
Our judgment as to the adequacy of our negative bid is based on
a number of assumptions about future events that we believe to
be reasonable but which may not prove to be accurate, and any
such inaccuracies may be material.
Loss Sharing Agreements. The Bank
entered into a Single Family Loss Agreement and Commercial Loss
Agreement with the FDIC on approximately $246.9 million of
Old FNBCFs assets, including 100% of the acquired loans
(excluding consumer loans) and other real estate, similar to the
loss sharing agreements described above for Old Premier. The
FDIC agreed to assume 80% of losses and share 80% of loss
recoveries on the first $80.0 million of losses on the
acquired loans and OREO, and assume 50% of losses and share 50%
of loss recoveries on losses exceeding $80.0 million.
Management is currently in the process of determining the fair
values associated with the Old FNBCF acquisition. Upon
determination of loan fair values, we expect to establish a
credit risk discount (non-accretable difference), representing
amounts not expected to be collected from the customer nor from
the liquidation of collateral) to cover our estimated losses on
the acquired loans. Nonetheless, to the extent that additional
impairment occurs on these assets, we will recognize a provision
for loan losses related to the probable loss associated with the
impaired pool of loans or specific loan. A loss on covered loans
will result in an increase to the indemnification asset
recognized through a credit to earnings equal to the FDIC share
of the loss under the specific loss sharing agreement covering
the impaired loans.
Value
Appreciation Instrument Agreement
In connection with the acquisition of Old FNBCF, we entered into
a value appreciation instrument agreement with the FDIC pursuant
to which, upon the occurrence of a qualified public offering or
sale of all or substantially all of our assets (where the
aggregate sale price exceeds the aggregate amount of all the
capital invested by our equity holders), the FDIC has the right,
which right may be exercised in whole or in part, to receive a
payment in cash or in stock in respect of up to
100,000 shares of Class A Common Stock (subject to
certain adjustments for stock splits or other similar
transactions) as follows: (i) if payment in cash is
elected, the payment shall be equal to the product of
(X) the applicable value per share minus $19.66 and
(Y) the number of shares of Class A Common Stock in
respect of which the FDICs
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right is being exercised; and (ii) if payment in stock is
elected, the payment shall be the number of shares of
Class A Common Stock equal to (X) the product of
(a) the number of shares of Class A Common Stock in
respect of which the FDICs right is being exercised and
(b) the applicable value per share minus $19.66,
divided by (Y) the applicable value per share.
The term of the agreement ends on the earlier to occur of the
first anniversary of a triggering event or April 29, 2013.
In the event that a triggering event does not occur prior to the
expiration of the term (or if the FDIC does not otherwise fully
exercise its right to receive payment under the agreement), then
upon the expiration of the term we must pay to the FDIC a
cash fee equal to the product of (i) the number of shares
of Class A Common Stock attributable to the unexercised
payment right of the FDIC and (ii) the per share price
equal to (x) the product of (A) the Companys
tangible book value (as defined in the agreement) per common
share as of the most recent quarter prior to the expiration of
the term and (B) the prevailing average price to tangible
book multiple of the components underlying the Nasdaq Bank Index
at such date, (y) minus $19.66. We believe that the
offering will be a qualified public offering under the value
appreciation instrument agreement.
Old
Cortez
Terms. On April 29, 2011, we
assumed substantially all of the deposits and acquired certain
assets and liabilities of Old Cortez under the terms of a
purchase and assumption agreement between the Bank and the FDIC
dated April 29, 2011, which agreement is similar to the
Premier Agreement. Under the purchase and assumption agreement
for Old Cortez, we assumed approximately $59.9 million of
Old Cortezs deposits and acquired approximately
$68.8 million of Old Cortezs total assets, including
$44.1 million in loans, and $4.2 million of other real
estate. The assets acquired also included $20.5 million of
cash and cash equivalents, securities, and other assets owned by
Old Cortez. With the acquisition of Old Cortez, we added two
branches and established our initial presence in Brooksville,
Florida, north of Tampa.
In connection with the acquisition, we conducted due diligence
on Old Cortezs loan portfolio similar to the due diligence
conducted in connection with the earlier acquisitions. Based on
this due diligence, we submitted a negative bid of
$4.5 million to the FDIC for the acquired assets of Old
Cortez. We expect both the combination of the negative bid and
the reimbursements under the loss sharing agreements to be
adequate to absorb the probable losses and expenses relating to
Old Cortezs loan and other real estate portfolios,
expected carrying costs for the nonperforming assets and the
costs to manage the portfolios. Our judgment as to the adequacy
of our negative bid is based on a number of assumptions about
future events that we believe to be reasonable but which may not
prove to be accurate, and any such inaccuracies may be material.
Loss Sharing Agreements. The Bank
entered into a Single Family Loss Share Agreement and Commercial
Loss Share Agreement with the FDIC on approximately
$46.9 million of Old Cortezs assets, including 100%
of the acquired loans (excluding consumer loans) and other real
estate, similar to the loss sharing agreements described above
for Old Premier. The FDIC agreed to assume 80% of losses and
share 80% of loss recoveries on the acquired loans and OREO.
Management is currently in the process of determining the fair
values associated with the Old Cortez acquisition. Upon
determination of loan fair values, we expect to establish a
credit risk discount (non-accretable difference), representing
amounts not expected to be collected from the customer nor from
the liquidation of collateral) to cover our estimated losses on
the acquired loans. Nonetheless, to the extent that additional
impairment occurs on these assets, we will recognize a provision
for loan losses related to the probable loss associated with the
impaired pool of loans or specific loan. A loss on covered loans
will result in an increase to the
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indemnification asset recognized through a credit to earnings
equal to the FDIC share of the loss under the specific loss
sharing agreement covering the impaired loans.
Old
Coastal
Terms. On May 6, 2011, we assumed
substantially all of the deposits and acquired certain assets
and liabilities of Old Coastal under the terms of a purchase and
assumption agreement between the Bank and the FDIC dated
May 6, 2011, which agreement is similar to the Premier
Agreement. Under the purchase and assumption agreement for Old
Coastal, we assumed approximately $122.5 million of Old
Coastals deposits and acquired approximately
$130.5 million of Old Coastals total assets,
including $95.2 million in loans, and $8.8 million of
other real estate. The assets acquired also included
$26.5 million of cash and cash equivalents, securities, and
other assets owned by Old Coastal. With the acquisition of Old
Coastal, we added two branches and established our initial
presence in Cocoa Beach, Florida.
In connection with the acquisition, we conducted due diligence
on Old Coastals loan portfolio similar to the due
diligence conducted in connection with the earlier acquisitions.
Based on this due diligence, we submitted a negative bid of
$5.2 million to the FDIC for the acquired assets of Old
Coastal. We expect both the combination of the negative bid and
the reimbursements under the loss sharing agreements to be
adequate to absorb the probable losses and expenses relating to
Old Coastals loan and other real estate portfolios,
expected carrying costs for the nonperforming assets and the
costs to manage the portfolios. Our judgment as to the adequacy
of our negative bid is based on a number of assumptions about
future events that we believe to be reasonable but which may not
prove to be accurate, and any such inaccuracies may be material.
Loss Sharing Agreements. The Bank
entered into a Single Family Loss Share Agreement and Commercial
Loss Share Agreement with the FDIC on approximately
$103.5 million of Old Coastals assets, including 100%
of the acquired loans, (excluding consumer loans) and other real
estate, similar to the loss sharing agreements described above
for Old Premier. The FDIC agreed to assume 80% of losses and
share 80% of loss recoveries on the first $29.0 million of
losses on the acquired loans and OREO, and assume 50% of losses
and share 50% of loss recoveries on losses exceeding
$29.0 million.
Management is currently in the process of determining the fair
values associated with the Old Cortez acquisition. Upon
determination of loan fair values, we expect to establish a
credit risk discount (non-accretable difference), representing
amounts not expected to be collected from the customer nor from
the liquidation of collateral) to cover our estimated losses on
the acquired loans. Nonetheless, to the extent that additional
impairment occurs on these assets, we will recognize a provision
for loan losses related to the probable loss associated with the
impaired pool of loans or specific loan. A loss on covered loans
will result in an increase to the indemnification asset
recognized through a credit to earnings equal to the FDIC share
of the loss under the specific loss sharing agreement covering
the impaired loans.
Loss Share
Resolution
As described above, we have completed six FDIC-assisted
acquisitions subject to loss share (and one FDIC-assisted
transaction not subject to loss-sharing agreement) that
significantly grew our asset and liability base. As of
December 31, 2010, 98.3% of the carrying costs of our loans
is covered by loss sharing agreements with the FDIC. We did not
enter into any loss sharing agreement with the FDIC in
connection with our acquisition of Old Sunshine. Because of the
loss protection provided by the FDIC, the risks associated with
the loans and foreclosed real estate we acquired in the
FDIC-assisted acquisitions covered by loss sharing agreements
are significantly different from the risks associated with our
loans and foreclosed real estate that are not covered under the
FDIC loss sharing agreements. Where applicable, we
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refer to loans subject to loss sharing agreements with the FDIC
as covered loans and loans that are not subject to
loss sharing agreements with the FDIC as non-covered
loans. As of December 31, 2010, our covered loans
totaled $515.6 million and our non-covered loans totaled
$8.8 million. Given the FDIC loss share protection for our
covered loans, our business model since our initial acquisition
on January 22, 2010 and for the future relies heavily on
our loss share resolution business and on the income generated
from the remediation and disposal of the assets we acquired from
the FDIC, rather than interest earned on loans and other assets.
Both the Commercial Loss Share Agreement and the Single Family
Loss Share Agreement for each of our acquisitions with a loss
sharing arrangement contain specific terms and conditions
regarding the management of the Covered Assets that we must
follow to receive reimbursement on losses from the FDIC. In
general, under the loss sharing agreements, we must:
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manage and administer covered loans and other assets and collect
and effect charge-offs and recoveries in a manner consistent
with our usual and prudent business and banking practices and,
with respect to single family shared-loss loans, customary
servicing procedures;
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exercise our best judgment in managing, administering and
collecting amounts on covered loans and other assets and
effecting charge-offs with respect to covered loans and other
assets;
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use commercially reasonable efforts to maximize recoveries with
respect to losses on single family shared-loss loans and use our
best efforts to maximize collections with respect to shared-loss
assets under the Commercial Loss Share Agreements;
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retain sufficient staff to perform the duties under the loss
sharing agreements;
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adopt and implement accounting, reporting, record-keeping and
similar systems with respect to the Commercial Loss Agreements;
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comply with the terms of the modification guidelines approved by
the FDIC or another federal agency for any single-family
shared-loss loan; and
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file quarterly certificates with the FDIC specifying the amount
of losses, charge-offs and recoveries.
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In addition, under both the Single Family Loss Share Agreements
and Commercial Loss Share Agreements, the FDIC is not required
to make any payments with respect to any charge-off or loss
event that it determines we should not have effected. For
instance, under the Single Family Loss Share Agreements, the
FDIC can deny coverage if it finds we failed to undertake
reasonable and customary loss mitigation efforts in accordance
with the applicable modification guidelines or failed to follow
customary servicing procedures. Under all of the loss sharing
agreements, the FDIC must provide the Bank with notice and an
opportunity to cure any such deficiency. Any unresolved disputes
with the FDIC regarding losses or payments will be subject to
binding arbitration.
To maintain compliance with the terms and conditions of the loss
sharing agreements, we have created a robust workout platform
from several departments to monitor, manage and administer the
different aspects of the loss sharing agreements. See
Credit Policies and ProceduresCredit
Administration/Loss Mitigation on page 92.
The cash payments we expect to receive in the future as a
consequence of the collection, sale or other disposition of
Covered Assets pursuant to the FDIC loss sharing agreements are
reflected on our balance sheet as the FDIC indemnification
asset. The carrying value of the total FDIC indemnification
asset as of December 31, 2010 was $162.6 million which
represents the present value of these expected payments. Through
December 31, 2010, we have filed with the FDIC claims
totaling $161.6 million under the loss sharing agreements.
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Acquired Assets
Not Covered by Loss Sharing Agreements
The Bank also acquired assets in the Acquisitions that are not
covered by the loss sharing agreements with the FDIC, including
loans (in the acquisition of Old Sunshine), cash, certain
investment securities purchased at fair market value (most of
which were subsequently sold and the proceeds of which we used
to acquire investment securities consistent with our investment
strategy) and other tangible assets. In addition, the loss
sharing agreements do not apply to assets acquired, purchased or
originated after the date of the applicable loss sharing
agreement or to investment securities.
Products and
Services
Lending
Activities
General. Our primary lending focus is
to serve consumers, commercial and middle market businesses and
their executives with a variety of financial products and
services, while maintaining strong and disciplined credit
policies and procedures.
We offer a full array of lending products that cater to our
customers needs including commercial loans, small business
loans, residential mortgage loans, commercial real estate loans,
equipment loans, term loans, asset-based loans, letters of
credit and commercial lines of credit.
Commercial
Loans
Commencing in late 2010, we began to build out our commercial
business origination platform in our strategic markets,
right-size our community banking platform, and build out our
treasury services platform. All of those efforts are now
substantially complete, and we have begun originating commercial
loans, closing approximately $150 million of such loans in
the first quarter of 2011. New relationships and loan growth are
expected to be primarily comprised of commercial and industrial
lending and owner-occupied real estate lending to small and
medium sized businesses and middle market companies and building
on existing historical banking relationships with members of the
Banks executive management team, as well as to
professional practices, and other small businesses. We also
intend to be opportunistic with high-quality seasoned
investor-owned real estate using conservative credit
underwriting metrics. We anticipate average credit relationships
to be in the range of $1.0 million to $5.0 million in
the business banking segment; $5.0 million to
$20.0 million in the middle market segment; and
$3.0 million to $15.0 million in the commercial real
estate segment, with some higher loan exposures based on
stronger underwriting metrics and risk profiles. Our disciplined
approach to credit is expected to facilitate a gradual
ramp-up of
loan production in early 2011, which will not reach full
capacity until at least 2012. As a result, our loan origination
forecast increases from 2011 into 2012. We believe our loan
origination growth will come as a result of not only moderate
organic growth in borrowing needs in the markets we serve, but
also from attracting new relationships to the Bank from targeted
prospective clients. We believe that the disintermediation in
the banking industry will provide opportunities for us to
realize organic growth from establishing new banking
relationships with customers that are dissatisfied with their
current banking provider. Our ability to gain market share will
also be dependent on our ability to provide full banking
relationships, and we accordingly expect to continue substantial
investment in treasury services personnel and technology.
In the case of new loan originations, the principal economic
risk associated with each lending category is the
creditworthiness of the borrower and the ability of the borrower
to repay the loan through a combination of cash flow, collateral
conversion and support from outside sources of repayment.
General economic conditions as well as the borrowers
capacity to withstand economic shocks and the strength of
outside sources of repayments, such as recourse to guarantors,
will affect the borrowers ultimate ability to repay. Other
general
91
factors affecting a commercial borrowers ability to repay
include interest rates, inflation and the demand for the
commercial borrowers products and services, as well as
other factors affecting a commercial borrowers customers,
suppliers and employees. Our underwriting standards vary for
each type of loan. In underwriting loans, we seek to minimize
our risks by giving careful consideration to a borrowers
financial history, future operating projections, and various
other considerations impacting the borrowers individual
financial capacity, as well as related industry and geographic
factors. Our underwriting analysis includes credit checks,
reviews of appraisals and environmental hazards and a review of
the borrowers financial condition through various forms of
financial statements and reports. Once a loan is approved and
closed, the Bank seeks to limit risk by analyzing each
borrowers cash flow and collateral value on a regular
basis.
Residential
Real Estate Loans
Commencing in late 2010, we began to establish our residential
mortgage loan origination platform. This build out has included
the hiring of a team consisting of a mortgage origination leader
with more than 30 years of residential lending experience
and four mortgage loan originators covering our key metro
markets and a mortgage loan processing and underwriting staff as
well as building out two other Florida based lending platforms.
We have contracted with a third-party mortgage origination
platform (Circle Mortgage Corporation) that will perform all of
the required compliance, disclosure and standardized
underwriting for each new loan request and a third-party loan
servicer (Bayview Loan Servicing, LLC) to perform the
ongoing loan servicing for both covered loans as well as for
newly originated single family mortgages. Our efforts in the
residential real estate loan program will be to focus on
origination of conforming loans for sale to third-party
purchasers, as well as the underwriting of residential real
estate mortgages for our balance sheet. We expect that the
on-balance sheet mortgages will consist primarily of jumbo
mortgages underwritten conservatively and at conservative
loan-to-values,
primarily as an adjunct to our other lines of business in order
to provide the product to the entrepreneurs and executives of
the companies we will have relationships with our business
banking and commercial banking segments.
Credit
Policies and Procedures
Loan Approval and Procedures. Our
internal credit policies and procedures are designed to minimize
credit risks associated with loans. We have adopted new credit
policies and procedures replacing the previously existing
policies and procedures of the Old Banks. Our loan approval
policies provide for limited levels of delegated management
authority with approval of larger loans requiring multi-level
review and approval and the approval of the Banks Credit
Committee, consisting of six members of senior management. All
new and renewed loan approvals are reviewed in summary by the
Credit Committee. To date, no loans have been made to directors
or executive officers of the Company or the Bank, other than one
residential mortgage loan to an officer in connection with his
relocation to Florida, and no such loans will be made unless the
loan is approved by the Board of Directors of the Bank and is on
terms not more favorable to such person than would be available
to a person not affiliated with the Bank.
Credit Administration/Loss
Mitigation. We have substantially revised the
credit policies of the Old Banks whose assets we acquired, and
have developed and implemented what we believe are conservative
credit standards and disciplined underwriting requirements to
maintain proper credit risk management. Wholesale banking credit
administration is led by a Chief Credit Officer with more than
20 years of in-market senior credit administration and
wholesale platform leadership experience. Our credit
administration platform relies on a disciplined management
process encompassing credit administration, risk management and
establishing asset disposition strategies. We have implemented a
common loan approval process across the entire Bank;
transitioned the servicing of the Banks legacy residential
loan
92
portfolio to Bayview Loan Servicing, LLC; implemented the
LoanVantage®
automated credit platform, which includes tracking of all
technical and credit policy exceptions, with full aggregation
reporting capability; and are continuing to recruit, staff and
build out our credit origination, credit administration, credit
risk review and portfolio management teams to facilitate the
2011 growth plan of the Bank. We intend to diversify our loan
exposures among local market areas, loan types, and industries.
We will endeavor to ensure that our largest customer loans are
made well below legal lending limits and to forego loans that
involve large credit exposures to any entity or individual. We
intend to maintain strong asset quality so that we can avoid
significant loan charge-offs and maintain our focus on serving
our customers and growing our business.
We also seek to manage our performing loans covered by loss
sharing agreements with the FDIC to maintain continued coverage
under the loss sharing agreements. Generally, under the
Commercial Loss Agreements, coverage will be lost on a covered
loan if we make certain advances, amendments, modifications,
renewals or extensions that are not permitted under the
agreement. For instance, coverage will be lost if we make any
additional advance or commitment on a covered loan unless:
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the advance or commitment is made within one year of the
acquisition date;
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total advances are less than 10% of the loans book value;
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no charge-off has previously been taken with respect to the
loan; and
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such advances are made in good faith and supported by
documentation in the credit files and in accordance with our
credit policy guidelines.
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Covered loans also cannot be amended, modified, renewed or
extended, or any term, right or remedy thereunder waived, unless
made in good faith and otherwise in accordance with our credit
policy guidelines, provided that no such amendment,
modification, renewal, extension or waiver can:
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extend the term of the loan beyond the end of the final quarter
in which the agreement terminates (or beyond the term of the
loan as currently in effect);
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increase the amount of principal under a term loan (unless such
increase is a permitted advance described above); or
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increase the maximum amount of principal authorized under a
revolving line of credit.
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All covered loan modifications are subject to the review and
approval of our Credit Department which will evaluate each
renewal and modification request to confirm it will meet the
requirements set forth in the applicable loss sharing agreement
for continued coverage. As of December 31, 2010, we have
not modified or renewed any covered loan out of loss share
coverage.
Key credit administration/workout processes implemented by us to
manage our asset portfolios include:
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independent credit decision making;
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weekly client contact and strategy reporting;
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close monitoring and aggressive calling on clients that are
delinquent with their loan payments;
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independent risk rating assessment on each loan and ongoing
monitoring by internal and external credit risk review;
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implementation of a reverse pipeline with monthly collection
reporting;
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93
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implementation of a portfolio management process to complete all
loan renewals on a timely basis prior to their maturity as well
as all ongoing required servicing;
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weekly assessment and deployment meetings with all portfolio
managers and work out officers;
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monthly detailed account-level progress reporting using
individual Criticized Asset Plans; and
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documented, ongoing contact management and file maintenance.
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In order to manage the workout of the loan portfolios we have
acquired to date and loan assets which we may acquire in the
future, we have built out a robust workout platform. The Legacy
Portfolio Management Group, which is comprised of employees from
the Special Assets Management, ORE Resolution and Loss
Share/General Bank Administration Groups, all work together to
provide timely resolution of acquired loan portfolios. Our
Special Assets Management Group is comprised of teams in Miami,
Naples/Ft. Myers and Sarasota, Florida, who lead the
workout of the Banks covered nonperforming loans. ORE
Resolution coordinates the transition of foreclosed real estate
properties and the timely marketing, negotiation and sale of
properties from the Bank. Our Loss Share/General Bank
Administration Group is made up of credit, accounting and IT
professionals that coordinate a number of activities relating to
the gathering of data and the process of preparing and
certifying loss share certificate submissions on a quarterly
basis to the FDIC. To date, our Legacy Portfolio Management
Group has been able to enhance collections on the loan
portfolios acquired in the Acquisitions and to workout and sell
a large amount of these acquired assets above their acquisition
price and carrying value, improving the yield generated from
those assets and also resulting in capital gains from the sale
of OREO owned by the Bank.
In addition to deploying new workout protocols and procedures,
our management has constructed forecasts reflecting the
collection and restructuring activities which will provide
internal measurements for bank performance and loss share
purposes. Credit-related budgets have been created which reflect
a longer-term forecast for the re-balancing of the credit
portfolio to a more appropriate mix of commercial and industrial
lending, commercial real estate, and consumer lending
activities. Our management team relies upon decades of banking
and credit experience, drawing upon experience in designing,
implementing and executing effective credit administration and
portfolio workout platforms. We believe that applying this
expertise has significantly enhanced the credit performance of
the acquired portfolios and in doing so has reduced both the
Banks and the FDICs exposure to credit-driven costs
associated with operating the Bank.
Deposits and
Other Sources of Funds
We believe a primary initial measure of success after the
acquisition of the assets and liabilities of a failed financial
institution is the performance of the acquired deposit base
during the period immediately subsequent to the acquisition. The
Bank has developed and deployed a branded conversion strategy,
titled Stronger Than Ever, to support stabilization
of the customer and deposit base. Key elements of the
Stronger Than Ever campaign include:
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retention of retail employees who interact with customers on a
daily basis;
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development of scripts for employees communicating with
customers;
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tracking of customer contacts for each branchs Top
100 customers;
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in-market advertising;
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60-day
closed account contact protocol and tracking;
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daily meetings to review relationship management techniques as
well as review daily results;
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daily sales management meetings for all branch managers and
above in the Retail Division;
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daily outbound call and appointment tracking, including new and
closed accounts; and
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service escalation and closing account protocols.
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The Bank has experienced deposit growth following each
acquisition, which we attribute in part to the Stronger
Than Ever campaign. This may also be attributable to
recapturing deposits that may have left during the period
immediately before the related banks closing, as well as
deepening existing relationships and improving product mix to a
higher percentage of transaction accounts.
In addition to deposits, we utilize advances from the FHLB as a
supplementary funding source to finance our operations. FHLB
advances are secured by stock in the FHLB required to be
purchased in proportion to outstanding advances and qualifying
first mortgage, commercial real estate, home equity loans and
investment securities. The contractual balance of FHLB advances
as of December 31, 2010 totaled $176.7 million, with
$40.0 million, $115.3 million and $20.0 million
maturing in 2011, 2012 and 2014, respectively. Outstanding FHLB
advances increased from $51.8 million at January 31,
2010, to $175.3 million as of December 31, 2010
primarily due to the Acquisitions.
Investment
Securities
Our investment policy has been established by the Board of
Directors and dictates that investment decisions will be made
based on, among other things, the safety of the investment,
liquidity requirements, interest rate risk, potential returns,
cash flow targets and consistency with our asset/liability
management. The Banks Investment Committee is responsible
for making securities portfolio decisions in accordance with the
established policies and in coordination with the Boards
Asset/Liability Committee. The Banks Investment Committee
members, and Bank employees under the direction of such
committee, have been delegated authority to purchase and sell
securities within specified investment policy guidelines.
Portfolio performance and activity are reviewed by the
Banks Investment Committee and full Board of Directors on
a periodic basis.
Our investment policy provides specific limits on investments
depending on a variety of factors, including its asset class,
issuer, credit rating, size, maturity, etc. Our current
investment strategy includes maintaining a high credit quality,
liquid, diversified portfolio invested in fixed and floating
rate securities with short- to intermediate-term maturities. The
purpose of this approach is to create a safe and sound
investment portfolio that minimizes exposure to interest rate
and credit risk while providing attractive relative yield given
market conditions.
As of December 31, 2010, we had an investment securities
portfolio of approximately $1.6 billion, representing
approximately 67.0% of our total assets, with 88.1% of the
portfolio invested in securities rated AAA by
Standard & Poors. As of December 31, 2010,
the weighted average duration of our investment portfolio was
approximately 1.1 years (assuming Bloomberg consensus
prepayment speeds and early calls if security is priced at a
premium).
95
The following table summarizes our investment securities
portfolio as of December 31, 2010, excluding bank stock.
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Investment Security Type
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Market Value
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Percent of Total
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($ in thousands)
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U.S. government agency and sponsored enterprise obligations
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$
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1,412,682
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87.5
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%
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U.S. government agency and sponsored enterprise mortgage-backed
securities
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80,431
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5.0
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%
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State and Municipal obligations
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1,423
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0.1
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%
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Other debt securities (Investment Grade Corporates)
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120,748
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7.4
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%
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Total Investment Securities
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$
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1,615,284
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100.0
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%
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Systems and
Platform Conversion
The integration of the Banks technology solutions onto a
common operating platform is, in managements view,
critical to delivering high-quality banking solutions and
services. Technology infrastructure consolidation can provide
efficiency in communication and delivery systems as well as cost
efficiencies. The conversion and consolidation of the technology
systems for each of the Old Premier, Old FCB and Old Peninsula
platforms has been completed. These efforts included multiple
system upgrades and enhancements; a new converged voice, data
and video network; virtualized
e-mail
solutions; and a core system conversion and merger onto the
upgraded banking solutions platform from FIS. The Old Sunshine
platform is scheduled to be converted to the same operating
platform during July 2011. The Old FNBCF, Old Cortez and Old
Coastal platforms are anticipated to be converted to the same
operating platform later in 2011.
Marketing and
Distribution
Primary
Market
The primary market in which the Bank operates is the state of
Florida. The bank currently has a 39-branch retail network that
encompasses Central Florida and spans the East and West coasts
of the state. Included in the Banks primary market are
three of the top four largest Metropolitan Statistical Areas
(MSA) in Florida; Orlando, Miami and West Palm Beach.
Distribution
Channels
The Bank takes a multi-channel distribution and integration
approach to marketing its products. The main channel of
distribution is the Banks 39-branch retail network. The
Bank supports its traditional branch network with convenience
technology such as internet banking, mobile and text banking as
well as the latest in treasury services. The Bank recently
expanded its reach by partnering with Publix Supermarkets
Presto network, which allows Bank customers the use of
Publixs 745 in-store ATMs without incurring a fee.
In addition to the experienced traditional retail platform
staff, the Bank also deploys middle market bankers and community
bankers into the market. These bankers focus on providing
personalized, professional service to small and commercial
businesses in our market. The middle market and community
bankers partner with the Banks treasury services
professionals to provide the high quality financial solutions to
their business customers.
The combination of the retail platform staff, in-market bankers
and convenience products has allowed the Bank to follow the
trend in banking in which customers to take advantage of
96
the full range of products that the Bank has to offer thus
increasing product and service cross selling, and in turn
customer loyalty.
Customer
Support
With each distribution channel comes an additional opportunity
and need for customer support. The Bank has ensured that
customers receive the same level of support at each touch point
by establishing a service excellence program and service
protocols. The Bank also has a customer service call center
which supports all segments of the Bank with dedicated channels
for retail and high touch commercial clients.
Deposit Product
Offerings
The Bank offers a wide variety of deposit products including
demand deposit accounts, interest-bearing products, savings
accounts and certificates of deposit. The Bank regularly
conducts market and competitor research to determine which
products best suit the needs of each of its diverse markets. The
Bank also utilizes the findings of its research during product
development to ensure that it remains competitive in the market
and can continue to fulfill the needs of its clientele.
The Bank also offers a full suite of treasury services that are
designed to help business customers streamline their financial
transactions, manage their accounts more efficiently and improve
their business record keeping. These treasury services
include ACH solutions, remote deposit capture, sweep accounts
and lock-box services.
Credit Product
Offerings
The Bank understands that credit products are an important
partner to deposit products. The Bank offers customizable credit
products for both business and consumer clients, including
consumer loans, credit cards, small business loans and larger
commercial lending products.
Marketing
Channels
To support consumer and business awareness of the Banks
market presence, financial strength and product offerings, the
Bank takes a multi-channel marketing approach. The Bank utilizes
the traditional print and radio advertising channels as well as
capitalizes on opportunities to support local and state-wide
causes that permit increased visibility of the Banks logo,
message, and experienced staff. By providing a consistent look
and message in all marketing efforts the Bank has been able to
gain notoriety and leverage these opportunities while increasing
brand awareness.
Acquisition
Marketing
Having already acquired seven banks within the state of Florida,
we understand the importance of post-acquisition marketing.
During and following each acquisition the company implements its
Stronger Than Ever campaign which features outbound
calling efforts and print advertising. The campaign communicates
the newly acquired institutions continuity of staff
combined with the financial strength and robust product offering
of the Bank.
Upon stabilization of the acquired platform, we engage in print
and radio advertising as well as supporting the important civic
and social events within the local communities.
Branding
In partnership with the systems conversion, the Bank is also in
the process of developing and implementing a common brand. The
Bank has chosen to leverage the name of the oldest acquired
institution and brand all existing and future branches as FCB,
Florida Community Bank. FCB was the first bank established in
Collier County in 1923. The Bank has seen
97
impressive customer retention with customers that joined Old FCB
as early as 1970. The rich history combined with the number of
markets served makes FCB the logical choice as the surviving
brand. Retaining the FCB name will further reinforce our message
that we are a Florida based and Florida focused bank.
The first step in the brand consolidation process came in
January of 2011 when we re-branded the 13 offices of Old
Peninsula to FCB, Florida Community Bank. The favorable customer
response supported the decision to convert all branches to FCB.
The marketing re-branding process has a target completion date
of July 25th. Having only one brand to market will allow us to
concentrate our efforts and capital on promoting the value and
brand of FCB, Florida Community Bank.
Competition
The banking business is highly competitive, and we experience
competition in our markets from many other financial
institutions. Competition among financial institutions is based
upon interest rates offered on deposit accounts, interest rates
charged on loans, other credit and service charges relating to
loans, the quality and scope of the services offered, the
convenience of banking facilities, reputation in the community
and, in the case of loans to commercial borrowers, relative
lending limits. We compete with commercial banks, credit unions,
savings and loan associations, mortgage banking firms, consumer
finance companies, securities brokerage firms, insurance
companies, money market funds and other mutual funds, as well as
super-regional, national and international financial
institutions that operate offices within our market areas and
beyond. Our largest banking competitors in our markets include
Bank of America, BankAtlantic, BB&T, JPMorgan Chase,
Regions Bank, SunTrust Bank, TD Bank and Wells Fargo.
We believe that the Banks operation as a Florida-based
regional bank with a broad base of local customers, as well as
the local relationships of the Banks senior management
team and existing and future relationship-oriented lending
officers, enhances its ability to compete with those non-local
financial institutions now operating in its market, but no
assurances can be given in this regard.
Employees
As of May 9, 2011, we had 450 full-time equivalent
employees. None of our employees are parties to a collective
bargaining agreement. We consider our relationships with our
employees to be good.
Properties
Bond Street Holdings currently leases approximately 150 square
feet of office space from the Bank in Miami, Florida, our and
the Banks principal executive offices, operations center
and a Premier-branded retail branch. Through the Bank, we
provide banking services at 39 full-service banking locations in
13 Florida counties.
At May 9, 2011, the Bank operated 30 branch offices under
the Florida Community Bank brand; 4 branches under the Premier
American Bank brand and 5 branches under the Sunshine State
Community Bank brand. Our main offices are located in Miami,
Florida and in Naples, Florida.
Legal
Proceedings
From time to time we are a party to various litigation matters
incidental to the conduct of our business. We are not presently
party to any legal proceedings the resolution of which we
believe would have a material adverse effect on our business,
operating results, financial condition or cash flow.
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SUPERVISION AND
REGULATION
The U.S. banking industry is highly regulated under federal
and state law. These regulations affect the operations of the
Company and its subsidiaries. Investors should understand that
the primary objective of the U.S. bank regulatory regime is
the protection of depositors, not the protection of stockholders.
The description below summarizes certain elements of the
applicable bank regulatory framework. This description is not
intended to include a description of all laws and regulations
applicable to us and the Bank. Banking statutes, regulations and
policies are continually under review by Congress and state
legislatures and federal and state regulatory agencies, and a
change in them, including changes in how they are interpreted or
implemented, could have a material effect on our business. In
addition to laws and regulations, state and federal bank
regulatory agencies may issue policy statements, interpretive
letters and similar written guidance applicable to us. Those
issuances also may affect the conduct of our business or impose
additional regulatory obligations. The description below is
qualified in its entirety by reference to the full text of the
statutes, regulations and policies that are described.
Bond Street
Holdings, Inc. as a Bank Holding Company
Any entity that acquires direct or indirect control of a bank
must obtain prior approval of the Board of Governors of the
Federal Reserve System (Federal Reserve) to become a bank
holding company pursuant to the Bank Holding Company Act of
1956, as amended (BHCA). We became a bank holding company upon
consummation of our first FDIC-assisted transaction. As a bank
holding company, we are subject to regulation under the BHCA,
and to inspection, examination, supervision and enforcement by
the Federal Reserve. Being a bank holding company enables us to
focus on control investments and broadens the investment
opportunities available to us as compared to a non-control
investor, through access to both public and private financial
institutions, failing and distressed financial institutions,
seized assets and deposits, and FDIC auctions. Federal Reserve
jurisdiction also extends to any company that is directly or
indirectly controlled by a bank holding company, such as
subsidiaries and other companies in which the bank holding
company makes a controlling investment. Any legal entity that is
deemed by the Federal Reserve to control the Company (including
Bond Street Management, LLC) must also be approved to
become a regulated bank holding company.
Statutes, regulations and policies could restrict our ability to
diversify into other areas of financial services, acquire
depository institutions, and make distributions or pay dividends
on our equity securities. They may also require us to provide
financial support to any bank which we control, maintain capital
balances in excess of those desired by management and pay higher
deposit insurance premiums as a result of a general
deterioration in the financial condition of the Bank or other
depository institutions.
The Bank as a
National Bank
The Bank is a national bank and is subject to supervision and
regular examination by its primary banking regulator, the Office
of the Comptroller of the Currency (OCC). The Banks
deposits are insured by the deposit insurance fund (DIF) of the
FDIC up to applicable limits in the manner and to the extent
provided by law. The Bank is subject to the Federal Deposit
Insurance Act, as amended (FDI Act) and FDIC regulations
relating to deposit insurance and may also be subject to
supervision and examination by the FDIC under certain
circumstances.
The Bank is subject to specific requirements pursuant to the OCC
Agreement which was entered into in connection with the
acquisition of Old Premier. The OCC Agreement requires, among
other things, that the Bank provide updated business plans to
the OCC each year, provide notice to, and obtain consent from,
the OCC with respect to any additional failed bank
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acquisitions from the FDIC or the appointment of any new
director or senior executive officer and to maintain various
financial and capital ratios.
The Bank and, with respect to certain provisions, the Company,
is also subject to an Order of the FDIC, dated January 22,
2010, issued in connection with the FDICs approval of the
Banks application for federal deposit insurance. The Order
requires, among other things, that during the first three years
of operation, the Bank must obtain approval before implementing
certain compensation plans, submit updated business plans and
reports of material deviations from the plans, submit quarterly
loss share reports and comply with the applicable requirements
of the FDIC Policy. A failure by the Bank or the Company to
comply with the requirements of the OCC Agreement or the FDIC
Order, or the objection by the OCC or the FDIC to any
materials or information submitted pursuant to the OCC Agreement
or the FDIC Order, could prevent us from executing our
business strategy and materially and adversely affect our
businesses and our consolidated results of operations and
financial condition.
Regulatory Notice
and Approval Requirements
A bank holding company must obtain prior approval of the Federal
Reserve in connection with any acquisition that results in the
bank holding company owning or controlling more than 5% of any
class of voting securities of a bank or another bank holding
company. In acting on such applications, the Federal Reserve
considers:
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The effect of the acquisition on competition;
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The financial condition and future prospects of the applicant
and the banks involved;
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The managerial resources of the applicant and the banks involved;
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The convenience and needs of the community, including the record
of performance under the Community Reinvestment Act; and
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The effectiveness of the applicant in combating money laundering
activities.
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Our ability to make investments in depository institutions will
depend on our ability to obtain approval of the Federal Reserve.
The Federal Reserve could deny our application based on the
criteria above or other considerations, including the condition
or regulatory status of Bond Street Management, LLC or other
controlled depository institutions.
Federal and state laws impose additional notice, approval, and
ongoing regulatory requirements on any stockholder or other
party that seeks to acquire direct or indirect
control of an FDIC-insured depository institution.
These laws include the BHCA and the Change in Bank Control Act.
Among other things, these laws require regulatory filings by a
stockholder or other party that seeks to acquire direct or
indirect control of an FDIC-insured depository
institution. The determination whether an investor
controls a depository institution is based on all of
the facts and circumstances surrounding the investment. As a
general matter, a party is deemed to control a depository
institution or other company if the party owns or controls 25%
or more of any class of voting securities. Subject to rebuttal,
a party may be presumed to control a depository institution or
other company if the investor owns or controls 10% or more of
any class of voting securities. If a partys ownership of
the Company were to exceed certain thresholds, the investor
could be deemed to control the Company for
regulatory purposes. This could subject the investor to
regulatory filings or other regulatory consequences.
Broad
Supervision, Examination, and Enforcement Powers
A principal objective of the U.S. bank regulatory regime is
to protect depositors by ensuring the financial safety and
soundness of banks. To that end, the Federal Reserve and
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other bank regulators have broad regulatory, examination, and
enforcement authority, including the power to issue cease and
desist orders, impose substantial fines and other civil and
criminal penalties, terminate deposit insurance and appoint a
conservator or receiver. Bank regulators regularly examine the
operations of banks and bank holding companies. In addition,
banks and bank holding companies are subject to periodic
reporting requirements.
Bank regulators have various remedies available if they
determine that the financial condition, capital resources, asset
quality, earnings prospects, management, liquidity, or other
aspects of a banking organizations operations are
unsatisfactory. Bank regulators may also take action if they
determine that the banking organization or its management is
violating or has violated any law or regulation. Bank regulators
have the power to, among other things:
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enjoin unsafe or unsound practices;
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require affirmative actions to correct any violation or practice;
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issue administrative orders that can be judicially enforced;
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direct increases in capital;
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direct the sale of subsidiaries or other assets;
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limit dividends and distributions;
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restrict growth;
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assess civil monetary penalties;
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remove officers and directors; and
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terminate deposit insurance.
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The FDIC may terminate a banks deposit insurance upon a
finding that the banks financial condition is unsafe or
unsound or that the bank has engaged in unsafe or unsound
practices or has violated any applicable rule, regulation, order
or condition enacted or imposed by the banks regulatory
agency. Engaging in unsafe or unsound practices or failing to
comply with applicable laws, regulations, and supervisory
agreements could subject us and our subsidiaries, Bond Street
Management, LLC, or their officers, directors, and
institution-affiliated parties to the remedies described above
and other sanctions.
Bank Holding
Company as a Source of Strength
It is a policy of the Federal Reserve that a bank holding
company should serve as a source of financial and managerial
strength to the banks that it controls. If a controlled bank is
in financial distress, then the Federal Reserve could assert
that the bank holding company must provide additional capital or
financial support to the bank. If a controlled bank is
undercapitalized, then the regulators could require the bank
holding company to guarantee a capital restoration plan. If the
Federal Reserve believes that a bank holding companys
activities, assets, or affiliates represent a significant risk
to the financial safety, soundness, or stability of a controlled
bank, then the Federal Reserve could require the bank holding
company to terminate the activities, liquidate the assets, or
divest the affiliates. The regulators may require these and
other actions in support of controlled banks even if such action
is not in the best interests of the bank holding company or its
stockholders. Because we are a bank holding company, the Federal
Reserve views us (and our consolidated assets) as a source of
financial and managerial strength for our controlled depository
institutions.
Moreover, the Dodd-Frank Act directs federal bank regulators to
require that all companies that directly or indirectly control
an insured depository institution serve as a source of strength
for the institution. The appropriate federal banking agency for
such a depository institution may require reports from companies
that own the insured depository institution to assess their
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ability to serve as a source of strength and to enforce
compliance with the
source-of-strength
requirements. The term source of financial strength
is defined as the ability of a company to provide financial
assistance to its insured depository institution subsidiaries in
the event of financial distress at such subsidiaries. The
Dodd-Frank Act requires that federal bank regulators propose
implementing regulations no later than July 21, 2011. Under
this requirement, in the future we could be required to provide
financial assistance to the Bank should it experience financial
distress.
We control the Bank, which is a national bank. Consequently, the
OCC could order an assessment of us if the Banks capital
were to become impaired. If we failed to pay the assessment
within three months, the OCC could order the sale of our equity
in the bank to cover the deficiency.
In addition, capital loans by us or the Bank to any of our
future subsidiary banks will be subordinate in right of payment
to deposits and certain other indebtedness of the subsidiary
bank. In the event of our bankruptcy, any commitment by us to a
federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and
entitled to a priority of payment.
Permitted
Activities and Investments of Bank Holding Companies
The BHCA generally prohibits a bank holding company from
engaging in activities other than those determined by the
Federal Reserve to be so closely related to banking as to be a
proper incident thereto. Provisions of the Gramm-Leach-Bliley
Financial Modernization Act of 1999 (GLB Act) expanded the
permissible activities of a bank holding company that qualifies
as a financial holding company. Under the regulations
implementing the GLB Act, a financial holding company may engage
in additional activities that are financial in nature or
incidental or complementary to a financial activity. Those
activities include, among other activities, certain insurance
and securities activities. We have not yet determined whether it
would be appropriate or advisable in the future to become a
financial holding company.
FDIC Statement of
Policy on Qualifications for Failed Bank Acquisitions
The FDIC approved our acquisition of Old Premier by order dated
January 22, 2010. That order included a condition that the
Bank, the Company, the Companys founders and each of our
investors comply with the applicable provisions of the FDIC
Policy. The FDIC Policy imposes additional restrictions and
requirements on certain institutions and their investors, to the
extent that those institutions seek to acquire a failed bank
from the FDIC. Certain provisions of the FDIC Policy are
summarized below. They include a higher capital requirement for
the Bank and a three-year restriction on the sale or transfer of
our securities by an investor. As the agency responsible for
resolving failed banks, the FDIC has discretion to determine
whether a party is qualified to bid on a failed institution. The
FDIC adopted the FDIC Policy on August 26, 2009. The FDIC
issued guidance under the FDIC Policy on January 6, 2010
and April 23, 2010.
For those institutions and investors to which it applies, the
FDIC Policy imposes the following provisions, among others.
First, the institution is required to maintain a ratio of
Tier 1 common equity to total assets of at least 10% for a
period of three years, and thereafter maintain a capital level
sufficient to be well capitalized under regulatory standards
during the remaining period of ownership of the investors. This
amount of capital exceeds that required under otherwise
applicable regulatory requirements. Second, investors that
collectively own 80% or more of two or more depository
institutions are required to pledge to the FDIC their
proportionate interests in each institution to indemnify the
FDIC against any losses it incurs in connection with the failure
of one of the institutions. Third, the institution is prohibited
from extending credit to its investors and to affiliates of its
investors. Fourth, investors may not
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employ ownership structures that use entities domiciled in bank
secrecy jurisdictions. The FDIC has interpreted this prohibition
to apply to a wide range of
non-U.S. jurisdictions.
In its guidance, the FDIC has required that
non-U.S. investors
subject to the FDIC Policy invest through a U.S. subsidiary
and adhere to certain requirements related to record keeping and
information sharing. Fifth, without FDIC approval, investors are
prohibited from selling or otherwise transferring their
securities in the institution for a three-year period following
the time of certain acquisitions. Certain provisions of the FDIC
Policy are summarized in Risk FactorsWe and our
investors are required to comply with the applicable provisions
of the FDIC Policy, including a three-year prohibition on sales
or transfers of our securities without prior FDIC
approval. The transfer restrictions in the FDIC Policy do
not apply to open-ended investment companies that are registered
under the Investment Company Act, issue redeemable securities,
and allow investors to redeem on demand. Sixth, investors may
not employ complex and functionally opaque ownership structures
to invest in institutions. Seventh, investors that own 10% or
more of the equity of a failed institution are not eligible to
bid for that failed institution in an FDIC auction. Eighth,
investors may be required to provide information to the FDIC,
such as with respect to the size of the capital fund or funds,
their diversification, their return profiles, their marketing
documents, their management teams, and their business models.
Ninth, the FDIC Policy does not replace or substitute for
otherwise applicable regulations or statutes.
Application of the FDIC Policy to us or our investors imposes
additional regulatory obligations. We continue to work with the
FDIC to exclude from application of the FDIC Policy certain of
our investors that hold 5% or less of the total voting power of
the Company.
Regulatory
Capital Requirements
General. Bank regulators view capital levels
as important indicators of an institutions financial
soundness. FDIC-insured depository institutions and their
holding companies are required to maintain minimum capital
relative to the amount and types of assets they hold. The final
supervisory judgment on an institutions capital adequacy
is based on the regulators individualized assessment of
numerous factors. For example, the FDIC Policy requires that
certain institutions maintain a ratio of Tier 1 common
equity to total assets of at least 10% for a period of
3 years from the time of certain acquisitions, which is
higher than the otherwise applicable regulatory capital
requirements. The FDIC has imposed this on the Bank and may
impose the same requirement on other depository institution
subsidiaries of the Company that we may acquire or control in
the future.
As a bank holding company, we are subject to various regulatory
capital adequacy requirements administered by the Federal
Reserve. The Bank is also subject to capital adequacy
requirements. The Federal Deposit Insurance Corporation
Improvement Act of 1991 required the federal regulatory agencies
to adopt regulations defining five capital tiers for banks: well
capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized.
Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary,
actions by regulators that, if undertaken, could have a direct
material effect on our financial condition.
Quantitative measures, established by the regulators to ensure
capital adequacy, require that a bank holding company maintain
minimum ratios of capital to risk-weighted assets. There are
three categories of capital under the guidelines. Tier 1
capital includes common equity holders equity, qualifying
preferred stock and trust preferred securities, less goodwill
and certain other deductions (including a portion of servicing
assets and the unrealized net gains and losses, after taxes, on
securities available for sale). Tier 2 capital includes
preferred stock not qualifying as Tier 1 capital,
subordinated debt, the allowance for credit losses and net
unrealized gains on marketable equity securities, subject to
limitations by the guidelines. Tier 2 capital is limited to
the amount of Tier 1 capital (i.e., at least half of the
total capital must be in
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the form of Tier 1 capital). Tier 3 capital includes
certain qualifying unsecured subordinated debt.
Under the guidelines, capital is compared with the relative risk
related to the balance sheet. To derive the risk included in the
balance sheet, a risk weighting is applied to each balance sheet
asset and off-balance sheet item, primarily based on the
relative credit risk of the counterparty. For example, claims
guaranteed by the U.S. government or one of its agencies
are risk-weighted at 0% and certain real-estate related loans
are risk-weighted at 50%. Off-balance sheet items, such as loan
commitments and derivatives, are also given a risk weight after
calculating balance sheet equivalent amounts. A credit
conversion factor is assigned to loan commitments based on the
likelihood of the off-balance sheet item becoming an asset. For
example, certain loan commitments are converted at 50% and then
risk-weighted at 100%. Derivatives are converted to balance
sheet equivalents based on notional values, replacement costs
and remaining contractual terms. For certain recourse
obligations, direct credit substitutes, residual interests in
asset securitization, and other securitized transactions that
expose institutions primarily to credit risk, the capital
amounts and classification under the guidelines are subject to
qualitative judgments by the regulators about components, risk
weightings and other factors.
In order to be deemed well-capitalized, banks and
their holding companies currently are required to maintain
Tier 1 capital and the sum of Tier 1 and Tier 2
capital equal to at least 6% and 10%, respectively, of their
total risk-weighted assets (including certain off-balance sheet
items, such as standby letters of credit). The federal bank
regulatory agencies may, however, set higher capital
requirements for an individual bank or when a banks
particular circumstances warrant. At this time the bank
regulatory agencies are more inclined to impose higher capital
requirements in order to meet well-capitalized standards, and
future regulatory changes could impose higher capital standards
as a routine matter.
The Federal Reserve may also set higher capital requirements for
holding companies whose circumstances warrant it. For example,
holding companies experiencing internal growth or making
acquisitions are expected to maintain strong capital positions
substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Also, the Federal
Reserve considers a tangible Tier 1 leverage
ratio (deducting all intangibles) and other indications of
capital strength in evaluating proposals for expansion or
engaging in new activities. In addition, the federal bank
regulatory agencies have established minimum leverage
(Tier 1 capital to adjusted average total assets)
guidelines for banks within their regulatory jurisdiction. These
guidelines provide for a minimum leverage ratio of 5% for banks
to be deemed well capitalized. As discussed above,
under the FDIC Policy, the Bank must maintain a ratio of
Tier 1 common equity to total assets of at least 10% for
three years from the date of our first FDIC-assisted
transaction. Our regulatory capital ratios and those of the Bank
are in excess of the levels established for
well-capitalized institutions.
As an additional means to identify problems in the financial
management of depository institutions, the FDI Act requires
federal bank regulatory agencies to establish certain
non-capital safety and soundness standards for institutions for
which they are the primary federal regulator. The standards
relate generally to operations and management, asset quality,
interest rate exposure and executive compensation. The agencies
are authorized to take action against institutions that fail to
meet such standards.
In addition, the Dodd-Frank Act further requires the federal
banking agencies to adopt capital requirements which address the
risks that the activities of an institution poses to the
institution and the public and private stakeholders, including
risks arising from certain enumerated activities. The federal
banking agencies will likely change existing capital guidelines
or adopt new capital guidelines in the future pursuant to the
Dodd-Frank Act, the implementation of Basel III (described
below) or other regulatory or supervisory changes. We
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cannot be certain what the impact on changes to existing capital
guidelines will have on us or the Bank.
Basel I, Basel II and Basel III
Accords. The current risk-based capital
guidelines that apply to us and the Bank are based on the 1988
capital accord, referred to as Basel I, of the
International Basel Committee on Banking Supervision (Basel
Committee), a committee of central banks and bank supervisors,
as implemented by federal bank regulators. In 2008, the bank
regulatory agencies began to phase-in capital standards based on
a second capital accord issued by the Basel Committee, referred
to as Basel II, for large or core international
banks (generally defined for U.S. purposes as having total
assets of $250 billion or more or consolidated foreign
exposures of $10 billion or more). Basel II emphasizes
internal assessment of credit, market and operational risk, as
well as supervisory assessment and market discipline in
determining minimum capital requirements.
Under the existing Basel I-based guidelines, the minimum ratio
of total capital to risk-weighted assets (which are primarily
the credit risk equivalents of balance sheet assets and certain
off-balance sheet items such as standby letters of credit, but
also include a nominal market risk equivalent balance related to
foreign exchange and debt/equity trading activities) is 8%. At
least half of the total capital must be composed of Tier 1
capital, which includes common stockholders equity
(including retained earnings), qualifying non-cumulative
perpetual preferred stock (and, for bank holding companies only,
a limited amount of qualifying cumulative perpetual preferred
stock and a limited amount of trust preferred securities), and
minority interests in the equity accounts of consolidated
subsidiaries, less goodwill, other disallowed intangibles, and
disallowed deferred tax assets, among other items. The Federal
Reserve also has adopted a minimum leverage ratio for bank
holding companies, requiring Tier 1 capital of at least 3%
of average quarterly total consolidated assets (as defined for
regulatory purposes), net of the loan loss reserve, goodwill and
certain other intangible assets.
Federal banking regulators have also established risk-based and
leverage capital guidelines that insured banks are required to
meet. These regulations are generally similar to those
established by the Federal Reserve for bank holding companies.
U.S. bank regulatory agencies have issued final rules with
respect to implementation of the Basel II framework. Under
the final Basel II rules, a small number of
core banking organizations (generally large or
internationally active organizations) will be required to use
the advanced approaches under Basel II for calculating
risk-based capital related to credit risk and operational risk,
instead of the methodology reflected in the regulations
effective prior to adoption of Basel II. The rules also require
core banking organizations to have rigorous processes for
assessing overall capital adequacy in relation to their total
risk profiles, and to publicly disclose certain information
about their risk profiles and capital adequacy.
In order to implement the rules, a core banking organization is
required to adopt an implementation plan and must satisfactorily
complete a parallel run, in which it calculates capital
requirements under both the Basel II rules and regulations
effective prior to the adoption of Basel II.
On September 12, 2010, the Group of Governors and Heads of
Supervision, the oversight body of the Basel Committee,
announced agreement on the calibration and phase-in arrangements
for a strengthened set of capital requirements, known as Basel
III. When fully phased-in on January 19, 2019,
Basel III increases the minimum Tier 1 common equity
ratio to 4.5%, net of regulatory deductions, and introduces a
capital conservation buffer of an additional 2.5% of common
equity to risk-weighted assets, raising the target minimum
Tier 1 common equity ratio to at least 7.0%. Basel III
increases the minimum Tier 1 capital ratio to 8.5%
inclusive of the capital conservation buffer, increases the
minimum total capital ratio to 10.5% inclusive of the capital
conservation buffer and introduces a countercyclical capital
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buffer of up to 2.5% of common equity or other fully loss
absorbing capital for periods of excess credit growth. The
capital conservation buffer is designed to absorb losses during
periods of economic stress. Banking institutions with a
Tier 1 common equity ratio above the minimum but below the
conservation buffer may face constraints on dividends, equity
repurchases and compensation based on the amount of such
shortfall.
Basel III also introduces a non-risk adjusted Tier 1
leverage ratio of 3%, based on a measure of total exposure
rather than total assets, and new liquidity standards. The
phase-in of the new rules is to commence on January 1,
2013, with the phase-in of the capital conservation buffer
commencing January 1, 2015 and the rules to be fully
phased-in by January 1, 2019.
In November 2010, Basel III was endorsed by the Seoul G20
Leaders Summit and will be subject to individual adoption by
member nations, including the United States. On
December 16, 2010, the Basel Committee issued the text of
the Basel III rules, which presents the details of global
regulatory standards on bank capital adequacy and liquidity
agreed by the Basel Committee and endorsed by the Seoul G20
Leaders Summit. The federal banking agencies will likely
implement changes to the current capital adequacy standards
applicable to us and our bank subsidiaries in light of Basel
III. If adopted by federal banking agencies, Basel III
could lead to significantly higher capital requirements and more
restrictive leverage and liquidity ratios. The ultimate impact
of the new capital and liquidity standards on us and our bank
subsidiaries is currently being reviewed and will depend on a
number of factors, including the rulemaking and implementation
by the U.S. banking regulators. We cannot determine the
ultimate effect that potential legislation, or subsequent
regulations, if enacted, would have upon our earnings or
financial position. In addition, significant questions remain as
to how the capital and liquidity mandates of the Dodd-Frank Act
will be integrated with the requirements of Basel III.
Note that the Dodd-Frank Act also requires the establishment of
more stringent prudential standards by requiring the federal
banking agencies to adopt capital and liquidity requirements
which address the risks that the activities of an institution
pose to the institution and the public and private stakeholders,
including risks arising from certain enumerated activities. In
particular, the Dodd-Frank Act excludes trust preferred
securities issued on or after May 19, 2010 from Tier 1
capital.
Prompt Corrective Action. The FDI Act requires
federal bank regulatory agencies to take prompt corrective
action with respect to FDIC-insured depository
institutions that do not meet minimum capital requirements. A
depository institutions treatment for purposes of the
prompt corrective action provisions will depend upon how its
capital levels compare to various capital measures and certain
other factors, as established by regulation.
Under this system, the federal banking regulators have
established five capital categories, well-capitalized,
adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized, in which all
institutions are placed. The federal banking regulators have
also specified by regulation the relevant capital levels for
each of the other categories. Under certain circumstances, a
well capitalized, adequately capitalized or undercapitalized
institution may be treated as if the institution were in the
next lower capital category. Federal banking regulators are
required to take various mandatory supervisory actions and are
authorized to take other discretionary actions with respect to
institutions in the three undercapitalized categories. The
severity of the action depends upon the capital category in
which the institution is placed. A banking institution that is
undercapitalized is required to submit a capital restoration
plan. Failure to meet capital guidelines could subject the bank
to a variety of enforcement remedies by federal bank regulatory
agencies, including: termination of deposit insurance by the
FDIC; restrictions on certain business activities; and
appointment of the FDIC as conservator or receiver.
Generally, subject to a narrow exception, the banking
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regulator must appoint a receiver or conservator for an
institution that is critically undercapitalized.
Regulatory Limits
on Dividends and Distributions
The Company is a legal entity separate and distinct from each of
its subsidiaries. The ability of a bank to pay dividends and
make other distributions, and to pay any management fee to its
parent holding company, is limited by federal and state law. The
specific limits depend on a number of factors, including the
banks type of charter, recent earnings, recent dividends,
level of capital, and regulatory status. The regulators are
authorized, and under certain circumstances are required, to
determine that the payment of dividends or other distributions
by a bank would be an unsafe or unsound practice and to prohibit
that payment. For example, the FDI Act generally prohibits a
depository institution from making any capital distributions
(including payment of a dividend) or paying any management fee
to its parent holding company if the depository institution
would thereafter be undercapitalized.
The ability of a bank holding company to pay dividends and make
other distributions can also be limited. A bank holding company
is subject to leverage and minimum capital requirements as
summarized above. The Federal Reserve has authority to prohibit
a bank holding company from paying dividends or making other
distributions. The Federal Reserve has issued a policy statement
with regard to the payment of cash dividends by bank holding
companies. The policy statement provides that, as a matter of
prudent banking, a bank holding company should not maintain a
rate of cash dividends unless its net income available to common
stockholders has been sufficient to fully fund the dividends,
and the prospective rate of earnings retention appears to be
consistent with the holding companys capital needs, asset
quality, and overall financial condition. Accordingly, a bank
holding company should not pay cash dividends that exceed its
net income or can only be funded in ways that weaken the bank
holding companys financial health, such as by borrowing.
In addition, the Dodd-Frank Act and Basel III impose
additional restrictions on the ability of banking institutions
to pay dividends.
Our ability to pay dividends or make other distributions to our
investors is limited by minimum capital and other requirements
prescribed by law and regulation. Currently, the OCC Agreement
prohibits the Bank from paying us a dividend for three years
from the date of the first FDIC-assisted transaction. Once the
three-year period has elapsed, the OCC Agreement imposes other
restrictions on the Banks ability to pay dividends,
including requiring prior approval from the OCC before any
distribution is made. The regulators have authority to impose
additional limits on dividends and distributions by the Company
and its subsidiaries. Certain restrictive covenants in future
debt instruments, if any, may also limit the Banks or our
ability to make dividend payments.
Reserve
Requirements
Pursuant to regulations of the Federal Reserve, all banks are
required to maintain average daily reserves at mandated ratios
against their transaction accounts. In addition, reserves must
be maintained on certain non-personal time deposits. These
reserves must be maintained in the form of vault cash or in an
account at a Federal Reserve Bank.
Limits on
Transactions with Affiliates and Insiders
Banks are subject to restrictions on their ability to conduct
transactions with affiliates, including us, and other related
parties. Section 23A of the Federal Reserve Act imposes
quantitative limits, qualitative requirements, and collateral
requirements on certain transactions by a bank with, or for the
benefit of, its affiliates. Transactions covered by
Section 23A include loans, extensions of credit, investment
in securities issued by an affiliate, and purchases of assets
from an affiliate. Section 23B of the Federal Reserve Act
requires that
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most types of transactions by a bank with, or for the benefit
of, an affiliate be on terms at least as favorable to the bank
than if the transaction were conducted with an unaffiliated
third party. The Federal Reserves Regulation W also
defines and limits the transactions in which the Bank may engage
with us or with other affiliates.
The Dodd-Frank Act generally enhances the restrictions on
transactions with affiliates under Section 23A and 23B of
the Federal Reserve Act, including an expansion of the
definition of covered transactions to include credit
exposures related to derivatives, repurchase agreements and
securities lending arrangements, and an increase in the amount
of time for which collateral requirements regarding covered
credit transactions must be satisfied. The definition of
affiliate was expanded to include any investment
fund to which we or an affiliate serves as an investment
adviser. The ability of the Federal Reserve to grant exemptions
from these restrictions is also narrowed by the Dodd-Frank Act,
including by requiring coordination with other bank regulators.
The Federal Reserves Regulation O imposes
restrictions and procedural requirements in connection with the
extension of credit by a bank to its directors, executive
officers, principal equity investors, and their related
interests. All extensions of credit to insiders and their
related interests must be on the same terms as, and subject to
the same loan underwriting requirements as, loans to persons who
are not insiders. In addition, Regulation O imposes lending
limits on loans to insiders and their related interests and
imposes, in certain circumstances, requirements for prior
approval of the loans by the Banks board of directors.
General
Assessment Fees
The OCC currently charges assessments to all national banks
based upon the asset size of the bank. In addition to the
general assessment fees, the OCC imposes surcharges on national
banks with a supervisory composite rating of 3, 4 or 5 in its
most recent safety and soundness examination. The general
assessment fee is paid to the OCC on a semi-annual basis. The
Dodd-Frank Act provides various agencies with the authority to
assess additional supervision fees.
Deposit Insurance
Assessments
FDIC-insured depository institutions, such as the Bank, are
required to pay deposit insurance premium assessments to the
FDIC. The amount of a particular institutions deposit
insurance assessment is based on that institutions risk
classification under an FDIC risk-based assessment system. An
institutions risk classification is assigned based on its
capital levels, the level of supervisory concern the institution
poses to its regulators and other risk measures. The FDIC
recently raised assessment rates to increase funding for the
DIF, which is currently under-funded.
The Dodd Frank Act makes permanent the general $250,000 deposit
insurance limit for insured deposits. In addition, federal
deposit insurance for the full net amount of deposits in
noninterest-bearing transaction accounts was extended to
January 1, 2013 for all insured banks.
The Dodd-Frank Act changes the deposit insurance assessment
framework, primarily by basing assessments on an
institutions total assets less tangible equity (subject to
risk-based adjustments that would further reduce the assessment
base for custodial banks) rather than domestic deposits, which
is expected to shift a greater portion of the aggregate
assessments to large banks. The Dodd-Frank Act also eliminates
the upper limit for the reserve ratio designated by the FDIC
each year, increases the minimum designated reserve ratio of the
DIF from 1.15% to 1.35% of the estimated amount of total insured
deposits by September 30, 2020, and eliminates the
requirement that the FDIC pay dividends to depository
institutions when the reserve ratio exceeds certain thresholds.
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The Dodd-Frank Act requires the DIF to reach a reserve ratio of
1.35% of insured deposits by September 30, 2020. On
December 14, 2010, the FDIC raised the minimum designated
reserve ratio of DIF to 2%. The ratio is higher than the minimum
reserve ratio of 1.35% as set by the Dodd-Frank Act. Under the
Dodd-Frank Act, the FDIC is required to offset the effect of the
higher reserve ratio on insured depository institutions with
consolidated assets of less than $10 billion.
On February 7, 2011, the FDIC approved a final rule on
Assessments, Dividends, Assessment Base and Large Bank Pricing.
The final rule, mandated by the Dodd-Frank Act, changes the
deposit insurance assessment system from one that is based on
domestic deposits to one that is based on average consolidated
total assets minus average tangible equity. Because the new
assessment base under the Dodd-Frank Act is larger than the
current assessment base, the final rules assessment rates
are lower than the current rates, which achieves the FDICs
goal of not significantly altering the total amount of revenue
collected from the industry. In addition, the final rule adopts
a scorecard assessment scheme for larger banks and
suspends dividend payments if the DIF reserve ratio exceeds 1.5%
but provides for decreasing assessment rates when the DIF
reserve ratio reaches certain thresholds. The final rule also
determines how the effect of the higher reserve ratio will be
offset for institutions with less than $10 billion of
consolidated assets.
Continued action by the FDIC to replenish the DIF as well as the
changes contained in the Dodd-Frank Act may result in higher
assessment rates, which would reduce our profitability or
otherwise negatively impact our operations.
In addition to its insurance assessment, each insured bank is
subject in 2011 to quarterly debt service assessments in
connection with bonds issued by a government corporation that
financed the federal savings and loans bailout. The first
quarter 2011 debt service assessment is 0.0102% of each
banks insured deposits and the second quarter 2011
assessment is 0.01% of each banks insured deposits.
Depositor
Preference
The FDI Act provides that, in the event of the liquidation
or other resolution of an insured depository institution,
the claims of depositors of the institution (including the
claims of the FDIC as subrogee of insured depositors) and
certain claims for administrative expenses of the FDIC as a
receiver will have priority over other general unsecured claims
against the institution. If we invest in or acquire an insured
depository institution that fails, insured and uninsured
depositors, along with the FDIC, will have priority in payment
ahead of unsecured, nondeposit creditors, including us, with
respect to any extensions of credit they have made to such
insured depository institution and priority over any of the
Banks stockholders, including us, or our investors or
creditors.
Liability of
Commonly Controlled Institutions
Under the FDI Act, FDIC-insured depository institutions can be
held liable for any loss incurred, or reasonably expected to be
incurred, by the FDIC in connection with the default of an
FDIC-insured depository institution controlled by the same bank
holding company, and for any assistance provided by the FDIC to
an FDIC-insured depository institution that is in danger of
default and that is controlled by the same bank holding company.
Default means generally the appointment of a
conservator or receiver for the institution. In danger of
default means generally the existence of certain
conditions indicating that a default is likely to occur in the
absence of regulatory assistance.
This cross-guarantee liability for a loss at a commonly
controlled institution would be subordinated in right of payment
to deposit liabilities, secured obligations, any other general
or
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senior liability, and any obligation subordinated to depositors
or other general creditors, other than obligations owed to any
affiliate of the depository institution (with certain
exceptions).
Federal Home Loan
Bank System
The Bank is a member of the Federal Home Loan Bank (FHLB) of
Atlanta, which is one of the 12 regional FHLBs composing
the FHLB system. Each FHLB provides a central credit facility
primarily for its member institutions as well as other entities
involved in home mortgage lending. Any advances from a FHLB must
be secured by specified types of collateral, and all long-term
advances may be obtained only for the purpose of providing funds
for residential housing finance. As a member of the FHLB of
Atlanta, the Bank is required to acquire and hold shares of
capital stock in the FHLB of Atlanta.
Anti-Money
Laundering Requirements
Under federal law, including the Bank Secrecy Act, the Patriot
Act, and the International Money Laundering Abatement and
Anti-Terrorist Financing Act, financial institutions (including
insured depository institutions, broker-dealers and certain
other financial institutions) must maintain anti-money
laundering programs that include established internal policies,
procedures, and controls; a designated compliance officer; an
ongoing employee training program; and testing of the program by
an independent audit function. Among other things, these laws
are intended to strengthen the ability of U.S. law
enforcement agencies and intelligence communities to work
together to combat terrorism on a variety of fronts. Financial
institutions are prohibited from entering into specified
financial transactions and account relationships and must meet
enhanced standards for due diligence and customer identification
in their dealings with
non-U.S. financial
institutions and
non-U.S. customers.
Financial institutions must take reasonable steps to conduct
enhanced scrutiny of account relationships to guard against
money laundering and to report any suspicious transactions, and
law enforcement authorities have been granted increased access
to financial information maintained by financial institutions.
Bank regulators routinely examine institutions for compliance
with these obligations and they must consider an
institutions compliance in connection with the regulatory
review of applications, including applications for banking
mergers and acquisitions. The regulatory authorities have
imposed cease and desist orders and civil money
penalty sanctions against institutions found to be violating
these obligations.
The Office of Foreign Assets Control (OFAC) is responsible for
helping to insure that U.S. entities do not engage in
transactions with certain prohibited parties, as defined by
various Executive Orders and Acts of Congress. OFAC publishes
lists of persons, organizations and countries suspected of
aiding, harboring or engaging in terrorist acts, known as
Specially Designated Nationals and Blocked Persons. If we or the
Bank find a name on any transaction, account or wire transfer
that is on an OFAC list, we or the Bank must freeze or block
such account or transaction, file a suspicious activity report
and notify the appropriate authorities.
Interstate
Banking and Branching
Federal law permits an adequately capitalized and adequately
managed bank holding company, with Federal Reserve approval, to
acquire banking institutions located in states other than the
bank holding companys home state without regard to whether
the transaction is prohibited under state law. In addition,
national banks and state banks with different home states are
permitted to merge across state lines, with the approval of the
appropriate federal banking agency, unless the home state of a
participating banking institution passed legislation prior to
June 1, 1997 that expressly prohibits interstate mergers.
The Dodd-Frank Act permits a national bank or a state bank, with
the approval of its regulator, to open a branch in any state if
the law of the state in which the branch is to be located would
permit the establishment of the
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branch if the bank were a bank chartered in that state. National
banks, such as the Bank, may provide trust services in any state
to the same extent as a trust company chartered by that state.
Privacy and
Security
Federal law establishes a minimum federal standard of financial
privacy by, among other provisions, requiring banks to adopt and
disclose privacy policies with respect to consumer information
and setting forth certain rules with respect to the disclosure
to third parties of consumer information. We have adopted and
disseminated privacy policies pursuant to applicable law.
Regulations adopted under federal law set standards for
protecting the security, confidentiality and integrity of
customer information, and require notice to regulators, and in
some cases, to customers, in the event of security breaches. A
number of states have adopted their own statutes concerning
financial privacy and requiring notification of security
breaches.
Consumer Laws and
Regulations
Banks and other financial institutions are subject to numerous
laws and regulations intended to protect consumers in
transactions with banks. These laws include, among others:
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Truth in Lending Act;
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Truth in Savings Act;
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Electronic Funds Transfer Act;
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Expedited Funds Availability Act;
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Equal Credit Opportunity Act;
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Fair and Accurate Credit Transactions Act;
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Fair Housing Act;
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Fair Credit Reporting Act;
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Fair Debt Collection Practices Act;
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GLB Act;
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Home Mortgage Disclosure Act;
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Right to Financial Privacy Act;
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Real Estate Settlement Procedures Act;
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laws regarding unfair and deceptive acts and practices; and
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usury laws.
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Many states and local jurisdictions have consumer protection
laws analogous, and in addition, to those listed above. These
federal, state, and local laws mandate certain disclosure
requirements and regulate the manner in which financial
institutions must deal with customers and monitor account
activity when taking deposits, making loans, or conducting other
types of transactions. Failure to comply with these laws and
regulations could give rise to substantial penalties,
reputational damage, regulatory sanctions, customer rescission
rights, action by state and local attorneys general, and civil
or criminal liability. The Dodd-Frank Act creates a new
independent Consumer Financial Protection Bureau (the
Bureau) which will have broad authority to regulate
consumer financial services and products provided by banks, such
as the Bank, and various non-bank providers. It will have
authority to promulgate regulations and issue orders, guidance,
policy statements, conduct examinations and bring enforcement
actions. In general, banks with assets of $10 billion or
less, such as the Bank, will be examined
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for consumer complaints by their bank regulator. The creation of
the Bureau is likely to lead to enhanced and strengthened
enforcement of consumer financial protection laws.
The Community
Reinvestment Act
The Bank is subject to the Community Reinvestment Act (CRA). The
CRA is intended to encourage banks to help meet the credit needs
of their service areas, including low and moderate income
neighborhoods, consistent with safe and sound bank operations.
The regulators examine and assign each bank a public CRA rating.
The CRA then requires bank regulators to take into account the
banks record in meeting the needs of its service area when
considering an application by a bank to establish a branch or to
conduct certain mergers or acquisitions. The Federal Reserve is
required to consider the CRA records of a bank holding company,
controlled banks when considering an application by the bank
holding company to acquire a bank or thrift or to merge with
another bank holding company.
When we apply for regulatory approval to make certain
investments, such as to acquire ownership or control of shares
or assets of a bank or thrift or to merge with any other bank
holding company, bank regulators will consider the CRA record of
the target institution and the Companys depository
institution subsidiaries. An unsatisfactory CRA record could
substantially delay approval or result in denial of an
application. The regulatory agencys assessment of the
institutions record is made available to the public. Since
the first FDIC-assisted transaction, bank regulators have not
conducted a CRA exam of the Bank.
In addition, federal law requires the disclosure of agreements
reached with community groups that relate to the CRA, and
contains various other provisions designed to improve the
delivery of financial services to consumers while maintaining an
appropriate level of safety in the financial services industry.
Changes in Laws,
Regulations, or Policies and the Dodd-Frank Act
Federal, state, and local legislators and regulators regularly
introduce measures or take actions that would modify the
regulatory requirements applicable to banks, thrifts, their
holding companies, and other financial institutions. Changes in
laws, regulations, or regulatory policies could impact us or the
Bank in ways we cannot predict.
On July 21, 2010, President Obama signed the Dodd-Frank Act
into law. The Dodd-Frank Act will have a broad impact on the
financial services industry, imposing significant regulatory and
compliance changes, including the designation of certain
financial companies as systemically significant, the imposition
of increased capital, leverage, and liquidity requirements, and
numerous other provisions designed to improve supervision and
oversight of, and strengthen safety and soundness within, the
financial services sector. Additionally, the Dodd-Frank Act
establishes a new framework of authority to conduct systemic
risk oversight within the financial system to be distributed
among new and existing federal regulatory agencies, including
the Financial Stability Oversight Council (Council), the Federal
Reserve, the OCC, and the FDIC.
The following items provide a brief description of certain
provisions of the Dodd-Frank Act.
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Source of Strength. The Dodd-Frank Act
requires all companies that directly or indirectly control an
insured depository institution to serve as a source of strength
for the institution. Under this requirement, in the future we
could be required to provide financial assistance to the Bank
should it experience financial distress.
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Payment of Interest on Demand Deposits
Permitted. The Dodd-Frank Act repeals the
prohibition on banks and other financial institutions from
paying interest on demand deposits. Financial institutions will
be permitted to begin paying interest on demand deposits
beginning in July 2011. This could result in increased
competition for these
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deposits from the Banks competitors and increase the
Banks overall cost of funds, which could increase our cost
of operations and reduce our profitability.
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Limitation on Federal Preemption. The
Dodd-Frank Act significantly reduces the ability of national
banks to rely upon federal preemption of state consumer
financial laws. Although the OCC will have the ability to make
preemption determinations where certain conditions are met, the
broad rollback of federal preemption has the potential to create
a patchwork of federal and state compliance obligations. This
could, in turn, result in significant new regulatory
requirements applicable to us, with potentially significant
changes in our operations and increases in our compliance costs.
It could also result in uncertainty concerning compliance, with
attendant regulatory and litigation risks.
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Mortgage Loan Origination and Risk
Retention. The Dodd-Frank Act contains additional
regulatory requirements that may affect our operations and
result in increased compliance costs. For example, the
Dodd-Frank Act imposes new standards for mortgage loan
originations on all lenders, including banks and thrifts, in an
effort to require steps to verify a borrowers ability to
repay. In addition, the Dodd-Frank Act generally requires
lenders or securitizers to retain an economic interest in the
credit risk relating to loans the lender sells or mortgage and
other asset-backed securities that the securitizer issues. The
risk retention requirement generally will be 5%, but could be
increased or decreased by regulation.
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Imposition of Restrictions on Certain
Activities. The Dodd-Frank Act requires new
regulations for the
over-the-counter
derivatives market, including requirements for clearing,
exchange trading, capital, margin, and reporting. Additionally,
the Dodd-Frank Act requires that certain swaps and derivatives
activities be pushed out of insured depository
institutions and conducted in non-bank affiliates, significantly
restricts the ability of a member of a depository institution
holding company group to invest in or sponsor certain private
funds, and broadly restricts such entities from engaging in
proprietary trading, subject to limited exemptions.
These restrictions may affect our ability to manage certain
risks in our business.
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Expanded FDIC Resolution Authority. While
insured depository institutions have long been subject to the
FDICs resolution framework, the Dodd-Frank Act creates a
new mechanism for the FDIC to conduct the orderly liquidation of
certain covered financial companies, including bank
holding companies and systemically significant non-bank
financial companies. Upon certain findings being made, the FDIC
may be appointed receiver for a covered financial company, and
would be tasked to conduct an orderly liquidation of the entity.
The FDIC liquidation process is generally modeled on the
existing Federal Deposit Insurance Act (FDI Act), bank
resolution regulations, and generally gives the FDIC more
discretion than in the traditional bankruptcy context.
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Consumer Financial Protection Bureau. The
Dodd-Frank Act creates the Bureau within the Federal Reserve
System. The Bureau is tasked with establishing and implementing
rules and regulations under certain federal consumer protection
laws with respect to the conduct of providers of certain
consumer financial products and services. The Bureau has
rulemaking authority over many of the statutes governing
products and services offered to bank and thrift consumers. For
banking organizations with assets of $10 billion or more,
the Bureau has exclusive rule making and examination, and
primary enforcement authority under federal consumer financial
law. In addition, the Dodd-Frank Act permits states to adopt
consumer protection laws and regulations that are stricter than
those regulations promulgated by the Bureau. This new federal
and state regulatory framework may result in significant new
regulatory requirements applicable to the us in respect of
consumer financial products and services, with potentially
significant increases in compliance costs and litigation risks.
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Deposit Insurance. The Dodd-Frank Act makes
permanent the general $250,000 deposit insurance limit for
insured deposits. The Dodd-Frank Act also provides unlimited
deposit coverage for non interest-bearing transaction accounts
until January 1, 2013. Amendments to the FDI Act also
revise the assessment base against which an insured depository
institutions deposit insurance premiums paid to DIF will
be calculated. Under these amendments, the assessment base will
no longer be the institutions deposit base, but rather its
average consolidated total assets less its average tangible
equity. Additionally, the Dodd-Frank Act makes changes to the
minimum designated reserve ratio of the DIF, increasing the
minimum from 1.15% to 1.35% of the estimated amount of total
insured deposits, and eliminating the requirement that the FDIC
pay dividends to depository institutions when the reserve ratio
exceeds certain thresholds. These provisions could increase the
FDIC deposit insurance premiums paid by the Bank.
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Transactions with Affiliates and Insiders. The
Dodd-Frank Act generally enhances the restrictions on
transactions with affiliates under Section 23A and 23B of
the Federal Reserve Act, including an expansion of the
definition of covered transactions and an increase
in the amount of time for which collateral requirements
regarding covered credit transactions must be satisfied. Insider
transaction limitations are expanded through the strengthening
of loan restrictions to insiders and the expansion of the types
of transactions subject to the various limits, including
derivatives transactions, repurchase agreements, reverse
repurchase agreements and securities lending or borrowing
transactions. Restrictions are also placed on certain asset
sales to and from an insider to an institution, including
requirements that such sales be on market terms and, in certain
circumstances, approved by the institutions board of
directors.
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Enhanced Lending Limits. The Dodd-Frank Act
strengthens the existing limits on a depository
institutions credit exposure to one borrower. Federal
banking law currently limits a federal thrifts ability to
extend credit to one person (or group of related persons) in an
amount exceeding certain thresholds. The Dodd-Frank Act expands
the scope of these restrictions to include credit exposure
arising from derivative transactions, repurchase agreements, and
securities lending and borrowing transactions.
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Corporate Governance. The Dodd-Frank Act
addresses many investor protection, corporate governance and
executive compensation matters that will affect most
U.S. publicly traded companies, including the Company. The
Dodd-Frank Act (1) grants stockholders of
U.S. publicly traded companies an advisory vote on
executive compensation; (2) enhances independence
requirements for compensation committee members;
(3) requires companies listed on national securities
exchanges to adopt incentive-based compensation clawback
policies for executive officers; and (4) provides the SEC
with authority to adopt proxy access rules that would allow
stockholders of publicly traded companies to nominate candidates
for election as a director and have those nominees included in a
companys proxy materials.
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Many of the requirements of the Dodd-Frank Act will be
implemented over time and most will be subject to regulations
implemented over the course of several years. Given the
uncertainty surrounding the manner in which many of the
Dodd-Frank Acts provisions will be implemented by the
various regulatory agencies and through regulations, the full
extent of the impact on our operations is unclear. The changes
resulting from the Dodd-Frank Act may impact the profitability
of our business activities, require changes to certain of our
business practices, impose upon us more stringent capital,
liquidity and leverage requirements or otherwise adversely
affect our business. These changes may also require us to invest
significant management attention and resources to evaluate and
make any changes necessary to comply with new statutory and
regulatory requirements. Failure to comply with the new
requirements may negatively impact our results of operations and
financial condition. While we cannot predict what effect any
presently contemplated or future changes in the laws or
regulations or their interpretations would have on us, these
changes could be materially adverse to our investors.
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MANAGEMENT
Executive
Officers and Directors
Our executive officers and directors and their ages and
positions as of May 9, 2011 are set forth below:
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Name
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Age
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Position
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Daniel M. Healy
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68
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Chief Executive Officer and Class III Director of the
Company; Chief Executive Officer and Director of the Bank.
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Vincent S. Tese
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68
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Executive Chairman and Class III Director of the Company;
Executive Chairman and Director of the Bank.
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Les J. Lieberman
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54
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Executive Vice Chairman and Class III Director of the
Company; Executive Vice Chairman and Director of the Bank.
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Kent S. Ellert
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47
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President, Chief Operating Officer and Class I Director of the
Company; President, Chief Operating Officer and Director of the
Bank.
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Stuart I. Oran
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60
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Executive Vice President, Chief Administrative Officer and
Class III Director of the Company; Executive Vice
President, Chief Administrative Officer and Director of the Bank.
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Timothy E. Johnson
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38
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Chief Financial Officer of the Company and the Bank.
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Alan Bernikow
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70
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Class II Director of the Company; Director of the Bank.
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Thomas E. Constance
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74
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Class II Director of the Company; Director of the Bank.
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Frederic Salerno
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67
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Class II Director of the Company; Director of the Bank.
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Gerald Luterman
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67
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Class I Director of the Company; Director of the Bank.
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Howard R. Curd
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72
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Class I Director of the Company; Director of the Bank.
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Paul Anthony Novelly
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67
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Class I Director of the Company; Director of the Bank.
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William L. Mack
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71
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Class II Director of the Company; Director of the Bank.
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James E. Baiter
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47
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Executive Vice President and Chief Credit Officer of the Bank.
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Juan C. Castro
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45
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Executive Vice President and Wholesale Banking Executive of the
Bank.
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The following is a biographical summary of each of our directors
and executive officers:
Board of
Directors
Daniel M. Healy. Daniel M. Healy has served as
Chief Executive Officer of the Company since November 3,
2009, and as a director of the Company since October 1,
2010. Mr. Healy has served as the Banks Chief
Executive Officer and as a director of the Bank since
January 22, 2010. Prior to our formation, Mr. Healy
served as Executive Chairman of the board of directors
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of Herald National Bank from its inception in November 2008
until his voluntary resignation in May 2009. From January 1992
until its sale to Capital One Financial Corporation in
December 2006, Mr. Healy was Executive Vice President
and Chief Financial Officer of North Fork Bancorporation, Inc.,
a regional bank holding company formerly listed on the New York
Stock Exchange. He was also a director of North Fork from
January 2000 until such sale. Prior to joining North Fork,
Mr. Healy was managing partner of several offices of KPMG
LLP. He is currently a Senior Advisor for Permira Advisors LLP,
a private equity firm, and a member of the boards of directors
and chairman of the Audit Committees of Keefe,
Bruyette & Woods, an investment bank that specializes
exclusively in the financial services sector, and Hiscox Ltd, a
specialist insurance group listed on the London Stock Exchange.
Mr. Healy is a graduate of St. Francis College, where
he received his Bachelor of Business Administration degree in
accounting, and is a Certified Public Accountant.
Mr. Healys experience as an executive officer and
director of a public regional bank holding company enables him
to bring valuable insight to the Board of Directors, including
an understanding of acquisition and expansion strategies and the
management of a growing regional banking operation.
Vincent S. Tese. Vincent S. Tese has served as
Executive Chairman of the Company since November 3, 2009,
and as a director of the Company since October 1, 2010.
Mr. Tese has served as the Banks Executive Chairman
and as a director of the Bank since January 22, 2010. From
1992 until 1994, Mr. Tese served as Vice Chairman of the
Port Authority of New York and New Jersey, a bi-state agency
that manages, develops and operates infrastructure and other
projects in the New York/New Jersey port district, subsequent to
being appointed its Commissioner in 1991. Prior to 1991,
Mr. Tese was appointed to various positions within the
administration of New Yorks former Governor Mario M.
Cuomo, including State Superintendent of Banks from 1983 to
March 1985, Chairman and Chief Executive Officer of the Urban
Development Corporation from March 1985 to 1987 and Director of
Economic Development for New York State from 1987 to 1994.
He is a director of Cablevision Systems Corporation, a
New York Stock Exchange-listed telecommunications, media
and entertainment company, GGCP, Inc., a privately held
investment firm, IntercontinentalExchange, Inc., an operator of
exchanges, trading platforms and clearing houses listed on the
New York Stock Exchange, Mack-Cali Realty Corporation, a New
York Stock Exchange-listed real estate investment trust, and
Madison Square Garden, Inc., a NASDAQ-listed company. From 1996
to 2010, Mr. Tese was a director of Bowne and Company,
Inc., a stockholder and marketing communications services
company listed on the New York Stock Exchange, and from December
1994 to May 2008, he was a member of the board of directors of
The Bear Stearns Companies Inc., a broker-dealer and global
securities and investment firm. Mr. Tese received a
Bachelors degree in accounting from Pace University in
1966 and following two years as a first lieutenant with the
U.S. Army, a Juris Doctor degree from Brooklyn Law School
in 1972 and a Master of Laws degree in taxation from New York
University School of Law in 1973. Mr. Teses extensive
experience in the banking and finance industries provides the
Board of Directors with insight into regulatory and related
matters and his leadership and visibility as a member of various
other boards of directors provide the Company with considerable
value as to business and economic perspective and other matters.
Les J. Lieberman. Les J. Lieberman has served
as Executive Vice Chairman of the Company since November 3,
2009, and as a director of the Company since October 1,
2010. Mr. Lieberman has served as the Banks Executive
Vice Chairman and as a director of the Bank since
January 22, 2010. Until December 31, 2009, as the
executive managing director, Mr. Lieberman actively managed
Sterling Partners, LLC, a merchant banking and asset management
business that he founded in 1999. Sterling Partners was the
investment manager of Suez Equity Investors, L.P., a private
equity fund of which Mr. Lieberman was the managing general
partner. Prior to founding Sterling Partners, Mr. Lieberman
served as Executive Managing Director of Indosuez Capital, the
middle market U.S. lending business of Banque Indosuez. In
that role, he was responsible for all merchant banking, senior
loan and mezzanine
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debt underwriting, subordinated debt investing, private equity
investment and asset management activities of Indosuez Capital,
including loan origination, analysis, approval and monitoring.
From 1989 to 1992, Mr. Lieberman served as a Managing
Director in the mergers and acquisitions department of
Kidder Peabody & Co., where he also was a member
of the investment banking departments operating committee.
From 1985 to 1989, he headed the Financial Services M&A
Group at Drexel Burnham Lambert, an investment banking firm
(where he was responsible for mergers and acquisitions involving
banking institutions). Prior to that, Mr. Lieberman was at
the accounting firm of Main Hurdman, where he was a Certified
Public Accountant. Mr. Lieberman received a Master of
Business Administration degree from the University of
Pennsylvanias Wharton School of Business and Finance and a
Bachelor of Arts degree from Franklin and Marshall College,
where he was elected to Phi Beta Kappa. Mr. Lieberman
possesses valuable experience in a broad array of bank and
finance related areas including as the founder and the senior
manager of the U.S. division of a global bank that focused
on underwriting, lending, private equity investing and asset
management; as a senior banker and a senior management member in
financial services mergers and acquisitions; and as a former
CPA. This experience enables him to bring valuable insight to a
variety of areas of the bank including investment activity, risk
management, credit review, acquisition analysis and capital
markets.
Kent S. Ellert. Kent S. Ellert has served as
President and Chief Operating Officer and as a director of the
Company since October 1, 2010. Mr. Ellert has served
as President and Chief Operating Officer of the Bank since
January 22, 2010, and as a director of the Bank since
February 23, 2010. From October 2009 until our purchase of
certain assets of Old Premier on January 22, 2010,
Mr. Ellert assisted us with the identification of target
depository institutions as a consultant to the Company. Prior to
joining our organization, Mr. Ellert was a consultant to
Southeast Acquisition Holding Corp., an entity established for
the pursuit of bank platform acquisitions in Florida. From
August 2007 to October 2008, Mr. Ellert was President and
Chief Executive Officer of Fifth Third BankSouth Florida.
Prior to joining Fifth Third Bank, Mr. Ellert worked for
Wachovia (legacy First Union) for 18 years, where he
oversaw the establishment of Wachovias first wholesale
banking platform in southwest Florida and managed the
combination of Wachovia and First Union Bank in Broward County,
Florida. Mr. Ellert held various other positions with
Wachovia from 1989 until 2007, including Executive Vice
President, Group Head Retail Banking, Southeast US Regional
President, Business/Commercial Banking Sales Director, Senior
Portfolio Manager and Corporate Banking Officer. Prior to
joining Wachovia, Mr. Ellert was a Relationship Manager at
NCNB (a predecessor to Bank of America). He is currently a
member of the board of directors of Florida Gulf Coast
University, Lutgert College of Business and prior member of the
board of the Economic Development Council, where he also is the
Vice Chairman of the Membership and Investment Committee.
Mr. Ellert held the position as the Chair of the Museum of
Science and Discovery and Deliver the Dream where he supported
various civic and social initiatives. Mr. Ellert is a
graduate of the University of Texas at Austin, where he received
his Bachelor of Business Administration degree in accounting,
and the University of Houston, where he received his Master in
Business Administration degree with a concentration in finance.
Mr. Ellert brings to the Bank valuable experience in the
management and operations of a regional bank, and his experience
and contacts in the Florida region also serve as a valuable
resource for the Board of Directors.
Stuart I. Oran. Stuart I. Oran has served as
Executive Vice President and Chief Administrative Officer and as
a director of the Company since October 1, 2010, and as
Executive Vice President and Chief Administrative Officer of the
Bank and as a director of the Bank since January 22, 2010.
Mr. Oran has been the Managing Member of Roxbury Capital
Group, a merchant banking firm he founded in 2002, which is
focused on private equity, restructuring and financing
transactions. From 1994 to 2002, he was a senior executive at
United Airlines/UAL Corporation, an international air carrier
traded on the NASDAQ Stock Exchange, with global responsibility
for their legal, governmental and regulatory affairs and
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profit and loss responsibility for Uniteds $6 billion
International Division, and was CEO of its business aviation
line of business. Previously, Mr. Oran was a corporate
partner at the New York law firm of Paul, Weiss, Rifkind,
Wharton & Garrison, which he joined in 1974.
Mr. Oran is a director of Spirit Airlines, a commercial air
carrier, and Red Robin Gourmet Burgers, a national casual dining
business listed on NASDAQ, and has been a director of
Wendys International and Deerfield Capital Corp, an
institutional asset manager listed on NASDAQ. Mr. Oran
received a Bachelor of Science degree from Cornell University
and a Juris Doctor degree from the University of Chicago Law
School. Mr. Orans years of experience as a merchant
banker, business executive and practicing attorney, and as a
director of several public and private companies, enables him to
bring important perspectives on issues relating to regulatory
and governance matters, corporate finance and leadership.
Alan Bernikow. Alan Bernikow has served as a
director of the Company since October 1, 2010, and as a
director of the Bank since January 22, 2010. From 1998
until his retirement in May 2003, Mr. Bernikow served as
the Deputy Chief Executive Officer of Deloitte &
Touche LLP, or D&T, a global professional services firm.
Prior to that, Mr. Bernikow held various senior executive
positions at D&T and various of its predecessor companies,
which he joined in 1977. Mr. Bernikow currently serves as a
director of Revlon, Inc., a worldwide cosmetics and beauty care
products company listed on the New York Stock Exchange, as a
director and chairman of the audit committee and compensation
committee of Mack-Cali Realty Corporation, a real estate
investment trust traded on the New York Stock Exchange, and as a
director and member of the audit committee of Casual Male Retail
Group, Inc., a specialty retailer of mens apparel that is
traded on the NASDAQ Stock Market. He also serves as a director
or trustee, and chairman of the audit committees, of certain
funds for which UBS Global Asset Management (US) Inc., a
wholly-owned subsidiary of UBS AG, or one of its affiliates,
serves as investment advisor,
sub-advisor
or manager. As a result of Mr. Bernikows long career
in various operating and directorship positions, he provides the
Board of Directors with business, leadership and management
experience and insights into many aspects of our operations.
Thomas E. Constance. Thomas E. Constance has
served as a director of the Company since October 1, 2010,
and as a director of the Bank since March 15, 2010.
Mr. Constance is Co-Chairman, and since 1994 a partner, of
Kramer Levin Naftalis & Frankel LLP, a law firm based
in New York City which the Company has retained to provide
certain legal services. From 1973 to 1994, Mr. Constance
was with the law firm of Shea & Gould.
Mr. Constance serves as a Trustee of the M.D. Sass
Foundation and St. Vincents Services. He has served as a
director of SIGA Technologies, Inc. since 2001.
Mr. Constance received a Bachelor of Science degree from
New York University and a Bachelor of Law degree from St.
Johns University School of Law. As a practicing attorney,
Mr. Constance brings an extensive history of counseling
both public and private companies with respect to governance
matters and other legal-related issues that may arise.
Frederic Salerno. Fred Salerno has served as a
director of the Company since October 1, 2010, and as a
director of the Bank since July 28, 2010. Mr. Salerno
is a retired Vice Chairman and Chief Financial Officer of
Verizon Communications Inc., a position he held from June 2000
to October 2002. Prior to that, Mr. Salerno served as Vice
Chairman and Chief Financial Officer of Bell Atlantic
Corporation (Verizons predecessor) from August 1997.
Before the merger of Bell Atlantic and NYNEX Corporation,
Mr. Salerno served as Vice Chairman, Finance and Business
Development of NYNEX from 1994 to 1997. Mr. Salerno was
Vice Chairman of the Board of NYNEX and President of the NYNEX
Worldwide Services Group from 1991 to 1994. Mr. Salerno is
a director of CBS, Akamai Technologies, Inc.,
IntercontinentalExchange, Inc., National Fuel Gas Company, and
Viacom Inc. From 1992 until 2008, Mr. Salerno also served
on the board of directors of The Bear Stearns Companies Inc., a
broker-dealer and global securities and investment firm. He
earned a Master of Business Administration degree from Adelphi
University and is a trustee of Manhattan College.
Mr. Salerno brings many years of
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business experience to the Board of Directors, which, among
other things, provides the Board of Directors with valuable
insight into general corporate and business matters for the Bank
and the Company.
Gerald Luterman. Gerald Luterman has served as
a director of the Company since October 1, 2010, and as a
director of the Bank since January 22, 2010.
Mr. Luterman served on the board of directors of IKON
Office Solutions, Inc. from 2003 to 2008, when it was acquired
by Ricoh Company, Ltd. Mr. Luterman served as Executive
Vice President and Chief Financial Officer of KeySpan
Corporation, a large gas distribution and integrated energy
company, from 1998 to 2007, when KeySpan was acquired by
National Grid plc. Before joining KeySpan, Mr. Luterman was
Senior Vice President and Chief Financial Officer of Arrow
Electronics. Prior to that, Mr. Luterman held senior
finance positions with American Express Company, a New York
Stock Exchange-listed global payments and travel company, and
Emerson Electric. In addition, Mr. Luterman was a principal
with Booz-Allen & Hamilton, a strategy and technology
consulting firm. He is currently a director of NRG Energy, a New
York Stock Exchange-listed energy provider, where he serves on
the audit and finance committees. Mr. Luterman is also
currently a director of The Conti Group and Lutheran Medical
Center. He is a member of the Financial Executive Institute and
the American Gas Association, where he previously served as
Chairman of the Finance Committee. Mr. Luterman brings many
years of experience as a chief financial officer, which, among
other things, provides the Board of Directors with valuable
insight into financial direction, financial statements and
general corporate finance matters for the Bank and the Company.
Howard R. Curd. Howard Curd has served as a
director of the Company since October 1, 2010, and as a
director of the Bank since September 1, 2010. A seasoned
executive, Mr. Curd has been Chairman of the Board and
Chief Executive Officer of Uniroyal Engineered Products, LLC
since 2003. He is a director of A. Schulman, Inc. and serves on
its Audit Committee and as Chair of its Strategic Planning
Committee. He has also served as a director of KeySpan
Corporation and its predecessors, and of Emcore Corporation.
Mr. Curd brings a long history of banking and general
business experience to the Board of Directors.
Paul Anthony Novelly. Tony Novelly has served
as a director of the Company since October 1, 2010, and as
a director of the Bank since September 23, 2010. He is
Chairman and Chief Executive Officer of Apex Oil Company, Inc.,
a privately held company based in St. Louis, Missouri
engaged in the trading, storage, marketing and transportation of
petroleum products, including liquid terminal facilities in the
Midwest and Eastern United States, and towboat and barge
operations on the inland waterway system. Mr. Novelly is
President and a director of AIC Limited, a Bermuda-based oil
trading company, Chairman of World Point Holdings, Inc., which
owns and operates petroleum storage facilities in the United
States, and Chief Executive Officer of St. Albans Global
Management, Limited Partnership, LLLP, which provides corporate
management services. He currently serves on the board of
directors at Boss Holdings, Inc., a distributor of work gloves,
boots and rainwear and other consumer products, and serves as
chairman of the board of FutureFuel Corp., a publicly held owner
and operator of a biofuel and specialty chemical plant in
Batesville, Arkansas. Within the past five years he has also
served on the boards of directors of The Bear Stearns Companies
Inc., a broker-dealer and global securities and investment firm,
and of Intrawest Corporation, a company that is a world leader
in destination resorts and adventure travel. Mr. Novelly
brings extensive expertise in business, commodities, and
consumer products to the Board of Directors.
William L. Mack. Bill Mack has served as a
director of the Company since October 1, 2010, and as a
director of the Bank since September 1, 2010. He is the
Chairman and founder of AREA Property Partners (f/k/a Apollo
Real Estate Advisors, L.P.), the Chairman of the board of
directors and Chairman of the Executive Committee of the board
of directors of Mack-Cali Realty Corporation, a real estate
investment trust traded on the New York Stock Exchange, and the
President and Senior Managing Partner of The Mack Company.
Mr. Mack has served as a
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member of the Mack-Cali board of directors and as Chairman of
the Executive Committee of that board since 1997, and as its
Chairman since 2000. At The Mack Company, Mr. Mack pioneered the
development of large, class A office properties and helped
to increase The Mack Companys real estate portfolio to
approximately 20 million square feet. In addition,
Mr. Mack is a founder of NRDC Real Estate Advisors, LLC and
NRDC Equity Partners LLC. He currently serves as a board member
of the Regional Advisory Board of JPMorgan Chase. Mr. Mack
previously served as a member of the boards of directors of
Retail Opportunity Investments Corporation, from 2009 to 2010;
City and Suburban Financial Corporation, from 1988 to 2007; The
Bear Stearns Companies Inc., from 1997 to 2004; Vail Resorts,
Inc., from 1993 to 2004; and Wyndham International, Inc., from
1999 to 2005. Mr. Mack is a vice chairman of the North
Shore-Long Island Jewish Health System, chairman of the board
for the Solomon R. Guggenheim Foundation, and Trustee and
Executive Committee member of Lenox Hill Hospital. He also is
trustee emeritus of the Board of Trustees of the University of
Pennsylvania and Vice Chairman of the Board of Overseers of The
Wharton School of Business and Finance at the University of
Pennsylvania. Mr. Mack attended The Wharton School and has
a Bachelor of Science degree in business administration and
finance and real estate from New York University.
Mr. Macks extensive business experience, particularly
in the area of real estate, provides the Board of Directors with
valuable insight with respect to matters related to real estate
banking products offered by the Bank.
Executive
Officers
Timothy E. Johnson. Timothy E. Johnson has
served as Chief Financial Officer of the Company and the Bank
since June 21, 2010. Prior to joining our organization,
Mr. Johnson was a partner at KPMG in Chicago, Illinois from
2004 to 2010. At KPMG, he served as the lead engagement partner
on more than 20 large and small bank acquisitions in the
southeast United States, including distressed bank and FDIC
failed bank transactions. He has focused on transactional
buy side diligence, including diligence on large
complex multi-channel regional banks, small community banks and
monoline specialty finance companies. From 2002 to 2004 he
served as Finance Director and Large Corporate Controller at the
Commercial Bank of Bank One, National Association (acquired by
JPMorgan Chase Bank, National Association), in which he managed
teams responsible for reporting, budgeting, forecasting and
analysis of the Commercial Banks loan and lease portfolio,
and was further responsible for the development and
implementation of several key reporting, accounting and
operational risk management initiatives undertaken by the
organization. From 1995 to 2002, Mr. Johnson served as an
audit manager for Arthur Andersen, performing audits of large
financial services entities. Mr. Johnson is a graduate of
the University of Wisconsin, where he received his Bachelor of
Business Administration degree in accounting.
James E. Baiter. James E. Baiter has served as
Executive Vice President and Chief Credit Officer of the Bank
since January 22, 2010. From October 2009 until our
purchase of certain assets of Old Premier on January 22,
2010, Mr. Baiter, along with Messrs. Ellert and
Castro, assisted us with the identification of target depository
institutions as a consultant to the Company. Prior to working
for the Bank, Mr. Baiter worked alongside
Messrs. Ellert and Castro as a consultant for Southeast
Acquisition Holding Corp. From August 2007 until October 2008,
Mr. Baiter was Director of Commercial Real Estate and
Special Assets of Fifth Third BankSouth Florida. Prior to
joining Fifth Third Bank, Mr. Baiter worked for Wachovia
(legacy First Union) for sixteen years, most recently as
Commercial Banking Director for Wachovias Broward/Palm
Beach County markets from 2001 to 2007. In that capacity, he was
responsible for marketing and administration of a 13 member team
specializing in wholesale banking. He also held various other
positions with Wachovia from 1991 until 2007, including Senior
Risk Manager, Senior Portfolio Manager and Commercial Banking
Officer. Prior to joining Wachovia in 1991, Mr. Baiter was
a Corporate Banking Officer at Southeast Bank, N.A.
Mr. Baiter is a
120
graduate of Washington State University, where he received his
Bachelor of Science degree in finance.
Juan C. Castro. Juan C. Castro has served as
Executive Vice President and Wholesale Banking Executive of the
Bank since January 22, 2010. From October 2009 until our
purchase of certain assets of Old Premier on January 22,
2010, Mr. Castro, along with Messrs. Ellert and
Baiter, assisted us with the identification of target depository
institutions as a consultant to the Bank. Prior to working for
the Bank, Mr. Castro worked alongside Messrs. Ellert
and Baiter as a consultant for Southeast Acquisition Holding
Corp. From August 2007 to October 2008, he was the Senior
Commercial Banker for Fifth Third Banks South Florida
affiliate. Prior to joining Fifth Third Bank, Mr. Castro
spent 17 years working for Wachovia Bank (legacy First
Union National Bank and Southeast Bank). In his most recent
capacity with Wachovia his role was as the Commercial Banking
Director for Wachovias Gulf Coast Region. Mr. Castro
established and managed a commercial banking team in the Gulf
Coast market of South Florida which was an expansion unit for
Wachovia. He also held various other senior line and credit
positions with Wachovia from 1990 until 2007, including Senior
Relationship Manager and Senior Credit Risk Manager for the
Broward County market; Senior Portfolio Manager and Senior
Underwriter in the Miami-Dade County market; and various other
positions in commercial and corporate banking with the legacy
First Union and Southeast Bank platforms prior to their
acquisition by Wachovia. Mr. Castro is a graduate of the
University of Miami, where he received his Bachelor of Science
degree in telecommunications management and his Masters of Urban
and Regional Planning degree.
Board
Composition
The bylaws of the Company provide that the Board of Directors
shall consist of not less than seven members nor more than 15
members, as set by the Board of Directors from time to time. The
certificate of incorporation of the Company provides that the
number of directors constituting the initial Board of Directors
of the Company is 12. The Board of Directors is divided into
three classes, as nearly equal in number as possible, designated
Class I, Class II and Class III. In case of any
increase or decrease, from time to time, in the number of
directors, the number of directors in each class shall be
apportioned as nearly equally as possible. No decrease in the
number of directors shall shorten the term of any incumbent
director. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at
which such director was elected; provided, that each director
initially appointed to Class I shall serve for an initial
term expiring at the Companys first annual meeting of the
stockholders; each director initially appointed to Class II
shall serve for an initial term expiring at the second annual
meeting of the stockholders; and each director initially
appointed to Class III shall serve for an initial term
expiring at the third annual meeting of the stockholders;
provided, further, that after the first re-election of
Class III directors for an additional three-year term, each
subsequent election of directors at any subsequent annual
meeting of the stockholders shall elect the directors elected at
such meeting for a one-year term expiring at the Companys
next annual meeting of the stockholders thereafter. The term of
each director shall continue until the election and
qualification of a successor and be subject to such
directors earlier death, resignation or removal.
Director
Independence
The Board of Directors currently consists of 12 members. In
order to determine which of our directors may qualify as
independent directors, we have adopted the director independence
standards of the New York Stock Exchange. The Board of Directors
has reviewed each of the directors relationships with the
Company in conjunction with such standard and has affirmatively
determined that the following members of the Board of Directors
are
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independent within the meaning of such rule:
Messrs. Bernikow, Luterman, Novelly, Mack, Constance, Curd,
and Salerno.
Board Leadership
Structure
The Executive Chairman of the Board of Directors presides at all
meetings of the Board of Directors of the Company. The Executive
Chairman is appointed on an annual basis by the members of the
Companys Board of Directors, to serve at its pleasure. The
offices of Executive Chairman of the Board of Directors of the
Company and Chief Executive Officer of the Company are
separatedVincent S. Tese has been appointed as Executive
Chairman of the Companys Board of Directors and Daniel M.
Healy is the Companys Chief Executive Officer. The Company
does not have a fixed policy with respect to the separation of
the offices of the Chairman or Executive Chairman of the Board
of Directors and Chief Executive Officer of the Company. We
believe that the separation of the offices is currently
appropriate and that it is in our best interests to make these
determinations from time to time.
Board Role in
Oversight of Risk
Our Board of Directors, together with the board of directors of
the Bank and the executive, audit, compensation and nomination
and governance committees of the boards of directors of the
Company and the Bank, coordinate with each other to provide
enterprise-wide oversight of our management and handling of
risk. In addition, the Banks board of directors has
established a Risk Policy Committee to assist in the oversight
of risk. These committees report regularly to the Banks
full board of directors on risk-related matters and provide the
Banks board of directors with integrated insight about the
Banks management of strategic, credit, interest rate,
financial reporting, technology, liquidity, compliance,
operational and reputational risks. In addition, the Banks
board of directors has a Loan and Credit Policy Committee and
Asset/Liability Management and Investment Committee, each which
provides risk management for the Bank in their respective areas
of oversight. The management of the Bank also provides reports
to our management and boards of directors regarding risk
management.
In addition, the Companys management also provides
additional risk oversight at the holding company level by
assisting the Bank with the management of our securities
portfolio, loan review, internal audit, compliance and asset
liability/liquidity structure. The Banks board of
directors has also established a management-level Risk
Policy Committee to assist in the oversight of risk.
At meetings of the Banks board of directors and its
committees, directors receive regular updates from management
regarding risk management. The Banks chief credit officer,
president and chief operating officer and chief financial
officer, who are responsible for instituting risk management
practices that are consistent with our overall business strategy
and risk tolerance, report directly to Mr. Healy, our Chief
Executive Officer, and lead managements risk discussions
at meetings of the Banks board of directors and its
committees. The contents of such discussions are also conveyed
to our Board of Directors in situations where it is appropriate
to address such matters at the holding company level. Outside of
formal meetings, members of our Board of Directors and the board
of directors of the Bank have regular access to senior
executives of the Bank, including the chief credit officers,
chief operations officer and chief financial officer.
Committees of the
Board of Directors
The standing committees of the Board include the Executive
Committee, Audit Committee, Compensation Committee, and
Nomination and Governance Committee.
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Executive
Committee
The Companys Executive Committee consists of four
directors (Messrs. Healy, Tese, Lieberman and Ellert).
Mr. Tese serves as Chairman of the Executive Committee. The
Executive Committees primary purpose is to act on behalf
of the full Board of Directors during the intervals between
meetings of the Board, usually when timing is critical. The
Executive Committee may also, from time to time, formulate and
recommend to the Board of Directors for approval general
policies regarding management of the business and affairs of the
Company. The Executive Committee of the Company has the power to
authorize and approve on behalf of the Company, any acquisition
of operations of any failed bank (including through the
acquisition of assets and assumption of liabilities) from the
FDIC, so long as the incremental capital contributed by the
Company to the Bank (or such other qualified subsidiary of the
Company, if any, as may effect such acquisition) in order to
effect such acquisition does not exceed $125 million. The
Executive Committee of the Bank has the power to authorize and
approve on behalf of the Bank any acquisition of operations of
any failed bank (including through the acquisition of assets and
assumption of liabilities) from the FDIC, so long as the asset
size of the acquisition target as reported on the acquisition
targets most recent Call Report does not exceed 15% of the
Banks total assets as reported on its most recent Call
Report.
Audit
Committee
The Companys Audit Committee consists of three directors
(Messrs. Bernikow, Luterman and Salerno), all of whom have
been determined by the Board of Directors to be independent.
Mr. Bernikow serves as the chairman and the Board of
Directors has determined that he qualifies as an audit
committee financial expert, as such term is defined in
applicable SEC regulations, and that he meets the New York Stock
Exchange standard of possessing accounting or related financial
management expertise. The Audit Committees primary duties
include the oversight of (i) the independent registered
public accounting firms qualifications and independence;
(ii) the performance of the Companys internal audit
function and independent registered public accounting firm; and
(iii) managements responsibilities to assure that
there is in place an effective system of controls reasonably
designed to safeguard the assets and income of the Company,
assure the integrity of the Companys financial statements
and maintain compliance with the Companys ethical
standards, policies, plans and procedures, and with laws and
regulations.
The Audit Committee charter also mandates that the Audit
Committee pre-approve all audit and non-audit services to be
provided by the independent registered public accounting firm.
Compensation
Committee
The Companys Compensation Committee consists of five
directors (Messrs. Salerno, Bernikow, Curd, Novelly and
Luterman), all of whom have been determined to be independent by
our Board of Directors. Mr. Salerno serves as Chairman of
the Compensation Committee. The Compensation Committee reviews
and recommends policies relating to compensation and benefits of
our officers and directors. The Compensation Committee reviews
and approves corporate goals and objectives relevant to
compensation of our Chief Executive Officer and other executive
officers, evaluates the performance of these officers in light
of those goals and objectives, and recommends the compensation
of these officers based on such evaluations. The Compensation
Committee also administers the issuance of stock options and
other awards under our stock plans.
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Nomination and
Governance Committee
The Companys Nomination and Governance Committee consists
of four directors (Messrs. Mack, Novelly, Bernikow and
Luterman), all of whom have been determined to be independent by
our Board of Directors. Mr. Mack serves as Chairman of the
Nomination and Governance Committee. The Nomination and
Governance Committee will be responsible for making
recommendations to our Board regarding candidates for
directorships and the size and composition of our Board. In
addition, the Nomination and Governance Committee will be
responsible for overseeing our corporate governance guidelines
and reporting and making recommendations to our Board concerning
governance matters.
Compensation
Committee Interlocks and Insider Participation
None of the directors who serve on the Compensation Committee of
the Company and the Bank has ever been employed by Bond Street
Holdings or the Bank. None of our executive officers serves or
has served as a member of the board of directors, compensation
committee or other board committee performing equivalent
functions of any entity that has one or more executive officers
serving on our boards of directors or on our Compensation
Committee.
Code of Business
Conduct and Ethics
We have adopted a code of business conduct and ethics that
applies to all of our employees, officers and directors,
including our Chief Executive Officer, Chief Financial Officer
and principal accounting officer. The code of business conduct
and ethics will be available on our website at
www.bondstreetholdings.com. We expect that any amendments to the
code, or any waivers of its requirements, will be disclosed on
our website. Information on, or accessible through, our website
is not part of, or incorporated by reference in, this prospectus.
124
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The following Compensation Discussion and Analysis provides
information regarding the objectives and elements of our
compensation program, policies and practices with respect to the
compensation of our executive officers who appear in the
Summary Compensation Table below (referred to
collectively throughout this section as our named
executive officers). Our named executive officers for the
fiscal year ended 2010 were:
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Daniel M. Healy, Chief Executive Officer of the Company and the
Bank
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Kent S. Ellert, President and Chief Operating Officer of the
Company and the Bank
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Timothy E. Johnson, Chief Financial Officer of the Company and
the Bank
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James E. Baiter, Executive Vice President and Chief Credit
Officer of the Bank
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Juan C. Castro, Executive Vice President and Wholesale Banking
Executive of the Bank
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Objectives of
Executive Compensation
Our executive compensation program for all of our executives,
including our named executive officers, is designed to pay for
performance as well as attract and retain qualified executive
officers. In order to accomplish these goals, our executive
compensation program is designed to achieve the following:
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Attract and retain management through meaningful and
competitive compensation programs with a primary focus on
long-term equity incentives that require continued employment
through long-term vesting periods.
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Align the interests of executive officers with the long-term
interests of our stockholders by rewarding our named
executive officers with long-term incentives that promote
long-term stockholder value creation.
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Promote stock ownership through providing executive
officers with long-term equity incentives.
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Reward individuals for performance with compensation tied
to Company, individual and business segment performance as
appropriate.
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Oversight of
Executive Compensation Program
The Companys executive compensation program (which
includes the compensation of executives of the Bank) is
administered by the Compensation Committee of the Board of
Directors. The Compensation Committee, which is comprised
entirely of independent directors, is responsible for
determining the compensation of the executives, including the
named executive officers, of the Company and the Bank and for
overseeing the Companys and the Banks executive
compensation and benefits programs. In order to put in place
executive compensation that reflects our executive compensation
program, our Compensation Committee looks not only at private
sector compensation but also takes into consideration the
regulatory framework in which we operate. Although we did not
take any Troubled Asset Relief Program (TARP) funds, and are
therefore not bound by any of the restrictions attached to TARP,
our Compensation Committee is aware of such restrictions, as
they impact the compensation packages many of our competitors
are able to offer their executives.
Our Compensation Committee is also mindful of the restrictions
placed on us by the OCC Agreement and the various Policy
Statements applicable to us which restrict our ability to
provide certain compensation arrangements to our executives. See
Supervision and
125
Regulation. In that context, we note that the 2009 Option
Plan provides that options granted thereunder cannot be
exercised earlier than January 25, 2013. Additionally, we
have certain Bank capital requirements that require the Bank to
keep a higher level of Tier 1 capital than some of our
competitors.
Role of the
Compensation Committee and Management
Pursuant to its committee charter, the Compensation Committee is
responsible for all aspects of the compensation programs for
executive officers. The Compensation Committee takes into
account a variety of factors including the regulatory
environment (as described above), market practices and trends
and contractual commitments when formulating compensation
programs.
The Compensation Committee then reports and makes a
recommendation to the Board of Directors regarding any
compensation program. As part of determining an appropriate
compensation program, the Compensation Committee reviews and
considers the risk profile associated with any such program. The
Compensation Committee does not set specific targets for
compensation levels but instead reviews each element of
compensation independently and determines the appropriate amount
for each element, as discussed below. Within the framework of
the programs approved by the Compensation Committee, management
provides input to the Compensation Committee on compensation
actions for executive officers and key select employees based on
their evaluation of individual and Company performance. In
making decisions regarding the compensation for the named
executive officers, the Compensation Committee focuses primarily
on the executive officers individual performance and our
overall Company performance as well as retention needs and
overall business environment
Role of
Compensation Consultant
The Compensation Committee has the sole authority to select and
retain outside compensation consultants or any other
consultants, legal counsel or experts to provide independent
advice and assistance in connection with the execution of its
responsibilities. The Compensation Committee retained
Compensation Advisory Partners LLC (CAP), to provide independent
compensation consulting services, particularly in light of the
complex regulatory environment in which we operate. CAP provided
a review of our existing executive compensation programs in
light of current market conditions and also provided insight on
future compensation initiatives.
Benchmarking
To provide the Compensation Committee with context, CAP reviewed
total compensation levels and pay practices and trends among
other comparable financial services institutions located
throughout the United States. The Compensation Committee used
this assessment as a reference point for competitive target
compensation pay levels and pay program design; however,
compensation actions were not determined based on these
findings. Accordingly, the Company does not benchmark
compensation.
Risk
Oversight
Our Audit Committee provides oversight of our enterprise risk
management, including the oversight of compensation practices to
ensure that our compensation programs do not encourage undue
risk. In addition, we are subject to various audits by the FDIC,
OCC and Federal Reserve which review our risk profile and
provide guidance on compensation programs. The Compensation
Committee and management take this guidance into consideration
when developing compensation programs. The Compensation
Committee and
126
Audit Committee do not believe that the compensation program
creates risks that are reasonably likely to have a material
adverse impact on the Company.
Elements of
Compensation
We believe that the compensation packages of our executive
officers, including our named executive officers, provide an
appropriate blend of fixed and variable compensation with
greater emphasis on long-term incentives. The compensation
elements were determined as follows:
Base
Salary
Base salaries comprise the fixed portion of total compensation
and are established based on an executives experience,
education and other qualifications. In most cases, we have
long-term contracts with our named executive officers which set
forth the amount of base compensation payable during the term of
such agreements. In 2010, there were no base salary increases
for the named executive officers.
Discretionary
Cash Bonus
Our named executive officers, including those with whom we have
entered into written contractual commitments, are eligible to
receive discretionary cash bonuses if such bonuses are awarded
by our Compensation Committee. These bonuses are designed to
reward executives based on the performance of the Company
overall, the performance of a specific business area and an
individuals performance. In 2010, the Compensation
Committee awarded discretionary cash bonuses to
Messrs. Ellert, Johnson, Baiter and Castro in the amounts
of: $425,000, $75,000, $225,000 and $225,000, respectively.
These were not tied to a specific performance goal but based on
the assessment of the Compensation Committee of overall results
and contributions.
Long-Term Equity
Based Compensation
At the time of the 2009 private placement financing, Bond Street
Holdings adopted the 2009 Option Plan, which is administered by
the Compensation Committee. The 2009 Option Plan provides for
the grant of options to acquire shares of Class A Common
Stock up to an aggregate of 10% of our issued and outstanding
shares of common stock at the time of the award, subject to a
maximum of 4,375,000 shares of Class A Common Stock
that may be issued under the 2009 Option Plan during its
five-year term. Executive management employees, consultants and
directors of the Company and the Bank are eligible to
participate in the 2009 Option Plan; provided that
Messrs. Healy, Tese and Lieberman may not be granted, in
total, options for more than 2% of the shares of common stock of
the Company. Each grant of options to acquire shares of Common
Stock will have an exercise price that is not less than the
greater of (x) 100% of the fair market value of the shares
of common stock (as defined in the 2009 Option Plan) and
(y) the book value of the shares of common stock on the
date of grant of such option. The Company will not modify the
exercise price of any outstanding option except in connection
with a reorganization, recapitalization or other similar event.
Outstanding options are not exercisable prior to
January 25, 2013, the third anniversary of our acquisition
of certain assets of Old Premier.
We use grants under the 2009 Option Plan to align our
executives interests with those of our stockholders. A
significant portion of our executives compensation is
equity based, so that the value of their compensation increases
as the value of the Company to our stockholders increases. Most
of our named executive officers were given option grants in
accordance with the terms and conditions of their employment
agreements, which are summarized below. Our Compensation
Committee has the authority to make additional grants to our
employees, including our executive officers, on a discretionary
basis. We do not establish specific
127
performance targets for long-term incentive levels. In 2010,
Messrs. Healy, Ellert, Johnson, Baiter and Castro received
options to purchase 151,533, 300,000, 150,000, 50,000 and
50,000 shares of Class A Common Stock, respectively,
in connection with their employment.
As required by the FDIC, no options under our 2009 Option Plan
may be exercised prior to January 25, 2013 and as a result
of such regulatory requirement, our employees (including our
named executive officers) are required to hold any option they
may be granted for a significant period of time. This
governmental-imposed requirement assists in aligning the
interests of our employees (including our named executive
officers) with those of our stockholders.
Compensation of
Our Chief Executive Officer
Our Chief Executive Officer does not receive any cash
compensation. As discussed elsewhere in this prospectus, our
Chief Executive Officer, along with Messrs. Tese, Lieberman
and Oran, are founders of our Company, and owned substantially
all of the equity of the Company prior to the Banks
receipt of a charter to conduct banking business, and prior to
or in connection with the financing of our Company, have
received certain warrants of the Company. The founders also
purchased equity in our Company, indirectly, in our 2009 private
placement financing, and have received grants under the 2009
Option Plan. As our Chief Executive Officer receives no cash
compensation and holds options and warrants to acquire equity,
and indirectly holds equity, in the Company, we believe our
Chief Executive Officers goals are fully aligned with
those of our stockholders.
Other Program
Elements
Employment
Arrangements with Named Executive Officers
The Bank has entered into employment agreements with
Messrs. Kent S. Ellert, Timothy E. Johnson, James E. Baiter
and Juan C. Castro. Daniel M. Healy, our Chief Executive
Officer, is the only named executive officer not party to an
employment agreement. The employment agreements set forth the
compensation terms of each such named executive officers
employment. In accordance with their employment agreements, the
named executive officers (excluding our Chief Executive Officer)
are entitled to receive certain benefits if their employment is
terminated by the Bank without cause (or by the executive for
good reason) or in connection with a change in control.
Perquisites
The named executive officers are entitled to receive limited
perquisite benefits including reimbursement for travel and
business related expenses, and a monthly car allowance or car
(including insurance, maintenance, and fuel). In accordance with
his employment agreement, Mr. Johnson was entitled to
receive additional relocation perquisites and reimbursement for
certain legal fees in connection with his employment agreement.
These benefits are described in greater detail under
Employment Agreements with Named Executive Officers.
Tax and
Accounting
The Compensation Committee will take into consideration the
requirement for a public company in order to maintain tax
deductibility of compensation under Section 162(m) of the
Internal Revenue Code.
Summary
Compensation Table
The following table sets forth information concerning all
compensation awarded to, earned by or paid to our principal
executive and financial officers and our three other most highly
compensated executive officers, collectively referred to as
named executive officers in this
128
prospectus, for all services rendered in all capacities to us
and our subsidiaries from the formation of the Company on
April 1, 2009 through December 31, 2010.
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Change in
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Non-
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Pension Value
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Equity
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and
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Incentive
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Nonqualified
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Plan
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Deferred
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All Other
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Stock
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Option
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Compen-
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Compensation
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Compen-
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Salary
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Bonus
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Awards
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Awards
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sation
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Earnings
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sation
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Total
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Name and Principal Position
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Year
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($)
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($)
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($)
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($) (1)
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($)
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($)
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($) (2)
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($)
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Daniel M. Healy
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2010
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142,456
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Chief Executive Officer of
the Company and the Bank (3)
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2009
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Kent S. Ellert
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2010
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383,333
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425,000
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1,680,000
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President and Chief Operating Officer of the Company and the
Bank (4)
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2009
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Timothy E. Johnson,
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2010
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212,051
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225,000
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870,000
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Chief Financial Officer of
the Company and the Bank (5)
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2009
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52,256
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James E. Baiter
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2010
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229,167
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225,000
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296,500
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Executive Vice President and Chief Credit Officer of the
Bank (6)
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2009
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Juan C. Castro
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2010
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229,167
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225,000
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296,500
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Executive Vice President and Wholesale Banking Executive of the
Bank (7)
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2009
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(1)
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The amounts in the option
awards column reflect the aggregate grant date fair value
of the stock options awarded during the applicable year to the
named executive officers, computed in accordance with Financial
Accounting Standards Board Accounting Standards Codification
Topic 718, CompensationStock Compensation (FASB ASC
Topic 718). The fair value of the stock options is
estimated on the date of grant using the Black-Scholes option
pricing model. For a discussion of valuation assumptions, see
Note to our consolidated financial statements included in
this prospectus.
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(2)
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The amounts indicated in the
all other compensation column for 2010 include the
following:
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a. Tax gross-up provided to
Mr. Johnson in connection with his relocation package,
$ .
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b. Reimbursement for certain
relocation and housing expenses of Mr. Johnson in
connection with his relocation package, $52,256.
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(3)
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Mr. Healy became Chief
Executive Officer of the Company and the Bank on
November 3, 2009 and January 22, 2010, respectively.
Mr. Healys option awards reflect options
under the 2009 Option Plan awarded on December 9, 2009 and
March 29, 2010 to purchase 127,510 and 24,023 shares,
respectively, of Class A Common Stock at an exercise price
of $20.00 per share. The options expire on December 19,
2019 and March 29, 2020, respectively.
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(4)
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Mr. Ellert became President
and Chief Operating Officer of the Company and the Bank on
October 1, 2010 and January 22, 2010, respectively.
The compensation for Mr. Ellert in 2010 reflects amounts
paid to him for a partial year of employment as well as sign-on
cash and equity awards under the terms of his employment
agreement. Mr. Ellerts option awards
reflect options under the 2009 Option Plan awarded on
February 23, 2010 to purchase 300,000 shares of
Class A Common Stock at an exercise price of $20.00 per
share. The options expire on February 23, 2020.
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(5)
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Mr. Johnson became Chief
Financial Officer of the Company and the Bank on October 1,
2009 and June 21, 2010, respectively. The compensation for
Mr. Johnson in 2010 reflects amounts paid to him for a
partial year of employment as well as sign-on cash and equity
awards under the terms of his employment agreement.
Mr. Johnsons option awards reflect
options under the 2009 Option Plan awarded on June 2, 2010
to purchase 150,000 shares of Class A Common Stock at
an exercise price of $20.00 per share. The options expire on
June 2, 2020.
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129
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(6)
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Mr. Baiter became Executive
Vice President and Chief Credit Officer of the Bank on
January 22, 2010. The compensation for Mr. Baiter in
2010 reflects amounts paid to him for a partial year of
employment as well as sign-on cash and equity awards under the
terms of his employment agreement. Mr. Baiters
option awards reflect options under the 2009 Option
Plan awarded on March 29, 2010 to purchase
50,000 shares of Class A Common Stock at an exercise
price of $20.00 per share. The options expire on March 29,
2020.
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(7)
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Mr. Castro became Executive
Vice President and Wholesale Banking Executive of the Bank on
January 22, 2010. The compensation for Mr. Castro in
2010 reflects amounts paid to him for a partial year of
employment as well as sign-on cash and equity awards under the
terms of his employment agreement. Mr. Castros
option awards reflect options under the 2009 Option
Plan awarded on March 29, 2010 to purchase
50,000 shares of Class A Common Stock at an exercise
price of $20.00 per share. The options expire on March 29,
2020.
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Grants of
Plan-Based Awards in Fiscal Year 2010
The following table provides a summary regarding plan-based
awards granted to the named executive officers in 2010.
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All Other
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Option
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Estimated Future Payouts
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Awards:
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Exercise or
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Under Equity Incentive Plan
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Number of
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Base Price of
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Grant Date
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Awards
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Shares or
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Option
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Fair Value
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Threshold
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Target
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Maximum
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Units
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Awards
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of Stock and Option
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Name
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Grant Date
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($)
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($)
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($)
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(#)
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($/Sh)
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Awards
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Daniel M. Healy
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3/29/2010
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24,023
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20.00
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$
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142,456
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Kent S. Ellert
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2/23/2010
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300,000
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20.00
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$
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1,680,000
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Timothy E. Johnson
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6/2/2010
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150,000
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20.00
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$
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870,000
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James E. Baiter
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3/29/2010
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50,000
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20.00
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$
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296,500
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Juan C. Castro
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3/29/2010
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50,000
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20.00
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$
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296,500
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Employment
Agreements with Named Executive Officers
The Bank currently has employment agreements with Kent Ellert,
Timothy Johnson, James Baiter and Juan Castro.
Messrs. Ellert and Johnson entered into amended and
restated employment agreements on January 10, 2011 and
January 24, 2011, respectively. Messrs. Baiter and
Castro entered into amended and restated employment agreements
on January 31, 2011. We have included below descriptions of
the current employment agreements of each of these officers, as
amended. There is no employment arrangement with Daniel M.
Healy, written or otherwise.
Kent S.
EllertPresident and Chief Operating Officer of the Company
and the Bank
On January 10, 2011, the Bank entered into an amended and
restated employment agreement with Kent Ellert. Under that
agreement, the current term of his employment commenced on
February 11, 2010 and ends on January 31, 2014, and,
unless either party provides 90 days notice in writing
prior to the end of then-current term, will automatically renew
for additional one year periods thereafter. Pursuant to the
employment agreement, Mr. Ellert is entitled to an annual
base salary of $450,000. Mr. Ellert is eligible to receive
an annual cash incentive bonus as may be approved by the
Compensation Committee of the Bank in its discretion pursuant to
the terms of the Banks annual incentive plan, as it may be
amended from time to time. The Bank will also reimburse
Mr. Ellert for all reasonable and necessary travel and
business expenses incurred by him in accordance with, and
subject to, the Banks standard policies. In addition, the
Bank provides Mr. Ellert with a car, and covers the costs
associated with the operation of the car, including insurance,
maintenance and fuel.
Pursuant to his employment agreement, Mr. Ellert was
granted an option to purchase 300,000 shares of
Class A Common Stock of the Company. The option is subject
to the provisions of the 2009 Option Plan and a stock option
agreement with the Company. The
130
option will vest with respect to one-third of the underlying
shares on each of the first, second and third anniversaries of
the option grant; provided, that the vested portion of the
option is not exercisable prior to January 25, 2013.
The Bank may terminate Mr. Ellerts employment
agreement with or without cause, and Mr. Ellert may
terminate his employment agreement with or without good reason,
including, in both instances, in connection with a change of
control. Further detail on our severance obligations to
Mr. Ellert, including the definitions of cause,
good reason and change of control, are
set forth below under the heading Potential Payments Upon
Termination or Change of Control.
Timothy E.
JohnsonChief Financial Officer of the Company and the
Bank
On January 24, 2011, the Bank entered into an amended and
restated employment agreement with Timothy Johnson. The current
term of his employment agreement commenced on June 28, 2010
and ends on June 30, 2013, and, unless either party
provides 90 days notice prior to the end of the
then-current term, will automatically renew for additional one
year periods thereafter. Pursuant to the employment agreement,
Mr. Johnson is entitled to an annual base salary of
$400,000. Mr. Johnson also received a one-time cash signing
bonus of $150,000, contingent upon one year of employment with
the Bank. Mr. Johnson is eligible to receive an annual cash
incentive bonus as may be approved by the Compensation Committee
of the Bank in its discretion pursuant to the terms of the
Banks annual incentive plan, as it may be amended from
time to time. The Bank will also reimburse Mr. Johnson for
all reasonable and necessary travel and business expenses
incurred by him in accordance with, and subject to, the
Banks standard policies. In addition, the Bank provides
Mr. Johnson with a car, and covers the costs associated
with the operation of the car, including insurance, maintenance
and fuel.
The Bank provided Mr. Johnson with a relocation package,
that included the following: (i) a loan at market terms for
the purchase of a primary residence, (ii) up to six
months temporary housing assistance, (iii) up to six
months of mortgage carrying costs on
Mr. Johnsons then-current principal residence,
(iv) up to two family house hunting trips to South Florida,
(v) assistance with the sale of Mr. Johnsons
then-current principal residence including payment of
brokers commission, and (vi) payment for the
reasonable costs of moving of furniture and personal effects as
reasonably determined by the board of directors of the Bank.
Prior to Mr. Johnsons relocation, the Bank also
reimbursed Mr. Johnson for all reasonable
out-of-town
travel and other reasonable expenses. Under his employment
agreement the Bank agreed to provide Mr. Johnson with a
full tax
gross-up
with respect to any payments or reimbursements relating to
Mr. Johnsons relocation benefits. Mr. Johnson
was also entitled to reimbursement from the Bank for up to
$7,000 for his reasonable legal fees and expenses incurred in
connection with the review and negotiation of his employment
agreement and related documentation.
Pursuant to his employment agreement, Mr. Johnson was
granted an option to purchase 150,000 shares of
Class A Common Stock of the Company. The option is subject
to the provisions of the 2009 Option Plan and a stock option
agreement with the Company. The option will vest with respect to
one-third of the underlying shares on each of the first, second
and third anniversaries of the option grant; provided, that the
vested portion of the option is not exercisable prior to
January 25, 2013. Notwithstanding the foregoing, the option
shall become immediately vested in full upon a change of control
(as defined in the option agreement) of either the Bank or the
Company or upon a termination of Mr. Johnsons
employment with the Bank as a result of his death or disability;
provided that, in no event shall such options become exercisable
prior to January 25, 2013. In addition, if
Mr. Johnsons employment is terminated by the Company
without cause or by Mr. Johnson for good reason, the
portion of his option that would have become vested upon the
next anniversary of the
131
grant shall vest upon such termination of employment, provided,
that in no event shall the option be exercisable before
January 25, 2013.
The Bank may terminate Mr. Johnsons employment with
or without cause, and Mr. Johnson may terminate his
employment with or without good reason, including, in both
instances, in connection with a change of control. Further
detail on our severance obligations to Mr. Johnson,
including the definitions of cause, good
reason and change of control, are set forth
below under the heading Potential Payments Upon
Termination or Change of Control.
James E.
BaiterExecutive Vice President and Chief Credit Officer of
the Bank
On January 31, 2011, the Bank entered into an amended and
restated employment agreement with James E. Baiter, under which
his employment commenced on February 17, 2010.
Mr. Baiters initial term of employment ends on
January 31, 2013, and thereafter will automatically renew
for additional one-year periods unless either party gives notice
90 days prior to the end of the term. Pursuant to the
employment agreement, Mr. Baiter is entitled to an annual
base salary of $250,000. Mr. Baiter is eligible to receive
an annual cash incentive bonus as may be approved by the
Compensation Committee of the Bank in its discretion pursuant to
the terms of the Banks annual incentive plan, as it may be
amended from time to time. The Bank will also reimburse
Mr. Baiter for all reasonable and necessary travel and
business expenses incurred by him in accordance with, and
subject to, the Banks standard policies.
Pursuant to his employment agreement, Mr. Baiter was
granted an option to purchase 50,000 shares of Class A
Common Stock of the Company. The option is subject to the
provisions of the 2009 Option Plan and a stock option agreement
with the Company. The option will vest with respect to one-third
of the underlying shares on each of the first, second and third
anniversaries of the option grant; however the vested portion of
the option is not exercisable prior to January 25, 2013.
The Bank may terminate Mr. Baiters employment with or
without cause, and Mr. Baiter may terminate his employment
with or without good reason, including, in both instances, in
connection with a change of control. Further detail on our
severance obligations to Mr. Baiter, including the
definitions of cause, good reason and
change of control, are set forth below under the
heading Potential Payments Upon Termination or Change of
Control.
Juan C.
CastroExecutive Vice President and Wholesale Banking
Executive of the Bank
On January 31, 2011, the Bank entered into an amended and
restated employment agreement with Juan C. Castro under which
his employment commenced on February 17, 2010.
Mr. Castros initial term of employment and ends on
August 17, 2011, and thereafter will automatically renew
for additional one-year periods unless either party gives notice
90 days prior to the end of the term. Pursuant to the
employment agreement, Mr. Castro is entitled to an annual
base salary of $250,000. Mr. Castro is eligible to receive
an annual cash incentive bonus as may be approved by the
Compensation Committee of the Bank in its discretion pursuant to
the terms of the Banks annual incentive plan, as it may be
amended from time to time. The Bank will also reimburse
Mr. Castro for all reasonable and necessary travel and
business expenses incurred by him in accordance with, and
subject to, the Banks standard policies.
Pursuant to his employment agreement, Mr. Castro was
granted an option to purchase 50,000 shares of Class A
Common Stock of the Company. The option is subject to the
provisions of the 2009 Option Plan and a stock option agreement
with the Company. The option will vest with respect to one-third
of the underlying shares on each of the first, second
132
and third anniversaries of the option grant; however the vested
portion of the option is not exercisable prior to
January 25, 2013.
The Bank may terminate Mr. Castros employment with or
without cause, and Mr. Castro may terminate his employment
with or without good reason, including, in both instances, in
connection with a change of control. Further detail on our
severance obligations to Mr. Castro, including the
definitions of cause, good reason and
change of control, are set forth below under the
heading Potential Payments Upon Termination or Change of
Control.
Outstanding
Equity Awards at 2010 Year-End
The following table provides a summary of equity awards
outstanding as of December 31, 2010 for the named executive
officers.
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Option Awards
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Stock Awards
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Equity
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Equity
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Incentive
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Incentive
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Plan
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Plan
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Awards:
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Equity
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Awards:
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Market or
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Incentive
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Number of
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Payout
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Plan
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Market
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Unearned
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Value of
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Awards:
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Value of
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Shares,
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Unearned
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Number of
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Number of
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Number of
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Number of
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Shares or
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Units or
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Shares,
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Securities
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Securities
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Securities
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Shares or
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Units of
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Other
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Units
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Underlying
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Underlying
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Underlying
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Units of
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Stock
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Rights
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or Other
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Unexercised
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Unexercised
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Unexercised
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Option
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Stock That
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That
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That
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Rights That
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Options
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Options
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Unearned
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Exercise
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Option
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Have Not
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Have Not
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Have Not
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Have Not
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(#)
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(#)
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Options
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Price
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Expiration
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Vested
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Vested
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Vested
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Vested
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Name
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Exercisable
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Unexercisable
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(#)
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($)
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Date
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(#)
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($)
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(#)
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($)
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(a)
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(b)
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(c)
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(d)
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(e)
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(f)
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(g)
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(h)
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(i)
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(j)
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Daniel M. Healy
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127,510
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(1)
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20.00
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12/9/2019
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24,023
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(2)
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20.00
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3/29/2020
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Kent S. Ellert
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300,000
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(3)
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300,000
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20.00
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9/26/2020
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Timothy E. Johnson
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150,000
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(3)
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150,000
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20.00
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6/2/2020
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James E. Baiter
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50,000
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(3)
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50,000
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20.00
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3/29/2020
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Juan C. Castro
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50,000
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(3)
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50,000
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20.00
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3/29/2020
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(1)
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These options vested immediately
upon issuance on December 9, 2009, but may not be exercised
prior to January 25, 2013.
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(2)
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These options vested immediately
upon issuance on March 29, 2010, but may not be exercised
prior to January 25, 2013.
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(3)
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These options will vest with
respect to
one-third of
the underlying shares on each of the first, second and third
anniversaries of the option grant. These options may not be
exercised prior to January 25, 2013.
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Option Exercises
and Stock Vested in 2010
As of December 31, 2010, 1,354,599 shares of
Class A Common Stock were issuable upon the exercise of
outstanding stock options granted under our 2009 Option Plan
with a weighted average exercise price of $20.15 per share, of
which 804,599 options were vested; pursuant to the terms thereof
none of the options were exercisable. In addition, as of
December 31, 2010, there were an aggregate of
2,346,561 shares reserved for future issuance under our
2009 Option Plan.
133
Potential
Payments Upon Termination or Change of Control
Severance
Arrangements for Kent S. Ellert
The following table and narrative describe and quantify the
potential payments to Mr. Ellert upon termination or change
of control, assuming that such termination or change of control
was effective as of December 31, 2010.
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Termination by the
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Company Without
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Termination by the
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Cause
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Termination Upon
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Company in
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(or by the Officer for
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Death
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Connection with a
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Mr. Kent S. Ellert
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Good Reason)
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or Disability
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Change of Control
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Aggregate monthly cash payments
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$
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$
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$
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Lump sum cash payment
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Value of accelerated stock options
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Total
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$
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$
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$
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Pursuant to Mr. Ellerts employment agreement, the
following termination and change of control-related
circumstances would trigger payments or the provision of other
benefits:
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Termination by the Bank without cause or by Mr. Ellert for
good reason.
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Termination within three months before or 12 months
following a change of control (i) by the Bank without cause
or (ii) by Mr. Ellert for good reason, or in the event
that Mr. Ellert terminates his employment for any reason
during the seventh calendar month following a change of control.
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Termination by the Bank for cause or by Mr. Ellert without
good reason.
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Termination due to Mr. Ellerts death or by the Bank
based on Mr. Ellerts disability.
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If Mr. Ellerts employment is terminated under any
circumstances, he will be entitled to the following:
(i) any accrued but unpaid salary for services rendered
through the date of termination; (ii) any vacation accrued
to the date of termination; (iii) any accrued but unpaid
expenses through the date of termination required to be
reimbursed in accordance with his employment agreement;
(iv) any benefits to which he may be entitled upon
termination pursuant to the benefit, annual bonus and incentive
plans and programs referred to in the employment agreement in
accordance with the terms of such plans and programs
(collectively, the Accrued Benefits).
If Mr. Ellerts employment is terminated by the Bank
without cause or if Mr. Ellert terminates his employment
for good reason, Mr. Ellert would be entitled to the
following, in addition to his Accrued Benefits: (i) a
severance payment of an amount equal to the sum of (A) his
salary and (B) the annual bonus paid or payable by the Bank
to Mr. Ellert for the annual bonus period ended immediately
prior to year in which his employment was terminated, payable in
equal installments during the 12 months following the date
of termination in accordance with the Banks normal payroll
practices and (ii) up to 18 months of the monthly
premiums for COBRA continuation coverage.
If Mr. Ellerts employment is terminated prior to the
expiration of the term within three months before or
12 months following a change of control (A) by the
Bank without cause or (B) by Mr. Ellert for good
reason, or in the event Mr. Ellert terminates his
employment with the Bank for any reason during the seventh
calendar month following a change of control, he will be
entitled to the following, in addition to his Accrued Benefits:
(i) a severance payment of an amount equal to the product
of two times the sum of (A) his salary and (B) the
annual bonus paid or payable by the Bank to Mr. Ellert for
the annual bonus period ended immediately prior
134
to year in which his employment was terminated, payable in equal
installments during the 24 months following the date of
termination in accordance with the Banks normal payroll
practices and (ii) up to 18 months of the monthly
premiums for COBRA continuation coverage.
If Mr. Ellerts employment is terminated by the Bank
for cause, or if Mr. Ellert terminates his employment
without good reason, he will be entitled only to his Accrued
Benefits.
If Mr. Ellerts employment is terminated prior to the
expiration of the term by reason of death or disability, he, or
his estate or beneficiaries, will be entitled to the following,
in addition to his Accrued Benefits: (i) continued payment
of his salary to himself in the case of disability (less any
disability benefits provided to Mr. Ellert under any
disability insurance paid for or for which premiums paid by
Mr. Ellert were reimbursed by the Bank) and to his estate
in the case of death, in either case through the end of the term
and (ii) up to 18 months of the monthly premiums for
COBRA continuation coverage (for Mr. Ellerts spouse
in the case of death).
Under his employment agreement, Mr. Ellert is subject to
certain covenants, including, but not limited to, a covenant not
to enter into a competing business or solicit employees or
customers of the Bank to terminate their relationship with the
Bank for a period of one year after the date of termination of
his employment, and a non-disclosure covenant. If, at the time
of termination of Mr. Ellerts employment or any time
thereafter, Mr. Ellert is in material breach of any of the
covenants in the employment agreement (which breach, if
susceptible to cure, continues unremedied following 15 days
written notice from the Bank to Mr. Ellert), except as
otherwise required by law, he shall not be entitled to any of
the payments described above (or if payments have commenced, any
continued payment).
Severance
Arrangement for Timothy E. Johnson
The following table and narrative describe and quantify the
potential payments to Mr. Johnson upon termination or
change of control, assuming that such termination or change of
control was effective as of December 31, 2010.
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Termination by the
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Company Without
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Termination by the
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Cause
|
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Termination Upon
|
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Company
|
|
|
|
(or by the Officer for
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Death
|
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|
in Connection with a
|
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Mr. Timothy E. Johnson
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|
Good Reason)
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or Disability
|
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|
Change of Control
|
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|
Aggregate monthly cash payments
|
|
$
|
|
|
|
$
|
|
|
|
$
|
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|
Lump sum cash payment
|
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|
|
|
|
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Value of accelerated stock options
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Total
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$
|
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$
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$
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|
Pursuant to Mr. Johnsons employment agreement, the
following termination and change of control-related
circumstances would trigger payments or the provision of other
benefits:
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Termination by the Bank without cause or by Mr. Johnson for
good reason.
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Termination within three months before or 12 months
following a change of control (i) by the Bank without cause
or (ii) by Mr. Johnson for good reason, or in the
event that Mr. Johnson terminates his employment for any
reason during the seventh calendar month following a change of
control.
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Termination by the Bank for cause or by Mr. Johnson without
good reason.
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Termination due to Mr. Johnsons death or by the Bank
based on Mr. Johnsons disability.
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135
If Mr. Johnsons employment is terminated under any
circumstances, he will be entitled to the following:
(i) any accrued but unpaid salary for services rendered
through the date of termination; (ii) any vacation accrued
to the date of termination; (iii) any accrued but unpaid
expenses through the date of termination required to be
reimbursed in accordance with his employment agreement;
(iv) any benefits to which he may be entitled upon
termination pursuant to the benefit, annual bonus and incentive
plans and programs referred to in the employment agreement in
accordance with the terms of such plans and programs
(collectively, the Accrued Benefits).
If Mr. Johnsons employment is terminated by the Bank
without cause or if Mr. Johnson terminates his employment
for good reason, Mr. Johnson would be entitled to the
following, in addition to his Accrued Benefits: (i) a
severance payment of an amount equal to the sum of (A) his
salary and (B) the annual bonus paid or payable by the Bank
to Mr. Johnson for the annual bonus period ended
immediately prior to year in which his employment was
terminated, payable in equal installments during the
12 months following the date of termination in accordance
with the Banks normal payroll practices; (ii) the
portion of his option to acquire Class A Common Stock of
the Company that would have become exercisable upon the next
anniversary of the grant date shall immediately become
exercisable upon such termination of employment (provided that
in no event shall the vested portion of the option become
exercisable prior to January 25, 2013) and
(iii) up to 18 months of the monthly premiums for
COBRA continuation coverage.
If Mr. Johnsons employment is terminated prior to the
expiration of the term within three months before or
12 months following a change of control (A) by the
Bank without cause or (B) by Mr. Johnson for good
reason, or in the event Mr. Johnson terminates his
employment with the Bank for any reason during the seventh
calendar month following a change of control, he will be
entitled to the following, in addition to his Accrued Benefits:
(i) a severance payment of an amount equal to the product
of two times the sum of (A) his salary and (B) the
annual bonus paid or payable by the Bank to Mr. Johnson for
the annual bonus period ended immediately prior to year in which
his employment was terminated, payable in equal installments
during the 24 months following the date of termination in
accordance with the Banks normal payroll practices;
(ii) the portion of his option to acquire Class A
Common Stock of the Company that would have become exercisable
upon the next anniversary of the grant date shall immediately
become exercisable upon such termination of employment; provided
that 100% of the option shall immediately become exercisable
upon the change of control (as defined in the option agreement);
provided, further, that in no event shall the vested portion of
the option become exercisable prior to January 25, 2013,
and (iii) up to 18 months of the monthly premiums for
COBRA continuation coverage.
If Mr. Johnsons employment is terminated by the Bank
for cause, or if Mr. Johnson terminates his employment
without good reason, he will be entitled only to his Accrued
Benefits.
If Mr. Johnsons employment is terminated prior to the
expiration of the term by reason of death or disability, he, or
his estate or beneficiaries, will be entitled to the following,
in addition to his Accrued Benefits: (i) continued payment
of his salary to himself in the case of disability (less any
disability benefits provided to Mr. Johnson under any
disability insurance paid for or for which premiums paid by
Mr. Johnson were reimbursed by the Bank) and to his estate
in the case of death, in either case through the end of the term
and (ii) up to 18 months of the monthly premiums for
COBRA continuation coverage (for Mr. Johnsons spouse
in the case of death).
Under his employment agreement, Mr. Johnson is subject to
certain covenants, including, but not limited to, a covenant not
to enter into a competing business or solicit employees or
customers of the Bank to terminate their relationship with the
Bank for a period of one year
136
after the date of termination of his employment, and a
non-disclosure covenant. If, at the time of termination of
Mr. Johnsons employment or any time thereafter,
Mr. Johnson is in material breach of any of the covenants
in the employment agreement (which breach, if susceptible to
cure, continues unremedied following 15 days written notice
from the Bank to Mr. Johnson), except as otherwise required
by law, he shall not be entitled to any of the payments
described above (or if payments have commenced, any continued
payment).
Severance
Arrangements for James E. Baiter
The following table and narrative describe and quantify the
potential payments to Mr. Baiter upon termination or change
of control, assuming that such termination or change of control
was effective as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by the
|
|
|
|
|
|
|
|
|
|
Termination by the
|
|
|
Officer in Connection with a
|
|
|
|
|
|
|
|
Mr. James E. Baiter
|
|
Company Without Cause
|
|
|
Change of Control
|
|
|
|
|
|
|
|
|
Aggregate monthly cash payments
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Lump sum cash payment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of accelerated stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pursuant to Mr. Baiters employment agreement, the
following termination and change of control-related
circumstances would trigger payments or the provision of other
benefits:
|
|
|
|
|
Termination by the Bank without cause or by Mr. Baiter for
good reason.
|
|
|
|
In the event that Mr. Baiter terminates his employment for
any reason during the seventh calendar month following a change
of control.
|
|
|
|
Termination by the Bank for cause or by Mr. Baiter without
good reason.
|
|
|
|
Termination due to Mr. Baiters death or by the Bank
based on Mr. Baiters disability.
|
If Mr. Baiters employment is terminated under any
circumstances, he will be entitled to the following:
(i) any accrued but unpaid salary for services rendered
through the date of termination; (ii) any vacation accrued
to the date of termination; (iii) any accrued but unpaid
expenses through the date of termination required to be
reimbursed in accordance with his employment agreement;
(iv) any benefits to which he may be entitled upon
termination pursuant to the benefit, annual bonus and incentive
plans and programs referred to in the employment agreement in
accordance with the terms of such plans and programs
(collectively, the Accrued Benefits).
If Mr. Baiters employment is terminated by the Bank
without cause or Mr. Baiter terminates his employment for
good reason, Mr. Baiter would be entitled to the following,
in addition to his Accrued Benefits: (i) a severance
payment of an amount equal to the sum of (A) his salary and
(B) the annual bonus paid or payable by the Bank to
Mr. Baiter for the annual bonus period ended immediately
prior to year in which his employment was terminated, payable in
equal installments during the 12 months following the date
of termination in accordance with the Banks normal payroll
practices and (ii) up to 18 months of the monthly
premiums for COBRA continuation coverage.
In the event Mr. Baiter terminates his employment with the
Bank for any reason during the seventh calendar month following
a change of control, he would be entitled to the following, in
addition to his Accrued Benefits, (i) a severance payment
of an amount equal to the sum of (A) his salary and
(B) the annual bonus paid or payable by the Bank to
Mr. Baiter for the annual bonus period ended immediately
prior to year in which his employment was terminated,
137
payable in equal installments during the 12 months
following the date of termination in accordance with the
Banks normal payroll practices and (ii) up to
18 months of the monthly premiums for COBRA continuation
coverage.
If Mr. Baiters employment is terminated by the Bank
for cause, or if Mr. Baiter terminates his employment
without good reason, he will be entitled only to his Accrued
Benefits.
If Mr. Baiters employment is terminated prior to the
expiration of the term by reason of disability, he will be
entitled to the following, in addition to his Accrued Benefits:
(i) continued payment of his salary (less any disability
benefits provided to Mr. Baiter under any disability
insurance paid for or for which premiums paid by Mr. Baiter
were reimbursed by the Bank) through the end of the term and
(ii) up to 18 months of the monthly premiums for COBRA
continuation coverage.
If Mr. Baiters employment is terminated prior to the
expiration of the term by reason of his death, his estate or
beneficiaries, will be entitled to the following, in addition to
his Accrued Benefits: (i) continued payment of his salary
to his estate (less any life insurance benefits provided by the
Bank or paid for or for which the premiums paid by
Mr. Baiter were reimbursed by the Bank), in either case
through the end of the term and (ii) up to 18 months
of the monthly premiums for COBRA continuation coverage for
Mr. Baiters spouse.
Under his employment agreement, Mr. Baiter is subject to
certain covenants, including, but not limited to, a covenant not
to enter into a competing business or solicit employees or
customers of the Bank to terminate their relationship with the
Bank for 180 days after the date of termination of his
employment or the last day of the term of the employment
agreement (whichever is earlier), and a non-disclosure covenant.
If, at the time of termination of Mr. Baiters
employment or any time thereafter, Mr. Baiter is in
material breach of any of the covenants in the employment
agreement, except as otherwise required by law, he shall not be
entitled to any of the payments described above (or if payments
have commenced, any continued payment).
Severance
Arrangements for Juan C. Castro
The following table and narrative describe and quantify the
potential payments to Mr. Castro upon termination or change
of control, assuming that such termination or change of control
was effective as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination by the
|
|
|
|
Termination by the
|
|
|
Officer in Connection with a
|
|
Mr. Juan C. Castro
|
|
Company Without Cause
|
|
|
Change of Control
|
|
|
Aggregate monthly cash payments
|
|
$
|
|
|
|
|
|
|
Lump sum cash payment
|
|
|
|
|
|
|
|
|
Value of accelerated stock options
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Pursuant to Mr. Castros employment agreement, the
following termination and change of control-related
circumstances would trigger payments or the provision of other
benefits:
|
|
|
|
|
Termination by the Bank without cause or by Mr. Castro for
good reason.
|
|
|
|
In the event that Mr. Castro terminates his employment for
any reason during the seventh calendar month following a change
of control.
|
|
|
|
Termination by the Bank for cause or by Mr. Castro without
good reason.
|
|
|
|
Termination due to Mr. Castros death or by the Bank
based on Mr. Castros disability.
|
138
If Mr. Castros employment is terminated under any
circumstances, he will be entitled to the following:
(i) any accrued but unpaid salary for services rendered
through the date of termination; (ii) any vacation accrued
to the date of termination; (iii) any accrued but unpaid
expenses through the date of termination required to be
reimbursed in accordance with his employment agreement;
(iv) any benefits to which he may be entitled upon
termination pursuant to the benefit, annual bonus and incentive
plans and programs referred to in the employment agreement in
accordance with the terms of such plans and programs
(collectively, the Accrued Benefits).
If Mr. Castros employment is terminated by the Bank
without cause or Mr. Castro terminates his employment with
good reason, he will be entitled to the following, in addition
to his Accrued Benefits: (i) a severance payment of an
amount equal to the sum of (A) his salary and (B) the
annual bonus paid or payable by the Bank to Mr. Castro for
the annual bonus period ended immediately prior to year in which
his employment was terminated, payable in equal installments
during the 12 months following the date of termination in
accordance with the Banks normal payroll practices and
(ii) up to 18 months of the monthly premiums for COBRA
continuation coverage.
In the event Mr. Castro terminates his employment with the
Bank for any reason during the seventh calendar month following
a change of control, he will be entitled to the following, in
addition to his Accrued Benefits: (i) a severance payment
of an amount equal to the sum of (A) his salary and
(B) the annual bonus paid or payable by the Bank to
Mr. Castro for the annual bonus period ended immediately
prior to year in which his employment was terminated, payable in
equal installments during the 12 months following the date
of termination in accordance with the Banks normal payroll
practices and (ii) up to 18 months of the monthly
premiums for COBRA continuation coverage.
If Mr. Castros employment is terminated by the Bank
for cause, or if Mr. Castro terminates his employment
without good reason, he will be entitled only to his Accrued
Benefits.
If Mr. Castros employment is terminated prior to the
expiration of the term by reason of disability, he will be
entitled to the following, in addition to his Accrued Benefits:
(i) continued payment of his salary (less any disability
benefits provided to Mr. Castro under any disability
insurance paid for or for which premiums paid by Mr. Castro
were reimbursed by the Bank) through the end of the term and
(ii) up to 18 months of the monthly premiums for COBRA
continuation coverage.
If Mr. Castros employment is terminated prior to the
expiration of the term by reason of his death, his estate or
beneficiaries, will be entitled to the following, in addition to
his Accrued Benefits: (i) continued payment of his salary
to his estate (less any life insurance benefits provided by the
Bank or paid for or for which the premiums paid by
Mr. Castro were reimbursed by the Bank), in either case
through the end of the term and (ii) up to 18 months
of the monthly premiums for COBRA continuation coverage for
Mr. Castros spouse.
Under his employment agreement, Mr. Castro is subject to
certain covenants, including, but not limited to, a covenant not
to enter into a competing business or solicit employees or
customers of the Bank to terminate their relationship with the
Bank for 180 days after the date of termination of his
employment or the last day of the term of the employment
agreement (whichever is earlier), and a non-disclosure covenant.
If, at the time of termination of Mr. Castros
employment or any time thereafter, Mr. Castro is in
material breach of any of the covenants in the employment
agreement, except as otherwise required by law, he shall not be
entitled to any of the payments described above (or if payments
have commenced, any continued payment).
139
Other General
Terms
Circumstances
Triggering Payments
Cause and change of control
are defined in the current employment agreements of
Messrs. Ellert, Johnson, Baiter and Castro as follows:
Cause generally includes:
|
|
|
|
|
the misappropriation of funds or property of the Bank or its
affiliates, or willful destruction of property of the Bank or of
its affiliates;
|
|
|
|
the conviction of (1) a felony or (2) any crime
involving fraud, dishonesty or moral turpitude or that
materially impairs the executive officers ability to
perform his duties with the Bank or that causes material damage
to the Bank or its affiliates;
|
|
|
|
the violation of any banking law or regulation or agreement with
any banking agency having jurisdiction over the Bank which is
reasonably likely to result in damage to the Bank or its
affiliates;
|
|
|
|
engaging in willful misconduct which constitutes a breach of
fiduciary duty or the duty of loyalty to the Bank or its
affiliates and which is reasonably likely to result in material
damage to the Bank or its affiliates;
|
|
|
|
the willful and material failure to perform his duties with the
Bank (other than as a result of total or partial incapacity due
to physical or mental illness);
|
|
|
|
the (1) willful violation of the Banks material
policies or rules or (2) negligent or willful misconduct in
the performance of his duties with the Bank, in each case, which
is reasonably likely to result in material damage to the Bank or
its affiliates; or
|
|
|
|
the material breach of any material provisions of the applicable
employment agreement.
|
A change of control is generally deemed to occur
upon:
|
|
|
|
|
any person is or becomes a beneficial
owner (as defined in Rule
l3d-3 under
the Securities Exchange Act of 1934, as amended (Exchange Act),
directly or indirectly, of securities of the Bank representing
more than 50% of the total voting power represented by then
outstanding voting securities of the Bank (calculated in
accordance with Rule
l3d-3 of the
Exchange Act); provided, that the term persons as
defined in Sections l3(d) and l4(d) of the Act shall not include
a trustee or other fiduciary holding securities under any
employee benefit plan of the Bank;
|
|
|
|
a merger of the Bank, the sale or disposition by the Bank of all
or substantially all of its assets, or any other business
combination of the Bank with any other corporation, other than
any such merger or business combination which would result in
the voting securities of the Bank outstanding immediately prior
thereto continuing to represent at least 50% of the total voting
power represented by the voting securities of the Bank or such
surviving entity outstanding immediately after such merger or
business combination; or
|
|
|
|
a majority of the directors who constituted the board of
directors of the Bank at the beginning of any
12-month
period are replaced by directors whose appointment or election
is not endorsed by a majority of the members of the board of
directors before the date of the appointment or election.
|
140
Good reason and disability
are defined in the current employment agreements of Messrs
Ellert and Johnson as follows:
Good Reason generally includes:
|
|
|
|
|
the executive officer ceasing to be a senior executive of the
Bank;
|
|
|
|
the relocation of executive officers principal work
location more than 50 miles from the greater Miami or
Fort Lauderdale, Florida metropolitan area;
|
|
|
|
the failure of the Bank to indemnify the executive officer, or
to maintain directors and officers liability
insurance coverage for the executive officer, as
required; or
|
|
|
|
the decrease or material failure of the Bank to pay the
executives compensation described in the applicable
employment agreement.
|
A disability generally includes the executives
inability to perform the duties and responsibilities
contemplated under the employment agreement for a period of
either (A) 90 consecutive days or (B) six months in
any 12-month
period due to a physical or mental incapacity or impairment.
Pursuant to each of the respective current employment
agreements, the Bank has agreed to indemnify each of
Messrs. Ellert, Johnson, Baiter and Castro for liabilities
incurred because of their employment and to provide each of them
with the full protection of any directors and
officers liability insurance policies maintained generally
for the benefit of its officers.
Compensation of
Directors for Fiscal Year 2010
During the fiscal year ended December 31, 2010, the
non-employee directors of the Company received total
compensation as shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Nonqualified
|
|
|
|
|
|
|
Fees Earned
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Deferred
|
|
All Other
|
|
|
|
|
or Paid in
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name (1)
|
|
Cash ($)
|
|
($)
|
|
($) (2)
|
|
($)
|
|
Earnings ($)
|
|
($)
|
|
($)
|
|
Alan Bernikow
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Constance
|
|
|
|
|
|
|
|
|
|
|
296,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard R. Curd
|
|
|
|
|
|
|
|
|
|
|
271,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerald Luterman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William L. Mack
|
|
|
|
|
|
|
|
|
|
|
271,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul Anthony Novelly
|
|
|
|
|
|
|
|
|
|
|
271,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frederic Salerno
|
|
|
|
|
|
|
|
|
|
|
271,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Each of Vincent S. Tese, Les J.
Lieberman and Stuart I. Oran serves as a director and executive
officer of the Company, but is not a named executive officer,
and does not receive any additional compensation for services
provided as a director.
|
|
(2)
|
|
Reflects the aggregate grant date
fair value of stock options awarded during 2010, computed in
accordance with FASB ASC Topic 718. The fair value of the stock
options is estimated on the date of grant using the
Black-Scholes option pricing model. For a discussion of
valuation assumptions, see Note to our
consolidated financial statements included in this prospectus
for the year ended December 31, 2010.
|
141
The table below shows the aggregate number of stock options (and
the exercise price thereof) held by non-employee directors as of
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Exercise Price of
|
Name
|
|
(in Shares) (1)
|
|
Stock Options
|
|
Alan Bernikow
|
|
|
50,000
|
|
|
$
|
20.00
|
|
Thomas E. Constance
|
|
|
50,000
|
|
|
$
|
20.00
|
|
Howard R. Curd
|
|
|
50,000
|
|
|
$
|
21.00
|
|
Gerald Luterman
|
|
|
50,000
|
|
|
$
|
20.00
|
|
William L. Mack
|
|
|
50,000
|
|
|
$
|
21.00
|
|
Paul Anthony Novelly
|
|
|
50,000
|
|
|
$
|
21.00
|
|
Frederic Salerno
|
|
|
50,000
|
|
|
$
|
21.00
|
|
|
|
|
(1)
|
|
All stock options included in this
table were awarded with a ten-year term.
|
For the year ending December 31, 2011, non-employee
directors each received an annual grant of options to purchase
50,000 shares of Class A Common Stock.
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table sets forth certain compensation plan
information with respect to both equity compensation plans
approved by security holders and equity compensation plans not
approved by security holders as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
Number of Securities
|
|
|
Weighted-Average
|
|
|
Future Issuance Under
|
|
|
|
to be Issued Upon
|
|
|
Exercise Price of
|
|
|
Equity Compensation
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
Securities Reflected in
|
|
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
1,354,599
|
(1)
|
|
$
|
20.15
|
(1)
|
|
|
2,346,561
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Total
|
|
|
1,354,599
|
(1)
|
|
$
|
20.15
|
(1)
|
|
|
2,346,561
|
|
|
|
|
(1)
|
|
Shares of Class A Common Stock
issuable upon exercise of options issued under the
Companys 2009 Option Plan.
|
As of December 31, 2010, there were no outstanding options
that had been awarded outside of the Companys equity
compensation plans.
142
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Statement of
Policy Regarding Transactions with Related Persons
Transactions by us with related parties are subject to a formal
written policy, as well as regulatory requirements and
restrictions. These requirements and restrictions include
Sections 23A and 23B of the Federal Reserve Act (which
govern certain transactions by the Bank with its affiliates) and
the Federal Reserves Regulation O (which governs
certain loans by the Bank to its executive officers, directors,
and principal stockholders). See Supervision and
RegulationLimits on Transactions with Affiliates and
Insiders.
We have adopted policies to comply with these regulatory
requirements and restrictions. Our policy provides that the
Companys Audit Committee shall, prior to the Company
entering into any related party transaction required to be
disclosed pursuant to Item 404 of
Regulation S-K
promulgated by the SEC, review and approve such transaction and
recommend to the Board of Directors that it approve such
transaction; however, the Company may only enter into a related
party transaction approved by the Audit Committee if the Board
of Directors also approves such transaction. The Audit Committee
shall report to the Board of Directors any proposed related
party transaction that it does not approve. The Audit Committee
shall also review and report to the Board of Directors any
questions of possible conflict of interest involving members of
the Board of Directors, members of senior management or their
immediate families.
Certain
Relationships and Related Person Transactions
Based on information provided by the directors and the executive
officers, the Audit Committee determined that there were no
related person transactions to be reported in this prospectus
other than:
On June 1, 2010, the Bank, Bond Street Management, LLC,
Bond Street Investors LLC and the Company (formerly Bond Street
Holdings LLC) (collectively, the Holding Companies)
entered into an Office Space, Expenses and Tax Allocation
Agreement (the Allocation Agreement). The parties to
the Allocation Agreement entered into an amendment to such
agreement on March 24, 2011. Under the terms of the
Allocation Agreement, as amended, (i) the Holding Companies
will rent office space from the Bank at a fair market rate,
(ii) the Company will prepare and file consolidated federal
income tax returns on behalf of the Holding Companies and the
Bank, (iii) the Bank will pay to the Company an amount
equal to the federal income taxes the Bank would have paid if it
were not included in such returns, and (iv) the Bank will
provide certain administrative and support services and incur
other miscellaneous expenses for the benefit of the Holding
Companies. All payments, reimbursements and other amounts due
under the Allocation Agreement are required to be made by the
applicable party on a quarterly basis. The Company pays
approximately $100,000 per quarter to the Bank in respect of
office space and shared cost of salaries for several executives.
Kramer Levin Naftalis & Frankel LLP serves as the
Companys principal outside legal counsel, and regularly
bills the Company for legal services provided to the Company.
One of our directors, Thomas Constance, is a partner at Kramer
Levin Naftalis & Frankel LLP.
In November 2009 and August 2010, we granted registration rights
to the investors in our 2009 and 2010 private placement
financings. See Shares Eligible for Future
SaleRegistration Rights for a description of the
registration rights.
All loans to executive officers and directors of the Company and
the Bank have been made in compliance with Section 22(h) of
the Federal Reserve Act and have been made in the ordinary
course of business and on substantially the same terms and
conditions, including interest rates and collateral, as those
prevailing at the time for comparable transactions with
143
the Banks other customers, and do not involve more than
the normal risk of collectability or present other unfavorable
features.
All of such loans are approved by the Board of Directors. The
following table presents a summary of the only loan in excess of
$120,000 extended by the Bank to any of the Companys
directors, executive officers or immediate family members of
such individuals.
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Highest
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Principal
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Amount Paid
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Year
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Balance
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Balance
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During Year
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Interest
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Name and Position
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Type
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Made
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During
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05/09/11
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Principal
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Interest
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Rate
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Timothy E. Johnson,
Chief Financial Officer of the Company and the Bank
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Residential
Mortgage
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2011
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$
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$
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$
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$
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%
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Upon completion of the Companys 2010 private placement
financing, Messrs. Healy, Lieberman, Tese, Oran and Ellert
received warrants (the exercise of which is conditioned upon the
consummation of an initial public offering of the Company that
raises at least $100 million of proceeds at a minimum
offering price of $20.00 per share (a Qualified
IPO)), to acquire an aggregate of 2,142,000 shares of
Class A Common Stock at an exercise price ranging from
$26.45 per share at the earliest time that a portion of such
warrants might first become exercisable on August 13, 2013
to $35.99 per share when such warrants expire on August 13,
2017. See Description of Capital StockWarrants.
Each of Messrs. Healy, Lieberman and Tese received such
warrants to acquire 642,600 shares, Mr. Oran received
such warrants to acquire 85,680 shares, and Mr. Ellert
received such warrants to acquire 128,520 shares.
On November 12, 2009, prior to the Companys initial
private placement financing, the Company issued, as a
distribution in respect of its existing equity, warrants to
purchase 3,310,428 shares of Class A Common Stock, at
per share exercise prices of $24.24, $26.18 and $28.28 each for
one-third of such shares, exercisable in three substantially
equal portions on each of the
6-month,
18-month and
30-month
anniversaries of the consummation of a Qualified IPO, but in no
event prior to January 25, 2013. Such warrants expire on
November 12, 2016. Each of Messrs. Healy, Lieberman
and Tese (or related transferees) holds such warrants to acquire
886,254 shares, and Mr. Oran (or related transferees)
holds such warrants to acquire 417,483 shares.
In each case, warrants issued prior to our conversion from a
limited liability company to a corporation on October 1,
2010 initially represented rights to acquire limited liability
company interests, and after October 1, 2010 represent
rights to acquire an equivalent number of shares of common stock.
In November 2009, concurrently with the consummation of the
Companys first private placement financing, Bond Street
Investors LLC acquired 1,069,519 Class A limited liability
company interests (now 1,069,519 shares of Class A Common Stock)
in the Company at the offering price minus the initial
purchasers discount/placement agent fee, or an aggregate
of approximately $20 million, including $6 million invested by
Messrs. Healy, Lieberman and Tese. In August 2010, concurrently
with the consummation of the Companys second private
placement financing, Bond Street Investors LLC acquired 702,976
Class A limited liability company interests (now 702,976 shares
of Class A Common Stock) in the Company at the offering price,
or an aggregate of approximately $14.8 million.
144
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the
beneficial ownership of the Companys voting securities as
of May 9, 2011 of (i) each person known to the Company
to beneficially own more than 5% of the applicable class of
voting securities, (ii) each director of the Company,
(iii) each named executive officer and (iv) all
directors and executive officers of the Company as a group. As
of May 9, 2011, a total of 32,548,906 shares of
Class A Common Stock were outstanding. Each share of
Class A Common Stock is entitled to one vote on matters on
which holders of Class A Common Stock are eligible to vote.
The column entitled Percentage of Total Voting Stock
Outstanding shows the percentage of total voting stock
beneficially owned by each listed party. Percentage ownership
prior to the offering is based on
32,548,906 shares of our Class A Common Stock
outstanding as of May 9, 2011. Percentage ownership
following the offering is based on
shares of our Class A Common Stock outstanding immediately
after the offering assuming that the underwriters
over-allotment option is not exercised. The Company also has
Class B Common Stock. As of May 9, 2011, a total of 4,462,692
shares of Class B Common Stock were outstanding. The
footnotes in the below table indicate the number of shares of
Class B Common Stock, if any, held by each listed party.
The number of shares beneficially owned is determined under
rules promulgated by the SEC, and the information is not
necessarily indicative of beneficial ownership for any other
purpose. Unless otherwise indicated, each person has sole
investment and voting power with respect to the shares
indicated. For purposes of this table, a person or group of
persons is deemed to have beneficial ownership as of
May 9, 2011 of any shares which such person has the right
to acquire within 60 days of May 9, 2011, through the
exercise or conversion of any stock option, convertible
security, warrant or other right. For purposes of computing the
percentage of outstanding shares held by each person or group of
persons named below on May 9, 2011, any security which such
person or persons have the right to acquire within 60 days
of May 9, 2011 is deemed to be outstanding for the purpose
of computing the percentage ownership of such person or persons,
but is not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person.
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Number of
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Percentage of
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Percentage of
|
|
|
Class A
|
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Total Voting Stock
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Total Voting
|
|
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Shares
|
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Outstanding
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Stock Outstanding
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Name and Address of
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Beneficially
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|
Prior to the
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Following the
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Beneficial Owner (1)
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Owned
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Offering
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Offering
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DIRECTORS AND NAMED EXECUTIVE OFFICERS
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Daniel M. Healy
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320,455
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(2)
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*
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%
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*
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%
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Kent S. Ellert
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25,000
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(3)
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*
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%
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|
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*
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%
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Timothy E. Johnson
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0
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(4)
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|
|
*
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%
|
|
|
*
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%
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James E. Baiter
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|
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0
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(5)
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|
|
*
|
%
|
|
|
*
|
%
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Juan C. Castro
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|
|
0
|
(5)
|
|
|
*
|
%
|
|
|
*
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%
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Vincent S. Tese
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|
|
320,455
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(6)
|
|
|
*
|
%
|
|
|
*
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%
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Les J. Lieberman
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|
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320,455
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(7)
|
|
|
*
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%
|
|
|
*
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%
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Stuart I. Oran
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|
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33,419
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(8)
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|
|
*
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%
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|
|
*
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%
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Alan Bernikow
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|
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0
|
(9)
|
|
|
*
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%
|
|
|
*
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%
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Thomas E. Constance
1177 Avenue of the Americas
New York, NY 10036
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|
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0
|
(9)
|
|
|
*
|
%
|
|
|
*
|
%
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Howard R. Curd
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|
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0
|
(9)
|
|
|
*
|
%
|
|
|
*
|
%
|
Gerald Luterman
|
|
|
0
|
(9)
|
|
|
*
|
%
|
|
|
*
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%
|
William L. Mack
|
|
|
217,601
|
(10)
|
|
|
*
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%
|
|
|
*
|
%
|
Paul Anthony Novelly
|
|
|
305,370
|
(11)
|
|
|
*
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%
|
|
|
*
|
%
|
Frederic Salerno
|
|
|
0
|
(9)
|
|
|
*
|
%
|
|
|
*
|
%
|
145
|
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|
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|
|
|
|
|
|
Number of
|
|
Percentage of
|
|
Percentage of
|
|
|
Class A
|
|
Total Voting Stock
|
|
Total Voting
|
|
|
Shares
|
|
Outstanding
|
|
Stock Outstanding
|
Name and Address of
|
|
Beneficially
|
|
Prior to the
|
|
Following the
|
Beneficial Owner (1)
|
|
Owned
|
|
Offering
|
|
Offering
|
|
All Executive Officers and Directors as a group (fifteen
persons)
|
|
|
1,279,586
|
|
|
|
3.9
|
%
|
|
|
|
%
|
OTHER HOLDERS OF 5% OR MORE OF THE COMPANYS VOTING STOCK
|
Franklin Mutual Advisers LLC
101 John F. Kennedy Pkwy
Short Hills, NJ 07078
|
|
|
2,620,320
|
(12)
|
|
|
8.1
|
%
|
|
|
|
%
|
Elliott Management Corporation
712 5th Avenue, 35th Floor
New York, NY 10019
|
|
|
2,380,952
|
(13)
|
|
|
7.3
|
%
|
|
|
|
%
|
Bond Street Investors LLC
5301 Blue Lagoon Drive, Miami,
Florida 33126(14)
|
|
|
1,772,495
|
|
|
|
5.5
|
%
|
|
|
|
%
|
Black Pearl Capital Limited
P.O. Box 2510
4th Floor Cayman Financial Centre
36A Dr. Roys Drive
George Town
Grand Cayman KY1-1105
Cayman Islands
|
|
|
1,601,734
|
(15)
|
|
|
5.0
|
%
|
|
|
|
%
|
Taconic Capital Advisors LLC
450 Park Avenue, 9th Floor
New York, NY 10022
|
|
|
1,596,400
|
(16)
|
|
|
5.0
|
%
|
|
|
|
%
|
|
|
|
(1)
|
|
Unless otherwise indicated, the
address for each executive officer and director of the Company
is
c/o Bond
Street Holdings, Inc., 5301 Blue Lagoon Drive, Miami, Florida
33126.
|
|
(2)
|
|
This includes:
(i) 1,995 shares of Class A Common Stock
beneficially owned by Mr. Healy through Bond Street
Management, LLC, (ii) 108,800 shares of Class A
Common Stock which he may be deemed to beneficially own by
reason of ownership of limited liability company interests in
Bond Street Investors LLC, and (iii) 98,430 shares of
Class A Common Stock that have been transferred by
Mr. Healy to various estate planning vehicles. This does
not include: (i) warrants to purchase 1,085,732 shares
of Class A Common Stock held by Mr. Healy directly and
warrants to purchase 443,122 shares of Class A Common
Stock that have been transferred by Mr. Healy to various
estate planning vehicles, or (ii) 246,667 shares of
Class A Common Stock issuable upon the exercise of options
(which warrants and options in no event can be exercised earlier
than January 25, 2013).
|
|
(3)
|
|
This includes 25,000 shares of
Class A Common Stock which Mr. Ellert may be deemed to
beneficially own by reason of limited liability company
interests in Bond Street Investors beneficially owned by him or
related parties, LLC beneficially owned by Mr. Ellert or
related parties. This does not include: (i) warrants to
purchase 128,520 shares of Class A Common Stock, or
(ii) 500,000 shares of Class A Common Stock
issuable upon the exercise of options which in no event can be
exercised earlier then January 25, 2013.
|
|
(4)
|
|
This does not include
200,000 shares of Class A Common Stock issuable upon
the exercise of options (which in no event can be exercised
earlier than January 25, 2013).
|
|
(5)
|
|
This does not include
150,000 shares of Class A Common Stock issuable upon
the exercise of options (which in no event can be exercised
earlier than January 25, 2013).
|
|
(6)
|
|
This includes:
(i) 1,995 shares of Class A Common Stock
beneficially owned by Mr. Tese through Bond Street
Management, LLC, and (ii) 108,800 shares of
Class A Common Stock which he may be deemed to beneficially
own by reason of ownership of limited liability company
interests in Bond Street Investors LLC. This does not include:
(i) warrants to purchase 985,992 shares of
Class A Common Stock held by Mr. Tese directly and
warrants to purchase 542,862 shares of Class A Common
Stock that have been transferred by Mr. Tese to certain
family members, or (ii) 246,667 shares of Class A
Common Stock issuable upon the exercise of options (which
warrants and options in no event can be exercised earlier than
January 25, 2013).
|
146
|
|
|
(7)
|
|
This includes:
(i) 1,995 shares of Class A Common Stock
beneficially owned by Mr. Lieberman through Bond Street
Management, LLC, (ii) 100,000 shares of Class A
Common Stock which he may be deemed to beneficially own by
reason of ownership of limited liability company interests in
Bond Street Investors LLC, and (iii) 98,432 shares of
Class A Common Stock that have been transferred by
Mr. Lieberman to various estate planning vehicles. This
does not include: (i) warrants to purchase
764,430 shares of Class A Common Stock held by
Mr. Lieberman directly and warrants to purchase
764,424 shares of Class A Common Stock that have been
transferred by Mr. Lieberman to various estate planning
vehicles, or (ii) 246,667 shares of Class A
Common Stock issuable upon the exercise of options (which
warrants and options in no event can be exercised earlier than
January 25, 2013).
|
|
(8)
|
|
This includes 315 shares of
Class A Common Stock beneficially owned by Mr. Oran through
Bond Street Management, LLC. This does not include:
(i) warrants to purchase 402,531 shares of
Class A Common Stock held by Mr. Oran directly and
warrants to purchase 100,632 shares of Class A Common
Stock that have been transferred by Mr. Oran to various
estate planning vehicles, or (ii) 150,000 shares of
Class A Common Stock issuable upon the exercise of options
(which warrants and options, in no event can be exercised
earlier than January 25, 2013).
|
|
(9)
|
|
This does not include 100,000
shares of Class A Common Stock issuable upon the exercise of
options (which in no event can be exercised earlier than January
25, 2013).
|
|
(10)
|
|
This includes 217,601 shares
of Class A Common Stock which Mr. Mack may be deemed to
beneficially own by reason of limited liability company
interests in Bond Street Investors LLC beneficially owned by him
or related parties. This does not include 100,000 shares of
Class A Common Stock issuable upon the exercise of options
(which in no event can be exercised earlier than
January 25, 2013).
|
|
(11)
|
|
This includes 305,370 shares
of Class A Common Stock which Mr. Novelly may be deemed to
beneficially own by reason of limited liability company
interests in Bond Street Investors LLC beneficially owned by him
or related parties. This does not include 100,000 shares of
Class A Common Stock issuable upon the exercise of options
(which in no event can be exercised earlier than
January 25, 2013).
|
|
(12)
|
|
This includes shares of
Class A Common Stock held by Franklin Mutual Advisers LLC
and certain affiliated entities.
|
|
(13)
|
|
This includes shares of
Class A Common Stock held by Elliott Management Corporation
and certain affiliated entities.
|
|
(14)
|
|
Bond Street Investors LLC is a
Delaware limited liability company in which certain of our
directors and officers, among others, have an interest. Bond
Street Investors LLC invested in each of the November 2009 and
August 2010 private placement financings.
|
|
(15)
|
|
This includes shares of
Class A Common Stock held by Black Pearl Capital Limited
and certain affiliated entities. This does not include
322,542 shares of Class B Common Stock held by Black
Pearl Capital Limited or certain of its affiliates.
|
|
(16)
|
|
This includes shares of
Class A Common Stock held by Taconic Capital Advisors LLC
and certain affiliated entities. This does not include
1,640,000 shares of Class B Common Stock held by
Taconic Capital Advisors LLC or certain of its affiliates.
|
147
SHARES ELIGIBLE
FOR FUTURE SALE
Prior to our initial public offering, there has been no public
market for our Class A Common Stock. We cannot predict the
effect, if any, that market sales of shares or the availability
of shares for sale will have on the market price prevailing from
time to time. Sales of our Class A Common Stock in the
public market after the restrictions lapse as described below,
or the perception that those sales may occur, could cause the
prevailing market price to decrease or to be lower than it might
be in the absence of those sales or perceptions. We intend to
apply to have our Class A Common Stock listed on the New
York Stock Exchange under the symbol
. As of May 9, 2011, there
were 37,011,598 shares of common stock outstanding,
including 32,548,906 shares of Class A Common Stock
and 4,462,692 shares of Class B Common Stock, held by
approximately 96 holders of record.
Sale of
Restricted Shares
Upon completion of the offering, we will have
shares of Class A Common Stock outstanding and
4,462,692 shares of Class B Common Stock outstanding.
The shares of Class A Common Stock being sold in the
offering will be freely tradable, other than by any of our
affiliates as defined in Rule 144 under the
Securities Act, without restriction or registration under the
Securities Act. All remaining shares, and all shares subject to
outstanding options, were issued and sold by us in private
transactions and are eligible for public sale if registered
under the Securities Act or sold in accordance with
Rule 144 or Rule 701 under the Securities Act. These
remaining shares are restricted securities within
the meaning of Rule 144 under the Securities Act.
As a result of the selling restriction agreements, and the
provisions of Rules 144 and 701, the restricted securities
will first become available for sale in the public market as
follows excluding the effect of purchases, if any, of shares of
our common stock by our existing stockholders in the offering:
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|
|
|
|
|
|
Additional Shares
|
|
Additional Shares of
|
|
|
|
|
of Class A Common
|
|
Class B Common
|
|
|
|
|
Stock Eligible for
|
|
Stock Eligible for
|
|
|
Days After the Date of this Prospectus
|
|
Public Sale
|
|
Public Sale
|
|
Comments
|
|
90 days
|
|
|
|
|
|
Shares available for sale after expiration of lock-up period in
the registration rights agreement described below.
|
180 days
|
|
|
|
|
|
Shares available for sale after expiration of lock-up agreements
described below.
|
Lock-Up
Arrangements
We have agreed that, for a period commencing on the date of the
underwriting agreement that we are entering into in connection
with the offering until 180 days after the initial closing of
the offering, and subject to compliance with registration rights
granted to our stockholders prior to the date hereof and
described herein, we will not, without the prior written consent
of Deutsche Bank Securities Inc.:
|
|
|
|
|
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, lend or
otherwise dispose of or transfer, directly or indirectly, any of
our equity securities or any
|
148
|
|
|
|
|
securities convertible into or exercisable or exchangeable for
our equity securities, or file any registration statement under
the Securities Act with respect to any of the foregoing; or
|
|
|
|
|
|
enter into any swap or other arrangement that transfers, in
whole or in part, directly or indirectly, any of the economic
consequences of ownership of any of our equity securities,
|
whether any such transaction described above is to be settled by
delivery of the shares of common stock or such other securities,
in cash or otherwise.
The prior sentence will not apply to grants of options to
acquire shares of common stock under our 2009 Option Plan or to
issuances in connection with the initial public offering.
Bond Street Management, LLC, Bond Street Investors LLC, our
officers and the Banks directors have each agreed that,
subject to certain exceptions, for a period beginning on the
date of the underwriting agreement that we are entering into in
connection with the offering and ending on (and including) the
date that is 180 days after the date of the initial closing of
the offering, they will not, without the prior written consent
of Deutsche Bank Securities Inc.:
|
|
|
|
|
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant for the sale of, lend or
otherwise dispose of or transfer, directly or indirectly, any of
our equity securities or any securities convertible into or
exercisable or exchangeable for our equity securities; or
|
|
|
|
enter into any swap or other arrangement that transfers to
another, in whole or in part, directly or indirectly, any of the
economic consequences of ownership of any of our equity
securities,
|
whether any such transaction described above is to be settled by
delivery of shares of common stock or such other securities, in
cash or otherwise.
Notwithstanding the prior sentence, subject to applicable
securities laws, the FDIC Policy and the restrictions contained
in our certificate of incorporation, these persons may transfer
our securities (including, without limitation, the shares of
common stock): (a) as a bona fide gift or gifts, provided
that the donee or donees agree to be bound in writing by the
same restrictions described above; or (b) to any trust for
the direct or indirect benefit of the holder or the immediate
family of the holder, provided that the trustee agrees in
writing to be bound by the same restrictions described above.
Pursuant to the registration rights agreements entered into in
connection with our 2009 and 2010 private placement financings,
each holder agreed that it would not, directly or indirectly,
sell, offer to sell, grant any option or otherwise transfer or
dispose of any equity securities or any securities convertible
into or exchangeable or exercisable for equity securities for a
period of up to 90 days (or 180 days with respect to
equity securities purchased by Bond Street Investors LLC
concurrently with the consummation of the 2009 private placement
financing) following the effective date of the registration
statement for the initial public offering or up to 90 days
(or 180 days with respect to equity securities purchased by
Bond Street Investors LLC concurrently with the consummation of
the 2009 private placement financing) following the date of an
underwritten offering pursuant to a shelf registration statement.
Rule 144
In general, under Rule 144 under the Securities Act, a
person (or persons whose shares are aggregated) who is not
deemed to have been an affiliate of ours at any time during the
three months preceding a sale, and who has beneficially owned
restricted securities within the meaning of Rule 144 for at
least six months (including any period of consecutive ownership
of
149
preceding non-affiliated holders) would be entitled to sell
those shares, subject only to the availability of current public
information about us. A non-affiliated person who has
beneficially owned restricted securities within the meaning of
Rule 144 for at least one year would be entitled to sell
those shares without regard to the provisions of Rule 144.
A person (or persons whose shares are aggregated) who is deemed
to be an affiliate of ours and who has beneficially owned
restricted securities within the meaning of Rule 144 for at
least six months would be entitled to sell within any
three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the applicable
class of common stock or the average weekly trading volume of
our common stock reported through the New York Stock Exchange
during the four calendar weeks preceding such sale. Such sales
are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information
about us.
Rule 701
In general, under Rule 701 under the Securities Act, most
of our employees, consultants or advisors who purchased shares
from us in connection with a qualified compensatory stock plan
or other written agreement are eligible to resell those shares
90 days after the date of this prospectus in reliance on
Rule 144, but without compliance with the holding period or
certain other restrictions contained in Rule 144.
Registration
Rights
Within 45 days after the effective date of the registration
statement of which this prospectus is a part, we have agreed to
use our best efforts to file a registration statement with the
SEC providing for the resale pursuant to Rule 415 from time
to time, by the holders thereof, of
(a) 22,069,519 shares of our common stock pursuant to
the terms of a Registration Rights Agreement, dated as of
November 12, 2009, by and between us and Deutsche Bank
Securities Inc. as initial purchase/placement agent for the
benefit of the investors in the 2009 private placement financing
and (b) 14,279,993 shares of our common stock pursuant
to the terms of a Registration Rights Agreement, dated as of
August 13, 2010, by and between us and the investors in the
2010 private placement financing.
The FDIC has also received certain registration rights for
shares of Class A Common Stock that may be issued pursuant
to the value appreciation instrument agreements entered into by
and between the Company and the FDIC in connection with the
acquisitions of certain assets of each of Old Peninsula, Old
Sunshine and Old FNBCF.
2009 Option
Plan
As described above in ManagementDescription of
Equity Incentive Plan, at the time of the 2009 private
placement financing we adopted the 2009 Option Plan, which is
administered by the Compensation Committee of the Board of
Directors. As described above in
ManagementDescription of Equity Incentive
Plan, the 2009 Option Plan provides for the grant of
options to acquire Class A Common Stock up to an aggregate
of 10% of our issued and outstanding common stock at the time of
the award, subject to a maximum of 4,375,000 shares of
common stock that may be issued during the five-year term of the
2009 Option Plan.
As of May 9, 2011, 2,700,501 shares of Class A
Common Stock were issuable upon the exercise of outstanding
stock options granted under our 2009 Option Plan with a weighted
average exercise price of $20.57 per share, of which 936,599
options were vested; pursuant to the terms thereof none of those
options were currently exercisable. In addition, as of
May 9, 2011, there were an aggregate of
1,000,659 shares reserved for future issuance under the
2009 Option Plan.
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As soon as practicable after the completion of the offering, we
intend to file a registration statement on
Form S-8
under the Securities Act to register all shares of common stock
issuable under the 2009 Option Plan. Accordingly, shares of
common stock underlying these options will be freely tradable
and eligible for sale in the public markets, subject to vesting
provisions, terms of the
lock-up
agreements, terms of any applicable holding period restrictions
related to the FDIC Policy and, in the case of affiliates only,
the restrictions of Rule 144 other than the holding period
requirement.
Warrants
On November 12, 2009, prior to the Companys initial
private placement financing, the Company issued, as a
distribution in respect of its existing equity, warrants to
purchase an aggregate of 3,310,428 shares of Class A
Common Stock, at per share exercise prices of $24.24, $26.18 and
$28.28 each for one-third of such shares, exercisable in three
substantially equal portions on each of the
6-month,
18-month and
30-month
anniversaries of the consummation of an initial public offering
of the Company that raises at least $100 million of
proceeds at a minimum offering price of $20.00 per share (a
Qualified IPO), but in no event prior to
January 25, 2013. Such warrants expire on November 12,
2016. We expect the offering to constitute a Qualified 110.
On August 13, 2010 and November 12, 2010, the Company
issued the 2010 Warrants to purchase an aggregate of
2,142,000 shares of Class A Common Stock, at a per
share exercise price of between $26.45 and $35.99 (depending on
the date of exercise). The first one-third of the 2010 Warrants
become exercisable upon the later to occur of (i) one half
year (183 days) following the consummation of a Qualified
IPO and (ii) August 13, 2013, the second one-third of
the 2010 Warrants become exercisable upon the later to occur of
(i) one and one half years (548 days) following the
consummation of a Qualified IPO and (ii) August 13,
2013, and the final one-third of the 2010 Warrants become
exercisable upon the later to occur of (i) two year and one
half years (913 days) following the consummation of a
Qualified IPO and (ii) August 13, 2013. Each of the
2010 Warrants will expire on August 13, 2017. We expect the
offering to constitute a Qualified IPO.
In each case, warrants issued prior to our conversion from a
limited liability company to a corporation on October 1,
2010 initially represented rights to acquire limited liability
company interests, and after October 1, 2010 represent
rights to acquire an equivalent number of shares of common stock.
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DESCRIPTION OF
CAPITAL STOCK
The following description sets forth the general terms and
provisions of our capital stock. The statements below describing
our securities do not purport to be complete and are qualified
in their entirety by reference to the applicable provisions in
the bylaws, certificate of incorporation and the registration
rights agreements, copies of which are included as exhibits to
the registration statement of which this prospectus is a
part.
General
Our certificate of incorporation provides that we may issue up
to 100,000,000 shares of Class A Common Stock, par
value $0.001 per share, and 50,000,000 shares of
Class B Common stock, par value $0.001 per share, and
10,000,000 shares of preferred stock, par value $0.001 per
share. As of May 9, 2011, there were 32,548,906 shares
of Class A Common Stock and 4,462,692 shares of
Class B Common Stock outstanding and 83 and 13 stockholders
of record, respectively. After the offering, there will be an
aggregate of shares of our Class A Common
Stock and Class B Common Stock outstanding
or shares if the underwriters exercise their
over-allotment option in full. In addition, as of May 9,
2011, there were options and warrants to purchase
8,152,929 shares of Class A Common Stock outstanding.
Common
Stock
Class A Common Stock and Class B Common
Stock. Other than with respect to voting rights
and transfer and conversion provisions, each as described below,
the Class A Common Stock and Class B Common Stock are
treated equally and identically.
Voting Rights. The holders of our Class A
Common Stock are entitled to one vote for each share held of
record on all matters properly submitted to a vote of the
stockholders, including the election of directors. Holders of
our Class B Common Stock do not have voting power except as
required by applicable law. Holders of common stock do not have
cumulative voting rights in the election of directors.
Accordingly, the holders of a majority of the shares of
Class A Common Stock entitled to vote in any election of
directors can elect all of the directors standing for election,
if they so choose.
Conversion. Each share of Class B Common
Stock will be convertible into one share of Class A Common
Stock, subject to the following restrictions. Class B
Common Stock may not be converted into Class A Common Stock
in the hands of the initial investor or any of its affiliates
and may only be transferred by the initial investor if
(A) such transfer is otherwise permitted by the
Companys certificate of incorporation and (B) such
transfer is (i) to an affiliate of the initial investor or
to the Company; (ii) in a widespread public distribution;
(iii) in transfers in which no transferee (or group of
associated transferees) would receive 2% or more of any class of
voting securities of the Company; or (iv) to a transferee
that would control more than 50% of the voting securities of the
Company without any transfer from the investor. Class A
Common Stock may not be converted into Class B Common Stock.
Dividends. Subject to preferences that may be
applicable to any then outstanding preferred stock, holders of
common stock are entitled to receive ratably those dividends, if
any, as may be declared by the Board of Directors out of legally
available funds. See Dividend Policy and
Supervision and RegulationRegulatory Limits on
Dividends and Distributions.
Liquidation, Dissolution and Winding Up. Upon
our liquidation, dissolution or winding up, the holders of
common stock will be entitled to share ratably in the assets
legally available for distribution to stockholders after the
payment of all our debts and other liabilities, subject to the
prior rights of any preferred stock then outstanding.
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Preemptive Rights. Holders of common stock
have no preemptive rights or conversion rights or other
subscription rights and there are no redemption or sinking funds
provisions applicable to the common stock.
Assessment. All outstanding shares of common
stock are, and the common stock to be outstanding upon
completion of the offering will be, fully paid and nonassessable.
Ownership Limitations. If any applicable
regulatory authority determines that the identity or structure
of a holder of common stock precludes the Company from
participating in any acquisition of a financial institution or
otherwise precludes the granting of any approval, consent or
similar actions, then the Company may require the holder of
common stock to transfer such common stock or, at the discretion
of the Company and subject to applicable regulatory approval,
the Company may repurchase the common stock from such holder.
The Company is a bank holding company. A holder of common stock
(or group of holders acting in concert) that (i) directly
or indirectly owns, controls or has the power to vote more than
5% of the total voting power of the Company, (ii) directly
or indirectly owns, controls or has the power to vote 10% or
more of any class of voting securities of the Company,
(iii) directly or indirectly owns, controls or has the
power to vote 25% or more of the total equity of the Company, or
(iv) is otherwise deemed to control the Company
under applicable regulatory standards may be subject to
important restrictions, such as prior regulatory notice or
approval requirements and applicable provisions of the FDIC
Policy.
Preferred
Stock
No shares of preferred stock are issued and outstanding, and we
have no current intent to issue preferred stock in the immediate
future. The Board of Directors will have the authority, without
further action by the stockholders, to issue from time to time
the undesignated preferred stock in one or more series and to
fix the number of shares, designations, preferences, powers, and
relative, participating, optional or other special rights and
the qualifications or restrictions thereof. The preferences,
powers, rights and restrictions of different series of preferred
stock may differ with respect to dividend rates, amounts payable
on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions, and purchase funds and
other matters. The issuance of preferred stock could decrease
the amount of earnings and assets available for distribution to
holders of common stock or adversely affect the rights and
powers, including voting rights, of the holders of common stock,
and may have the effect of delaying, deferring or preventing a
change in control of the Company.
Warrants
On November 12, 2009, prior to the Companys initial
private placement financing, the Company issued, as a
distribution in respect of its existing equity, warrants (the
2009 Warrants) to purchase an aggregate of
3,310,428 shares of Class A Common Stock, at per share
exercise prices of $24.24, $26.18 and $28.28 each for one-third
of such shares exercisable in three substantially equal portions
on each of the
6-month,
18-month and
30-month
anniversaries of the consummation of a Qualified IPO, but in no
event prior to January 25, 2013. The 2009 Warrants expire
on November 12, 2016. We expect the offering to constitute
a Qualified IPO.
On August 13, 2010 and November 12, 2010, the Company
issued warrants (the 2010 Warrants) to purchase an
aggregate of 2,142,000 shares of Class A Common Stock,
at a per share exercise price of between $26.45 and $35.99
(depending on the date of exercise). The first one-third of the
2010 Warrants are exercisable upon the later to occur of
(i) one half year (183 days) following the
consummation of a Qualified IPO and (ii) August 13,
2013, the second one-third of the 2010 Warrants are exercisable
upon the later to occur of (i) one and one half
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years (548 days) following the consummation of a Qualified
IPO and (ii) August 13, 2013, and the final one-third
of the 2010 Warrants are exercisable upon the later to occur of
(i) two year and one half years (913 days) following
the consummation of a Qualified IPO and
(ii) August 13, 2013. Each of the 2010 Warrants will
expire on August 13, 2017 and may not be exercised prior to
August 13, 2013. The exercise price of such warrants
increases continuously, based on the actual number of days
elapsed from August 13, 2010 until August 13, 2017
according to the formula: $21.00*(1.08)^(number of days
elapsed from August 13, 2010 to the date of exercise
divided by 365). For example, the minimum exercise price would
be $26.45 per share at the earliest time that a portion of such
warrants might first become exercisable on August 13, 2013,
and the maximum exercise price would be $35.99 per share when
such warrants expire on August 13, 2017. We expect the
offering to constitute a Qualified IPO.
In each case, warrants issued prior to our conversion from a
limited liability company to a corporation on October 1,
2010 initially represented rights to acquire limited liability
company interests, and after October 1, 2010 represent
rights to acquire an equivalent number of shares of common stock.
Registration
Rights
Within 45 days from the effective date of the registration
statement of which this prospectus is a part, we have agreed to
use our best efforts to file a registration statement with the
SEC providing for the resale pursuant to Rule 415 from time
to time by the holders of (a) 22,069,519 shares of our
common stock pursuant to the terms of a Registration Rights
Agreement, dated as of November 12, 2009, by and between us
and Deutsche Bank Securities Inc. as initial purchase/placement
agent for the benefit of the investors in the 2009 private
placement financing and (b) 14,279,993 shares of our
common stock pursuant to the terms of a Registration Rights
Agreement, dated as of August 13, 2010, by and between us
and the investors in the 2010 private placement financing.
The FDIC has also received certain registration rights for
shares of Class A Common Stock that may be issued pursuant
to the value appreciation instrument agreements entered into by
and between the Company and the FDIC in connection with the
acquisitions of each of Old Peninsula, Old Sunshine and Old
FNBCF.
Limitation of
Liability and Indemnification of Directors and Authorized
Representatives
Delaware General
Corporation Law
The DGCL at Section 102(b)(7) enables a corporation in its
original certificate of incorporation or an amendment thereto to
eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach
of the directors fiduciary duty, except (i) for any
breach of the directors duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the
DGCL (providing for liability of directors for unlawful payment
of dividends or unlawful stock purchases or redemptions), or
(iv) for any transaction from which the director derived an
improper personal benefit.
The DGCL, at Section 145, provides, in pertinent part, that
a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the corporation), by reason of the fact that he is
or was a director, officer, employee or agent of the corporation
or is or was serving another corporation, partnership, joint
venture, trust or other enterprise, at the request of the
corporation, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with such action, suit
or
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proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest
of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. Lack of good faith, or lack of a reasonable belief
that ones actions are in or not opposed to the best
interest of the corporation, or with respect to any criminal
action or proceeding, lack of reasonable cause to believe
ones conduct was unlawful is not presumed from the
termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or nolo contendere plea or its
equivalent. In addition, the indemnification of expenses
(including attorneys fees) is allowed in derivative
actions, except no indemnification is allowed in respect of any
claim, issue or matter as to which any such person has been
adjudged to be liable to the corporation, unless and only to the
extent the Court of Chancery or the court in which such action
or suit was brought decides that indemnification is proper. To
the extent that any such person succeeds on the merits or
otherwise in defense of any of the above described actions or
proceedings, he shall be indemnified against expenses (including
attorneys fees). The determination that the person to be
indemnified met the applicable standard of conduct, if not made
by a court, is made by the board of directors of the corporation
by a majority vote of a quorum consisting of directors not party
to such an action, suit or proceeding or, if a quorum is not
obtainable or a disinterested quorum so directs, by independent
legal counsel in a written opinion or by the stockholders.
Expenses may be paid in advance upon the receipt of undertakings
to repay. A corporation may purchase indemnity insurance.
Certificate of
Incorporation
Our certificate of incorporation provides that the Company, to
the fullest extent permitted by the provisions of
Section 145 of the DGCL, as the same may be amended and
supplemented, shall indemnify each person who is or was an
officer or director of the Company and each person who serves or
served as an officer or director of any other corporation,
partnership, joint venture, trust or other enterprise at the
request of the Company and may indemnify any and all other
persons whom it shall have power to indemnify under said
section, each an authorized representative from and against any
and all of the expenses, liabilities or other matters referred
to in or covered by said section. Our certificate of
incorporation further provides that a director, officer or other
authorized representative of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director, officer or other authorized
representative, except to the extent that exculpation from
liability is not permitted under the DGCL as in effect at the
time such liability is determined.
Expenses actually and reasonably incurred by any person
indemnified under our certificate of incorporation in defending
a third party proceeding or corporate proceeding shall be paid
by the Company in advance of the final disposition of such third
party proceeding or corporate proceeding and within 30 days
of receipt by the secretary of the Company, if required by law,
of an undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the Company as authorized in
the certificate of incorporation. Any person receiving
indemnification payments shall reimburse the Company for such
indemnification payments to the extent that such person also
receives payments under an insurance policy in respect of such
matter.
Our certificate of incorporation provides that the Company will
use commercially reasonable efforts to purchase and maintain
directors and officers liability insurance (or its
equivalent) for the Company and its subsidiaries with
financially responsible insurers in such amounts and against
such losses and risks as are customary for the business
conducted by the Company and its subsidiaries. We maintain
insurance policies under which our directors and officers are
insured, within the limits and subject to the limitations of the
policies, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain
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liabilities which might be imposed as a result of such actions,
suits or proceedings, to which they are parties by reason of
being or having been such directors or officers which could
include liabilities under the Securities Act or the Exchange Act.
Indemnification
Agreements
Prior to completion of the offering, we intend to enter into
separate indemnification agreements with each of our directors
and officers. Each indemnification agreement will provide, among
other things, for indemnification to the fullest extent
permitted by law and our certificate of incorporation against
any and all expenses and liabilities, including judgments,
fines, penalties, interest and amounts paid in settlement of any
claim with our approval and counsel fees and disbursements. The
indemnification agreements will provide for the advancement or
payment of expenses to the indemnitee and for reimbursement to
us if it is found that such indemnitee is not entitled to such
indemnification under applicable law and our certificate of
incorporation.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling us pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Board
Composition
The bylaws of the Company provide that the Board of Directors
shall consist of not less than seven members or more than 15
members, as set by the Board of Directors from time to time. The
certificate of incorporation of the Company provides that the
number of directors constituting the initial Board of Directors
of the Company is 12. The Board of Directors is divided into
three classes, as nearly equal in number as possible, designated
Class I, Class II and Class III. In case of any
increase or decrease, from time to time, in the number of
directors, the number of directors in each class shall be
apportioned as nearly equally as possible. No decrease in the
number of directors shall shorten the term of any incumbent
director. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at
which such director was elected; provided, that each director
initially appointed to Class I shall serve for an initial
term expiring at the first annual meeting of the stockholders;
each director initially appointed to Class II shall serve
for an initial term expiring at the second annual meeting of the
stockholders; and each director initially appointed to
Class III shall serve for an initial term expiring at the
third annual meeting of the stockholders; provided, further,
that after the first re-election of Class III directors for
an additional three-year term, each subsequent election of
directors at any subsequent annual meeting of the stockholders
shall elect the directors elected at such meeting for a one year
term expiring at the Companys next annual meeting of the
stockholders thereafter. The term of each director shall
continue until the election and qualification of a successor and
be subject to such directors earlier death, resignation or
removal.
Anti-Takeover
Considerations and Special Provisions of our Certificate of
Incorporation, Bylaws and Delaware Law
The following sets forth certain provisions of the DGCL, our
certificate of incorporation and our bylaws. Banking laws also
impose notice approval and ongoing regulatory requirements on
any stockholder or other party that seeks to acquire direct or
indirect control of an FDIC-insured depository
institution. For additional information, see the section of this
prospectus entitled Supervision and
RegulationRegulatory Notice and Approval
Requirements.
Requirements for Advance Notification of Stockholder
Nominations and Proposals. Our bylaws establish
advance notice procedures with respect to stockholder proposals
and the
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nomination of candidates for election as directors, other than
nominations made by or at the director of our Board of Directors
or a committee of our Board of Directors.
Stockholder Meetings. Our bylaws provide that
special meetings of the stockholders may be called for any
purpose or purposes pursuant to a resolution approved by the
Executive Committee of the Board of Directors, or by the
Executive Chairman, the Executive Vice-Chairman, the Chief
Executive Officer or the Secretary upon written request signed
by the holders of more than 50% of the issued and outstanding
stock entitled to vote at such meeting.
No Action by Stockholders Without a
Meeting. Our certificate of incorporation
provides that stockholders are not entitled to act by written
consent.
Amendments to our Certificate of Incorporation and
Bylaws. Under the DGCL, our bylaws may be
modified by the affirmative vote of the holders of a majority of
our outstanding stock entitled to vote thereon. Our certificate
of incorporation provides that our Board of Directors is
expressly empowered to adopt, amend or repeal our bylaws.
The DGCL also provides that any amendment of our certificate of
incorporation must be made by a resolution of the board of
directors setting forth the amendment, declaring its
advisability, and either calling a special meeting of the
stockholders entitled to vote thereon or directing that the
amendment proposed be considered at the next annual meeting of
the stockholders. The affirmative vote of the holders of a
majority of our outstanding shares entitled to vote thereon is
required to approve any amendment to our certificate of
incorporation; provided, that the prior approval of holders of
Class A Common Stock entitled to vote thereon whose
aggregate Class A Common Stock holdings at such time exceed
80% of all Class A Common Stock at such time is required to
(i) amend or alter the provision of the certificate of
incorporation regarding amendments to our certificate of
incorporation and bylaws and (ii) to amend or repeal, or
adopt any provisions inconsistent with the section of the
certificate of incorporation regarding the composition and term
of office of our Board of Directors.
No Cumulative Voting. The DGCL provides that
stockholders are not entitled to the right to cumulate votes in
the election of directors unless the certificate of
incorporation provides otherwise. Our certificate of
incorporation does not provide for cumulative voting in the
election of directors.
Director Removal. Our bylaws provide that
holders of Class A Common Stock entitled to vote thereon
whose aggregate Class A Common Stock holdings at such time
exceed 80% of all Class A Common Stock at such time may
remove an officer or director without cause by written notice to
the Company and such officer or director.
Section 203 of the DGCL. We will be
subject to Section 203 of the DGCL, which prohibits a
Delaware corporation from engaging in any business combination
with any interested stockholder for a period of three years
after the date that such stockholder became an interested
stockholder, with the following exceptions:
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before such date, our Board of Directors approved either the
business combination or the transaction that resulted in the
stockholder becoming an interested holder;
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upon completion of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction began,
excluding for purposes of determining the voting stock
outstanding (but not the outstanding voting stock owned by the
interested stockholder) those shares owned (1) by persons
who are directors and also officers and (2) employee stock
plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or
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on or after such date, the business combination is approved by
our Board of Directors and authorized at an annual or special
meeting of the stockholders, and not by written consent, by the
affirmative vote of the holders of at least
662/3%
of the outstanding voting stock that is not owned by the
interested stockholder.
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In general, Section 203 defines business
combination to include the following:
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any merger or consolidation involving the corporation and the
interested stockholder;
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any sale, transfer, pledge, or other disposition of 10% or more
of the assets of the corporation involving the interested
stockholder;
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subject to certain exceptions, any transaction that results in
the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder;
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any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock or any class or
series of the corporation beneficially owned by the interested
stockholder; or
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the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges, or other financial
benefits by or through the corporation.
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In general, Section 203 defines an interested
stockholder as an entity or person who, together with the
persons affiliates and associates, beneficially owns, or
within three years prior to the time of determination of
interested stockholder status did own, 15% or more of the
outstanding voting stock of the corporation.
A Delaware corporation may opt out of
Section 203 with an expressed provision in its original
certificate of incorporation or an expressed provision in its
certificate of incorporation or by-laws resulting from
amendments approved by holders of at least a majority of the
corporations outstanding voting shares. We intend not to
elect to opt out of Section 203.
Transfer Agent
and Registrar
BNY Mellon Shareowner Services, 480 Washington Boulevard, Jersey
City, New Jersey 07310, telephone:
(800) 851-9677
(United States and Canada) or
(201) 680-6578
(International) is our transfer agent and registrar.
Listing
We intend to apply to have our common stock listed on the New
York Stock Exchange under the symbol
.
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UNDERWRITING
Subject to the terms and conditions of the underwriting
agreement, the underwriters named below, through their
representatives Deutsche Bank Securities Inc. and J.P. Morgan
Securities LLC, have severally agreed to purchase from us the
following respective number of shares of Class A Common
Stock at a public offering price less the underwriting discounts
and commissions set forth on the cover page of this prospectus:
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Number of
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Shares of Class A
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Underwriters
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Common Stock
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Deutsche Bank Securities Inc.
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J.P. Morgan Securities LLC
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Goldman, Sachs & Co.
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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Sandler ONeill & Partners L.P.
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Total
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In addition, we estimate the total expenses of the offering
payable by us, excluding underwriting discounts and commissions,
will be approximately $ .
We have agreed to indemnify the underwriters against some
specified types of liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters
may be required to make in respect of any of these liabilities.
The underwriting agreement provides that the obligations of the
several underwriters to purchase the shares of Class A
Common Stock offered hereby are subject to certain conditions
precedent and that the underwriters will purchase all of the
shares of Class A Common Stock offered by this prospectus,
other than those covered by the over-allotment option described
below, if any of these shares are purchased.
We have been advised by the representatives of the underwriters
that the underwriters propose to offer the shares of
Class A Common Stock to the public at the public offering
price set forth on the cover of this prospectus and to dealers
at a price that represents a concession not in excess of
$ per share under the public offering price.
The underwriters may allow, and these dealers may re-allow, a
concession of not more than $ per share to
other dealers. After the initial public offering,
representatives of the underwriters may change the offering
price and other selling terms. Sales of shares of Class A
Common Stock outside of the United States may be made by
affiliates of the underwriters.
We have granted to the underwriters an option, exercisable not
later than 30 days after the date of this prospectus, to
purchase up to additional shares of
Class A Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover
page of this prospectus. The underwriters may exercise this
option only to cover over-allotments made in connection with the
sale of the Class A Common Stock offered by this
prospectus. To the extent that the underwriters exercise this
option, each of the underwriters will become obligated, subject
to conditions, to purchase approximately the same percentage of
these additional shares of Class A Common Stock as the
number of shares of Class A Common Stock to be purchased by
it in the above table bears to the total number of shares of
Class A Common Stock offered by this prospectus. We will be
obligated, pursuant to the option, to sell these additional
shares of Class A Common Stock to the underwriters to the
extent the option is exercised. If any additional shares of
Class A Common Stock are purchased, the underwriters will
offer the additional shares on the same terms as those on which
the shares are being offered.
The underwriting discounts and commissions per share are equal
to the public offering price per share of Class A Common
Stock less the amount paid by the underwriters to us per
159
share of Class A Common Stock. The underwriting discounts
and commissions are % of the initial public
offering price. We have agreed to pay the underwriters the
following discounts and commissions, assuming either no exercise
or full exercise by the underwriters of the underwriters
over-allotment option:
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Total Fees
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Without Exercise
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With Full Exercise
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of Over-Allotment
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of Over-Allotment
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Fee per Share
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Option
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Option
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Discounts and commissions paid by us
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$
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$
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$
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We estimate that the total expenses of the offering payable by
us, including registration, filing and listing fees, printing
fees and legal and accounting expenses, but excluding the
underwriting discounts and commissions, will be approximately
$ .
We have agreed to indemnify the underwriters against some
specified types of liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters
may be required to make in respect of any of these liabilities.
We have agreed that we will not (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right
or warrant to purchase or for the sale of, lend or otherwise
dispose of or transfer, directly or indirectly, any of our
equity securities or any securities convertible into or
exercisable or exchangeable for our equity securities, or file
any registration statement under the Securities Act with respect
to any of the foregoing (except as required pursuant to our
existing registration rights agreements), or publicly disclose
the intention to make any offer, sale, pledge, disposition or
filing, or (ii) enter into any swap or other arrangement
that transfers, in whole or in part, directly or indirectly, any
of the economic consequences of ownership of any of our equity
securities, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery
of shares of Class A Common Stock or such other securities,
in cash or otherwise, in each case without the prior written
consent of Deutsche Bank Securities Inc. for a period beginning
on the date of this prospectus and ending 180 days after
the initial closing of the offering, other than the shares of
Class A Common Stock to be sold hereunder, any shares of
Class A Common Stock issued upon the exercise of warrants,
options or shares reserved for issuance under our 2009 Option
Plan and shares of our common stock issued in exchange for all
or substantially all of the equity or assets of a company in
connection with a merger or acquisition. Notwithstanding the
foregoing, if (1) during the last 17 days of the
180-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
Bond Street Management, LLC, Bond Street Investors LLC, certain
stockholders, our officers and directors and the Banks
officers and directors have each entered into a
lock-up
agreement with the underwriters prior to the commencement of the
offering pursuant to which each of these persons or entities,
subject to certain exceptions, for a period beginning on the
date of this prospectus and ending 180 days after the
initial closing of the offering, may not, without the prior
written consent of Deutsche Bank Securities Inc. (1) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any
option, right or warrant for the sale of, lend or otherwise
dispose of or transfer, directly or indirectly, any of our
equity securities or any securities convertible into or
exercisable or exchangeable for our equity securities
(including, without limitation, shares of Class A Common
Stock or such other securities which may be deemed to be
beneficially owned by such directors, executive officers,
managers and members in accordance with the
160
rules and regulations of the Securities and Exchange Commission
and securities which may be issued upon exercise of a share
option or warrant) or (2) enter into any swap or other
arrangement that transfers to another, in whole or in part,
directly or indirectly, any of the economic consequences of
ownership of any of our equity securities, whether any such
transaction described in clause (1) or (2) above is to
be settled by delivery of shares of Class A Common Stock or
such other securities, in cash or otherwise, or (3) make
any demand for or exercise any right with respect to the
registration of any shares of Class A Common Stock or any
security convertible into or exercisable or exchangeable for our
shares of Class A Common Stock. Notwithstanding the
foregoing, if (1) during the last 17 days of the
180-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(2) prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
180-day
period, the restrictions described above shall continue to apply
until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
Consent for the restricted transactions described above may be
given by Deutsche Bank Securities Inc. at any time without
public notice. Transfers or dispositions can also be made during
the lock-up
period in the case of gifts or for estate planning purposes
where the donee or trustee, as applicable, agree in writing to
be bound to the same restrictions described above. There are no
agreements between the representatives and any of our
stockholders or affiliates releasing them from these
lock-up
agreements prior to the expiration of the
180-day
period.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over
which they exercise discretionary authority without the specific
written approval of the account holder.
Certain of the underwriters and their affiliates have provided
in the past to us and our affiliates and may provide from time
to time in the future certain commercial banking, financial
advisory, investment banking and other services for us and such
affiliates in the ordinary course of their business, for which
they have received and may continue to receive customary fees
and commissions. In addition, from time to time, certain of the
underwriters and their affiliates may effect transactions for
their own account or the account of customers, and hold on
behalf of themselves or their customers, long or short positions
in our debt or equity securities or loans, and may do so in the
future.
In connection with (i) the August 2010 private placement of
limited liability company interests of Bond Street Holdings LLC
(the predecessor entity to the Company) and (ii) the
November 2010 private placement of shares of Class A Common
Stock and Class B Common Stock of the Company, Deutsche
Bank Securities Inc. received cash compensation for acting as
placement agent, a portion of which was paid at the time of the
closing of the private placement financings,
and million of which in the aggregate was
taken out of the proceeds of the private placement financings
and held aside to be paid at the time of a qualified initial
public offering. We expect the offering to constitute a
qualified initial public offering and to pay the funds held
aside to Deutsche Bank Securities Inc. upon completion of the
offering. None of the proceeds from the offering will be used to
pay any portion of the withheld placement fee.
In connection with the offering, the underwriters may purchase
and sell shares of our Class A Common stock in the open
market. These transactions may include short sales, purchases to
cover positions created by short sales and stabilizing
transactions.
Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the
offering. Covered short sales are sales made in an amount not
greater than the underwriters option to purchase
additional shares of Class A Common Stock from us in the
offering. The underwriters may close out any covered short
position by either
161
exercising their option to purchase additional shares or
purchasing shares in the open market. In determining the source
of shares to close out the covered short position, the
underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to
the price at which they may purchase shares through the
over-allotment option.
Naked short sales are any sales in excess of the over-allotment
option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position
is more likely to be created if underwriters are concerned that
there may be downward pressure on the price of the shares in the
open market prior to the completion of the offering.
Stabilizing transactions consist of various bids for or
purchases of our common stock made by the underwriters in the
open market prior to the completion of the offering.
The underwriters may impose a penalty bid. This occurs when a
particular underwriter repays to the other underwriters a
portion of the underwriting discount received by it because the
representatives of the underwriters have repurchased shares sold
by or for the account of that underwriter in stabilizing or
short covering transactions.
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or slowing a decline in the
market price of our Class A Common Stock. Additionally,
these purchases, along with the imposition of the penalty bid,
may stabilize, maintain or otherwise affect the market price of
our Class A Common Stock. As a result, the price of our
Class A Common Stock may be higher than the price that
might otherwise exist in the open market. These transactions may
be effected on the New York Stock Exchange, in the
over-the-counter
market or otherwise.
We intend to apply to list our common stock on the New York
Stock Exchange under the trading symbol
.
A prospectus in electronic format is being made available on
Internet web sites maintained by one or more of the lead
underwriters of the offering and may be made available on web
sites maintained by other underwriters. Other than the
prospectus in electronic format, the information on any
underwriters web site and any information contained in any
other web site maintained by an underwriter is not part of the
prospectus or the registration statement of which the prospectus
forms a part.
Pricing of the
Offering
Prior to the offering, there has been no public market for our
Class A Common Stock. Consequently, the initial public
offering price of our Class A Common Stock will be
determined by negotiation among us and the representatives of
the underwriters. Among the primary factors that will be
considered in determining the initial public offering price, we
and the representatives of the underwriters expect to consider a
number of factors including:
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prevailing market conditions;
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our results of operations in recent periods;
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the present stage of our development;
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the market capitalizations and stages of development of other
companies that we and the representatives of the underwriters
believe to be comparable to our business; and
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estimates of our business potential.
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See Risk FactorsThere has been no prior public
market for our common stock and an active trading market in our
stock may not develop or be sustained.
162
CERTAIN MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
FOR NON-U.S.
HOLDERS OF CLASS A COMMON STOCK
The following is a summary of certain material U.S. federal
income tax consequences relevant to
non-U.S. Holders
(as defined below) of the purchase, ownership and disposition of
our Class A Common Stock. The following summary is based on
current provisions of the Internal Revenue Code of 1986, as
amended, or the Code, Treasury regulations and judicial and
administrative authority, all of which are subject to change,
possibly with retroactive effect. U.S. federal estate and
gift tax consequences and state, local and
non-U.S. tax
consequences are not summarized, nor, except as provided herein,
are tax consequences to special classes of investors including,
but not limited to, tax-exempt organizations, insurance
companies, banks or other financial institutions,
controlled foreign corporations, passive
foreign investment companies, partnerships or other
entities classified as partnerships for U.S. federal income
tax purposes, dealers in securities, expatriates, persons liable
for the alternative minimum tax, traders in securities that
elect to use a
mark-to-market
method of accounting for their securities holdings, persons who
have acquired our Class A Common Stock as compensation or
otherwise in connection with the performance of services, or
persons that will hold our Class A Common Stock as a
position in a hedging transaction, straddle,
conversion transaction or other risk reduction
transaction. Tax consequences may vary depending upon the
particular status of an investor. The summary is limited to
non-U.S. Holders
who will hold our Class A Common Stock as capital
assets (generally, property held for investment).
You are a
non-U.S. Holder
if you are a beneficial owner of our Class A Common Stock
for U.S. federal income tax purposes that is neither an
entity or arrangement treated as a partnership nor (i) a
citizen or individual resident of the United States; (ii) a
corporation (or other entity that is taxable as a corporation)
created or organized in the United States or under the laws of
the United States or of any State (or the District of Columbia);
(iii) an estate if the income of such estate falls within
the federal income tax jurisdiction of the United States
regardless of the source of such income; or (iv) a trust
(a) if a United States court is able to exercise primary
supervision over its administration and one or more United
States persons have the authority to control all of the
substantial decisions of the trust, or (b) that has in
effect a valid election under applicable Treasury regulations to
be treated as a U.S. person.
If an entity or arrangement treated as a partnership for
U.S. federal income tax purposes holds our Class A
Common Stock, the tax consequences to a partner relating to an
investment in our Class A Common Stock will generally
depend upon the status of the partner and the activities of the
partnership. If you are treated as a partner in such an entity
holding our Class A Common Stock, you are urged to consult
your own tax advisor as to the particular U.S. federal
income tax consequences applicable to you.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL INCOME TAX
CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF OUR
CLASS A COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR
NON-U.S. TAX
LAWS AND ANY OTHER U.S. FEDERAL TAX LAWS (INCLUDING THE
U.S. FEDERAL ESTATE AND GIFT TAX LAWS).
Distributions
Distributions with respect to our Class A Common Stock will
be treated as dividends when paid to the extent of our current
or accumulated earnings and profits as determined for
U.S. federal income tax purposes. Generally, distributions
treated as dividends paid to a
non-U.S. holder
with respect to our Class A Common Stock will be subject to
a 30% U.S. withholding tax, or such lower rate as may be
specified by an applicable income tax treaty. Distributions that
are effectively connected with such
non-U.S. holders
conduct of a
163
trade or business in the United States (and, if a tax treaty
applies, are attributable to a U.S. permanent establishment
of such holder) are generally subject to U.S. federal
income tax on a net income basis at applicable graduated
U.S. federal income tax rates and are exempt from the 30%
withholding tax (assuming compliance with certain certification
requirements). Any such effectively connected distributions
received by a
non-U.S. holder
that is a corporation may also, under certain circumstances, be
subject to an additional branch profits tax at a 30%
rate or such lower rate as may be applicable under an income tax
treaty.
For purposes of obtaining a reduced rate of withholding under an
income tax treaty, a
non-U.S. holder
will generally be required to provide a U.S. taxpayer
identification number as well as certain information concerning
the holders country of residence and entitlement to tax
treaty benefits. A
non-U.S. holder
can generally meet the certification requirement by providing a
properly executed Internal Revenue Service (IRS)
Form W-8BEN
(if the holder is claiming the benefits of an income tax treaty)
or
Form W-8ECI
(if the dividends are effectively connected with a trade or
business in the United States) or suitable substitute form.
Non-U.S. holders
are urged to consult their own tax advisors regarding their
entitlement to benefits under an applicable income tax treaty
and the manner of claiming the benefits of such treaty.
Sale or Other
Disposition
A
non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax on gain realized on the sale, exchange or other
disposition (other than a redemption, which may be subject to
withholding tax or certification requirements under certain
circumstances) of our Class A Common Stock unless:
(i) the non-US holder is an individual that is present in
the United States for 183 or more days in the taxable year of
the sale or disposition, and certain other requirements are met;
(ii) the gain is effectively connected with the conduct by
the
non-U.S. holder
of a trade or business within the United States (and, if a tax
treaty applies, is attributable to a U.S. permanent
establishment maintained by such
non-U.S. holder);
or (iii) our Class A Common Stock constitutes a
United States real property interest by reason of
our status as a U.S. real property holding corporation, or
USRPHC, for U.S. federal income tax purposes at any time
within the shorter of the five-year period ending on the date of
the disposition, or the
non-U.S. holders
holding period for our Class A Common Stock.
We believe we are not currently and do not anticipate becoming a
USRPHC for U.S. federal income tax purposes. However, no
assurance can be given that we will not become a USRPHC in the
future. Even if we become a USRPHC, however, so long as our
Class A Common Stock is regularly traded on an established
securities market, such Class A Common Stock will be
treated as U.S. real property interests in the hands of a
non-U.S. holder
only if the
non-U.S. holder
actually or constructively holds more than 5% of our
Class A Common Stock.
If an individual
non-U.S. holder
is present in the United States for 183 days or more during
the year of disposition, the
non-U.S. holder
may pay U.S. federal income tax at a flat 30% rate (or such
lower rate specified by an applicable income tax treaty) on the
gain from the sale or other disposition of our Class A
Common Stock (other than gain that is effectively connected with
a U.S. trade or business), which may be offset by
U.S.-source
capital losses.
Gain that is effectively connected with the conduct by
non-U.S. holders
of a trade or business within the United States (and, if a
treaty applies, is attributable to a U.S. permanent
established maintained by the
non-U.S. holder)
will be subject to U.S. federal income tax on a net income
basis at the regular graduated U.S. federal income tax
rates generally as if such holder were a resident of the United
States. Further,
non-U.S. holders
that are foreign corporations may also be subject to a branch
profits tax equal to 30% (or such lower rate specified by an
applicable income tax treaty) of a portion of its effectively
connected earnings and profits for the taxable year, as adjusted
for certain items.
164
Information
Reporting and Backup Withholding
Payment of dividends, and the tax withheld with respect thereto,
is subject to information reporting requirements. These
information reporting requirements apply regardless of whether
no withholding was required because the distributions were
effectively connected with the holders conduct of a
U.S. trade or business, or withholding was reduced or
eliminated by an applicable income tax treaty. Under the
provisions of an applicable income tax treaty or agreement,
copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in
the country in which the
non-U.S. holder
resides. U.S. backup withholding will generally apply on
payment of dividends to
non-U.S. holders
unless such
non-U.S. holders
furnish to the payor a
Form W-8BEN
(or other applicable form), or otherwise establish an exemption
and the payor does not have actual knowledge or reason to know
that the holder is a U.S. person, as defined under the
Code, that is not an exempt recipient.
Payment of the proceeds of a sale of our Class A Common
Stock within the United States or conducted through certain
U.S.-related
financial intermediaries is subject to information reporting
and, depending on the circumstances, backup withholding, unless
the
non-U.S. holder,
or beneficial owner thereof, as applicable, certifies that it is
a
non-U.S. holder
on
Form W-8BEN
(or other applicable form), or otherwise establishes an
exemption and the payor does not have actual knowledge or reason
to know the holder is a U.S. person, as defined under the
Code, that is not an exempt recipient.
Any amount withheld under the backup withholding rules from a
payment to a
non-U.S. holder
is allowable as a credit against such
non-U.S. holders
U.S. federal income tax, which may entitle the
non-U.S. holder
to a refund, provided that the
non-U.S. holder
timely provides the required information to the IRS. Moreover,
certain penalties may be imposed by the IRS on a
non-U.S. holder
who is required to furnish information but does not do so in the
proper manner.
Non-U.S. holders
are urged to consult their tax own advisors regarding the
application of backup withholding in their particular
circumstances and the availability of and procedure for
obtaining an exemption from backup withholding under current
Treasury regulations.
Recent
Legislation Relating to Foreign Accounts
Recently enacted legislation will require, after
December 31, 2012, withholding at a rate of 30% on
dividends in respect of, and gross proceeds from the sale of,
our Class A Common Stock held by or through certain foreign
financial institutions (including investment funds), unless such
institution enters into an agreement with the Secretary of the
Treasury to report, on an annual basis, information with respect
to accounts or interests in the institution held by certain
United States persons and by certain
non-U.S. entities
that are wholly- or partially-owned by United States persons.
Accordingly, the entity through which our Class A Common
Stock is held will affect the determination of whether such
withholding is required. Similarly, dividends in respect of, and
gross proceeds from the sale of, our Class A Common Stock
held by an investor that is a non-financial
non-U.S. entity
will be subject to withholding at a rate of 30%, unless such
entity either (i) certifies to us that such entity does not
have any substantial United States owners or
(ii) provides certain information regarding the
entitys substantial United States owners,
which we will in turn provide to the Secretary of the Treasury.
Prospective investors are urged to consult with their own tax
advisors regarding the possible implications of the legislation
on their investment in our Class A Common Stock.
165
LEGAL
MATTERS
The validity of the shares of Class A Common Stock offered
by this prospectus will be passed upon for Bond Street Holdings,
Inc. by Kramer Levin Naftalis & Frankel LLP, New York,
New York and, with respect to bank regulatory matters, Willkie
Farr & Gallagher LLP, Washington, DC. Certain legal
matters with respect to the offering will be passed upon for the
underwriters by Skadden, Arps, Slate, Meagher & Flom
LLP, New York, New York.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting included in this prospectus and elsewhere in
the registration statement have been so included in reliance
upon the reports of Grant Thornton, LLP, independent registered
public accountants, upon the authority of said firm as experts
in accounting and auditing in giving said reports.
WHERE YOU CAN
FIND MORE INFORMATION
We have filed with the SEC through its Electronic Data Gathering
and Retrieval System, or EDGAR, a registration statement on
Form S-1
under the Securities Act with respect to the offer and sale of
Class A Common Stock pursuant to this prospectus. This
prospectus, filed as a part of the registration statement, does
not contain all of the information set forth in the registration
statement or the exhibits and schedules thereto in accordance
with the rules and regulations of the SEC and reference is
hereby made to such omitted information. Statements made in this
prospectus concerning the contents of any contract, agreement,
or other document filed as an exhibit to the registration
statement are summaries of the terms of such contracts,
agreements, or documents. Reference is made to each such exhibit
for a more complete description of the matters involved. The
registration statement and the exhibits and schedules thereto
filed with the SEC may be inspected, without charge, and copies
may be obtained at prescribed rates at the SECs Public
Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. The public may obtain additional
information regarding the operation of the Public Reference Room
by calling the SEC at
1-800-SEC-0330.
The registration statement and other information filed by us
with the SEC via EDGAR are also available at the web site
maintained by the SEC on the World Wide Web at
http://www.sec.gov.
The internet address of our corporate website is
www.bondstreetholdings.com. We intend to make our periodic SEC
reports (on
Forms 10-K
and 10-Q)
and current reports (on
Form 8-K),
as well as the beneficial ownership reports filed by our
directors, officers and 10% stockholders (on Forms 3, 4 and
5) available free of charge through our website as soon as
reasonably practicable after they are filed electronically with
the SEC. We may from time to time provide important disclosures
to investors by posting them in the investor relations section
of our website, as allowed by SEC rules.
The information on our website is not a part of this prospectus
and will not be part of any of our periodic or current reports
to the SEC.
166
BOND STREET
HOLDINGS, INC AND SUBSIDIARIES
TABLE OF
CONTENTS
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F-2
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F-4
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F-5
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Consolidated financial statements:
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F-7
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F-8
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F-9
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F-10-54
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F-1
REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Bond Street Holdings, Inc. and Subsidiaries:
We have audited Bond Street Holdings, Inc. (a Delaware
Corporation) and Subsidiaries (the Company) internal
control over financial reporting as of December 31, 2010,
based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The
Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in the accompanying
Managements Report on Internal Control Over
Financial Reporting. Our responsibility is to express
an opinion on Companys internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or combination of control
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material
misstatement of the companys annual or interim financial
statements will not be prevented or detected on a timely basis.
The following material weakness has been identified and included
in managements assessment. There were inadequate internal
controls over financial reporting related to a change in vendors
which caused a significant delay in appropriately recording the
purchase accounting entries of the Company and amounted to a
material adjustment to the financial statements.
In our opinion, because of the effect of the material weakness
described above on the achievement of the objectives of the
control criteria, Bond Street Holdings, Inc. and Subsidiaries
has not maintained effective internal control over financial
reporting as of
F-2
December 31, 2010, based on criteria established in
Internal ControlIntegrated Framework issued by COSO.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Bond Street Holdings, Inc. and
Subsidiaries as of December 31, 2010 and 2009, and the
related consolidated statements of income and other
comprehensive income, stockholders equity, and cash flows
for the year ended December 31, 2010 and for the period
from inception (April 1, 2009) to December 31,
2009. The material weakness identified above was considered in
determining the nature, timing, and extent of audit tests
applied in our audit of the 2010 financial statements, and this
report does not affect our report dated May 12, 2011, which
expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
New York, New York
May 12, 2011
F-3
Bond Street
Holdings, Inc.
Managements
Report on Internal Control Over Financial Reporting
Bond Street Holdings Inc. (the Company)s
internal control over financial reporting is a process effected
by those charged with governance, management, and other
personnel, designed to provide reasonable assurance regarding
the preparation of reliable financial statements in accordance
with accounting principles generally accepted in the United
States of America. An entitys internal control over
financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the entity;
(2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally
accepted in the United States of America, and that receipts and
expenditures of the entity are being made only in accordance
with authorizations of management and those charged with
governance; and (3) provide reasonable assurance regarding
prevention, or timely detection and correction of unauthorized
acquisition, use, or disposition of the entitys assets
that could have a material effect on the financial statements.
Management is responsible for establishing and maintaining
effective internal control over financial reporting. Management
assessed the effectiveness of the Companys internal
control over financial reporting as of December 31, 2010,
based on the framework set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal
Control Integrated Framework.
A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material
misstatement of our annual or interim consolidated financial
statements will not be prevented or detected on a timely basis.
In our assessment of the effectiveness of internal control over
financial reporting at December 31, 2010, we identified the
following material weakness:
In connection with the acquisitions of Premier American Bank,
Florida Community Bank and Peninsula Bank (the Acquisitions) the
Company engaged the services of third parties to obtain an
independent computation of the fair value of assets and
liabilities as of the date of the acquisitions. Furthermore,
management intended to use the assistance of the third party to
establish a sustainable model and process to perform the
required accounting calculation in support of recordkeeping of
loans accounted for under the provisions of Accounting Standards
Codification (ASC)
310-30
Receivables, Loans and Debt Securities Acquired with
Deteriorated Credit Quality. During the 4th quarter of
2010 Management engaged an additional third party to evaluate
the results of the valuation and identify potential weaknesses
in the process. Towards the end of 2010 and during the first
quarter of 2011, Management identified errors in the
determination of fair value of certain assets acquired and
liabilities assumed and as well as weaknesses in the structure
of the processes that resulted in adjustments to balance sheet
and income statements of the Company as of and for the year
ended December 31, 2010. Management believes that the
engagement of the second third party in conjunction with other
corrective actions (including but not limited to, enhancement of
policies and procedures, allocation of additional resources,
etc.) has assisted the Company in the remediation of this
weakness.
Based on our assessment, and because of the material weakness
previously discussed, we have concluded that our internal
control over financial reporting was not effective at
December 31, 2010.
The effectiveness of our internal control over financial
reporting has been audited by Grant Thornton LLP, an independent
registered public accounting firm, as stated in its report which
is included herein.
BOND STREET HOLDINGS, INC.
F-4
REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
Bond Street Holdings, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
Bond Street Holdings, Inc. (a Delaware corporation) and
Subsidiaries as of December 31, 2010 and 2009, and the
related consolidated statements of operations and other
comprehensive income (loss), stockholders equity and cash
flows for the year ended December 31, 2010 and for the
period from inception (April 1, 2009) to
December 31, 2009. These consolidated financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Bond Street Holdings, Inc. and Subsidiaries as of
December 31, 2010 and 2009, and the results of their
operations and their cash flows for the year ended
December 31, 2010 and for the period from inception
(April 1, 2009) to December 31, 2009, in
conformity with accounting principles generally accepted in the
United States of America.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), Bond
Street Holdings, Inc.s and Subsidiaries internal control
over financial reporting as of December 31, 2010, based on
criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) and our report dated May 12,
2011, expressed an adverse opinion on internal control over
financial reporting.
/s/ GRANT THORNTON LLP
New York, New York
May 12, 2011
F-5
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
(dollars
in thousands, except for per-share data)
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
ASSETS:
|
Cash and cash equivalents
|
|
$
|
43,412
|
|
|
$
|
7,168
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
Held-to-maturity
securities
|
|
|
512
|
|
|
|
|
|
Available for sale securities
|
|
|
1,614,736
|
|
|
|
|
|
Federal Home Loan Bank and other bank stock
|
|
|
28,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
1,643,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
515,321
|
|
|
|
|
|
Loss-share indemnification asset
|
|
|
162,596
|
|
|
|
|
|
Due from Federal Deposit Insurance Corporation (FDIC)
|
|
|
28,621
|
|
|
|
|
|
Premises and equipment
|
|
|
19,623
|
|
|
|
|
|
Other real estate owned
|
|
|
23,219
|
|
|
|
|
|
Funds in restricted escrow account
|
|
|
|
|
|
|
413,200
|
|
Other assets
|
|
|
17,212
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,453,661
|
|
|
$
|
421,061
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Transaction accounts:
|
|
|
|
|
|
|
|
|
Non-interest bearing
|
|
$
|
86,196
|
|
|
$
|
|
|
Interest bearing
|
|
|
294,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total transaction accounts
|
|
|
380,451
|
|
|
|
|
|
Time deposits
|
|
|
1,133,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
1,514,259
|
|
|
|
|
|
Advances from the Federal Home Loan Bank
|
|
|
176,689
|
|
|
|
|
|
Deferred taxes
|
|
|
10,924
|
|
|
|
|
|
Other liabilities
|
|
|
23,086
|
|
|
|
1,186
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,724,958
|
|
|
|
1,186
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Class A interests (20,365,655 units)
|
|
|
|
|
|
|
377,661
|
|
Class A common stock, par value $0.001 per share;
100 million shares authorized and 32,548,906 issued and
outstanding
|
|
|
33
|
|
|
|
|
|
Class B interests (2,365,950 units)
|
|
|
|
|
|
|
43,875
|
|
Class B common stock, par value $0.001 per share;
50 million shares authorized and 4,462,692 issued and
outstanding
|
|
|
4
|
|
|
|
|
|
Additional paid-in capital
|
|
|
709,536
|
|
|
|
|
|
Retained earnings
|
|
|
19,972
|
|
|
|
(1,661
|
)
|
Accumulated other comprehensive loss
|
|
|
(842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
728,703
|
|
|
|
419,875
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,453,661
|
|
|
$
|
421,061
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
(dollars
in thousands, except for share data)
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2010 and for the period
from April 1, 2009 (date of inception) to December 31,
2009
|
|
2010
|
|
|
2009
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
Interest and fees on loans
|
|
$
|
33,908
|
|
|
$
|
|
|
Interest on investment securities
|
|
|
12,631
|
|
|
|
|
|
Interest on federal funds sold and other
|
|
|
34
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
46,573
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
Interest on deposits
|
|
|
13,417
|
|
|
|
|
|
Interest on borrowings
|
|
|
1,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
14,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
31,725
|
|
|
|
4
|
|
Provision for loan losses
|
|
|
9,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision
|
|
|
21,863
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
Service charges and fees
|
|
|
2,620
|
|
|
|
|
|
Accretion of discount on loss-share indemnification asset
|
|
|
5,302
|
|
|
|
|
|
Reimbursement of expenses subject to loss-share indemnification
|
|
|
13,983
|
|
|
|
|
|
Income from resolution of troubled assets
|
|
|
1,494
|
|
|
|
|
|
Gain on FDIC assisted transactions
|
|
|
26,188
|
|
|
|
|
|
Gain on sales of other real estate owned
|
|
|
8,293
|
|
|
|
|
|
Gain on sales of investment securities
|
|
|
6,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest income
|
|
|
64,074
|
|
|
|
|
|
Non interest expenses:
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
21,651
|
|
|
|
|
|
Occupancy and equipment expenses
|
|
|
4,985
|
|
|
|
10
|
|
Other real estate and troubled assets resolution related expenses
|
|
|
17,590
|
|
|
|
|
|
Professional services
|
|
|
12,498
|
|
|
|
1,607
|
|
Other
|
|
|
11,387
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
|
68,111
|
|
|
|
1,665
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax benefit
|
|
|
17,826
|
|
|
|
(1,661
|
)
|
Income tax benefit
|
|
|
(3,807
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
21,633
|
|
|
$
|
(1,661
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share: Basic and diluted
|
|
$
|
0.77
|
|
|
$
|
(0.53
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: Basic
and diluted
|
|
|
28,247,986
|
|
|
|
3,113,918
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
21,633
|
|
|
$
|
(1,661
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Unrealized net holding gains on securities available for sale,
net of taxes of $1,861
|
|
|
2,963
|
|
|
|
|
|
Reclassification adjustment for gains on securities available
for sale included in net income, net of taxes of $2,389
|
|
|
(3,805
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
20,791
|
|
|
$
|
(1,661
|
)
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(dollars in thousands, except for share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Class A Interests
|
|
|
Class A Common Stock
|
|
|
Class B Interests
|
|
|
Class B Common Stock
|
|
|
Paid in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders
|
|
|
|
Units
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Units
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Loss
|
|
|
Equity
|
|
|
Balance at April 1, 2009 (Inception date)
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Member contribution
|
|
|
20,365,655
|
|
|
|
377,661
|
|
|
|
|
|
|
|
|
|
|
|
2,365,950
|
|
|
|
43,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
421,536
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,661
|
)
|
|
|
|
|
|
|
(1,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
20,365,655
|
|
|
|
377,661
|
|
|
|
|
|
|
|
|
|
|
|
2,365,950
|
|
|
|
43,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,661
|
)
|
|
|
|
|
|
|
419,875
|
|
Conversion of units to shares
|
|
|
(20,365,655
|
)
|
|
|
(377,661
|
)
|
|
|
20,365,655
|
|
|
|
21
|
|
|
|
(2,365,950
|
)
|
|
|
(43,875
|
)
|
|
|
2,365,950
|
|
|
|
2
|
|
|
|
421,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares sold in 2010 capital raise
|
|
|
|
|
|
|
|
|
|
|
12,183,251
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
2,096,742
|
|
|
|
2
|
|
|
|
285,759
|
|
|
|
|
|
|
|
|
|
|
|
285,773
|
|
Stock options awarded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,264
|
|
|
|
|
|
|
|
|
|
|
|
2,264
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,633
|
|
|
|
|
|
|
|
21,633
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(842
|
)
|
|
|
(842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
|
|
|
|
$
|
|
|
|
|
32,548,906
|
|
|
$
|
33
|
|
|
|
|
|
|
$
|
|
|
|
|
4,462,692
|
|
|
$
|
4
|
|
|
$
|
709,536
|
|
|
$
|
19,972
|
|
|
$
|
(842
|
)
|
|
$
|
728,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(dollars in thousands)
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2010 and for the period
from April 1, 2009 (date of inception) to December 31,
2009
|
|
2010
|
|
|
2009
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
21,633
|
|
|
$
|
(1,661
|
)
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Accretion of discount on loans
|
|
|
(32,219
|
)
|
|
|
|
|
Amortization of premium on investment securities
|
|
|
5,311
|
|
|
|
|
|
Provision for loan losses
|
|
|
9,862
|
|
|
|
|
|
Accretion of discount on loss-share indemnification asset
|
|
|
(5,302
|
)
|
|
|
|
|
Reimbursement of expenses subject to loss-share indemnification
|
|
|
(13,983
|
)
|
|
|
|
|
Income on loss-share indemnification asset, resulting from
impairments and dispositions of covered assets, net
|
|
|
(157
|
)
|
|
|
|
|
Amortization of clawback liability
|
|
|
1,242
|
|
|
|
|
|
Gain on FDIC assisted transactions
|
|
|
(26,188
|
)
|
|
|
|
|
Gain on sales of investment securities
|
|
|
(6,194
|
)
|
|
|
|
|
Gain on sales of assets
|
|
|
(8,293
|
)
|
|
|
|
|
Stock compensation expense
|
|
|
2,264
|
|
|
|
|
|
Depreciation and amortization
|
|
|
742
|
|
|
|
|
|
Deferred tax benefit
|
|
|
(3,807
|
)
|
|
|
|
|
Decrease (Increase) in other assets, net
|
|
|
14,649
|
|
|
|
(693
|
)
|
Increase in other liabilities, net
|
|
|
4,574
|
|
|
|
1,186
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(35,866
|
)
|
|
|
(1,168
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Cash received from FDIC assisted transactions
|
|
|
455,107
|
|
|
|
|
|
Purchases of investment securities available for sale
|
|
|
(7,530,444
|
)
|
|
|
|
|
Sales, paydowns and maturities of
available-for-sale
securities
|
|
|
6,125,678
|
|
|
|
|
|
Purchases of FHLB and other bank stock
|
|
|
(19,148
|
)
|
|
|
|
|
Change in loans, net
|
|
|
85,264
|
|
|
|
|
|
Collection from FDIC on loss-share indemnification asset
|
|
|
132,840
|
|
|
|
|
|
Proceeds from sale of other real estate owned
|
|
|
22,408
|
|
|
|
|
|
Purchases of premises and equipment, net
|
|
|
(20,365
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(748,660
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Change in deposits, net
|
|
|
47,036
|
|
|
|
|
|
Change in borrowings, net
|
|
|
74,761
|
|
|
|
|
|
Decrease (increase) in funds in restricted escrow account
|
|
|
413,200
|
|
|
|
(413,200
|
)
|
Proceeds from capital raise, net
|
|
|
285,773
|
|
|
|
421,536
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
820,770
|
|
|
|
8,336
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
36,244
|
|
|
|
7,168
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
7,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
|
43,412
|
|
|
|
7,168
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Interest payments during the period
|
|
$
|
11,234
|
|
|
$
|
|
|
Income taxes paid during the period
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Transfer of loans to other real estate owned
|
|
$
|
12,191
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-9
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
(dollars in
thousands, except for per-share data)
|
|
1
|
Presentation of
Financial Statements
|
Bond Street Holdings, Inc., (the Company) was formed
on April 1, 2009, and is a registered Bank Holding Company
incorporated in Delaware. The Company wholly owns Premier
American Bank, National Association (the Bank), a
federally-chartered, federally-insured commercial bank whose
primary regulator is the Office of the Comptroller of the
Currency (the OCC).
During 2010, following receipt of final approval to establish a
new national bank from the OCC on January 22, 2010, the
Bank acquired certain assets and assumed certain liabilities,
including substantially all deposits, of three failed depository
institutions: Premier American Bank, Miami, Florida; Florida
Community Bank, Immokalee, Florida; and Peninsula Bank,
Englewood, Florida (collectively the Acquisitions).
In each of these cases, the Bank entered into a Purchase and
Assumption Agreement with the Federal Deposit Insurance
Corporation (FDIC) providing for the FDIC to assume
responsibility for certain losses on the acquired loan
portfolios. As of December 31, 2010, the Bank operated 26
branches and employed 348 full-time employees in the South
Florida market, with operations extending from Naples to
Sarasota on the West Coast of Florida and from Miami to Palm
Beach on the East Coast of Florida.
The Company may undertake to acquire control of more depository
institutions through auctions by the FDIC of failed depository
institutions (an Assisted Transaction) or seek to
acquire control of additional depository banking institutions in
the United States outside of such process. The Company and the
Bank are subject to regulations primarily of certain federal
agencies and can be periodically examined by those authorities.
As a consequence of the extensive regulation, the Companys
business is susceptible to the impacts of federal legislation
and regulations including but not limited to the Federal Reserve
Bank (FRB), OCC and FDIC. The Company became subject
to regulation by the FRB as of January 22, 2010.
|
|
2
|
Summary of
Significant Accounting Policies
|
Business
combinations
The Company accounts for transactions that meet the definition
of a purchase business combination by recording the assets
acquired and liabilities assumed at their fair value upon
acquisition. Intangible assets, indemnification contracts and
contingent consideration are identified and recognized
individually. If the fair value of the assets acquired exceeds
the purchase price plus the fair value of the liabilities
assumed, a bargain purchase gain is recognized. Conversely, if
the purchase price plus the fair value of the liabilities
assumed exceeds the fair value of the assets acquired, goodwill
is recognized.
Consolidation
The consolidated financial statements include the accounts of
the Company, its wholly owned subsidiary, the Bank, and the
Banks subsidiaries, which consist of a group of real
estate holding companies. Any intercompany accounts and
transactions have been eliminated in consolidation.
Use of
Estimates
The Companys financial reporting and accounting policies
conform to accounting principles generally accepted in the
United States of America (GAAP). The preparation of
F-10
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
financial statements in conformity with GAAP 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.
Material estimates subject to change include the carrying value
of loans, the allowance for loan losses, the carrying value of
the loss-share indemnification asset, the carrying value of
other real estate owned, the carrying value of intangible
assets, contingent consideration liability, the determination of
fair value for financial instruments, acquisition-related fair
value computations and their impact in earnings and the
realization of deferred tax assets.
Fair Value
Measurement
The Company uses estimates of fair value in applying various
accounting standards for its consolidated financial statements.
Under GAAP, fair value measurements are used in one of four ways:
1. In the consolidated balance sheet with changes in fair
value recorded in the consolidated statements of operations and
other comprehensive income (loss),
2. In the consolidated balance sheets with changes in fair
value recorded in the accumulated other comprehensive loss
section of the consolidated statements of changes in
stockholders equity,
3. In the consolidated balance sheet for instruments
carried at lower of cost or fair value with impairment charges
recorded in the consolidated statements of operations and other
comprehensive income (loss) and
4. In the notes to the consolidated financial statements.
Fair value is defined as the price to sell an asset or transfer
a liability in an orderly transaction between willing and able
market participants. In general, the Companys policy in
estimating fair values is to first look at observable market
prices for identical assets and liabilities in active markets,
where available. When these are not available, other inputs are
used to model fair value such as prices of similar instruments,
yield curves, volatilities, prepayment speeds, default rates and
credit spreads (including for the Companys liabilities),
relying first on observable data from active markets. Depending
on the availability of observable inputs and prices, different
valuation models could produce materially different fair value
estimates. The values presented may not represent future fair
values and may not be realizable.
Accounting Standards Codification (ASC) Topic 825,
Financial Instruments, allows the Company an
irrevocable option for measurement of eligible financial assets
or financial liabilities at fair value on an instrument by
instrument basis (the fair value option). Subsequent to the
initial adoption of ASC Topic 825, the Company may elect to
account for eligible financial assets and financial liabilities
at fair value. Such an election may be made at the time an
eligible financial asset, financial liability or firm commitment
is recognized or when certain specified reconsideration events
occur. The Company has not elected the fair value option for any
eligible financial instrument as of December 31, 2010.
F-11
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Transfers of
Financial Assets
Transfers of financial assets are accounted for as sales, when
control over the assets has been surrendered. A gain or loss is
recognized in earnings upon completion of the sale based on the
difference between the sales proceeds and the carrying value of
the assets. Control over the transferred assets is deemed to
have been surrendered when the assets have been isolated from
the Company, the transferee obtains the right (free of
conditions that constrain it from taking advantage of that
right) to pledge or exchange the transferred assets and the
Company does not maintain effective control over the transferred
assets through an agreement to repurchase them before their
maturity.
Cash and Cash
Equivalents
Cash and cash equivalents include cash and due from banks,
interest-bearing deposits with banks, Federal funds sold and
securities purchased under resale agreements or similar
arrangements. Cash and cash equivalents have original maturities
of three months or less. Accordingly, the carrying amount of
such instruments is considered a reasonable estimate of fair
value. The Companys balances maintained may at times,
exceed available depository insurance limits. The Bank is
required to maintain reserve balances with the FRB. Such reserve
requirements are based on a percentage of deposit liabilities
and may be satisfied by cash on hand. The average reserves
required to be held at the FRB as of December 31, 2010, was
$38.0 million.
Restricted Cash
Balances
Restricted cash represents funds held in a demand deposit escrow
account of the Placement Agent. At December 31, 2009, the
Company had $413.2 million in this account and none at
December 31, 2010. All of these funds were fully insured
under the Transaction Account Guaranty Program
(TAGP) created on October 14, 2008. The TAGP
was extended through December 31, 2010.
Investment
Securities
The Company determines the classification of investment
securities at the time of purchase. If the Company has the
intent and the ability at the time of purchase to hold
securities until maturity, they are classified as
held-to-maturity.
Investment securities
held-to-maturity
are stated at amortized cost.
Securities to be held for indefinite periods of time, but not
necessarily to be
held-to-maturity
or on a long-term basis, are classified as available for sale
and carried at estimated fair value with unrealized gains or
losses reported as a separate component of stockholders
equity in accumulated other comprehensive loss, net of
applicable income taxes. Interest income and dividends on
securities are recognized in interest income on an accrual
basis. Premiums and discounts on debt securities are amortized
as an adjustment to interest income over the period to maturity
or call of the related security using the effective interest
method. Realized gains or losses on the sale of securities, if
any, are determined using the specific identification method.
If a decline in the fair value of a security below its amortized
cost is judged by management to be other than temporary, the
cost basis of the security is written down to its fair value and
the amount of the write-down is included in earnings. In order
to determine if a decline in fair value is other than temporary,
management considers several factors, including
F-12
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
the length of time and extent to which the fair value has been
less than the amortized cost basis, the financial condition and
near-term prospects of the security (considering factors such as
adverse conditions specific to the security and ratings agency
actions) and the intent and ability to retain the investment in
order to allow for an anticipated recovery in fair value. If the
impairment is not other than temporary, the portion of the
impairment related to credit losses is recorded in earnings and
the impairment related to other factors is recorded in other
comprehensive income.
Investments in Federal Home Loan Bank (FHLB) and
other bank stock are carried at cost because they can only be
redeemed at par and are required investments based on
measurements of the Companys assets
and/or
borrowing levels. Investments are held to provide liquidity and
to serve as a source of income.
Loans
Receivable
The Companys accounting methods for loans differ depending
on whether the loans are originated or purchased, and for
purchased loans, whether the loans were acquired as a result of
a business acquisition or purchased at a discount as a result of
credit deterioration since the date of origination.
Originated
Loans
Loans that management has the intent and ability to hold for the
foreseeable future are reported at their outstanding principal
balances net of any unearned income, charge-offs, unamortized
fees and costs on originated loans and unamortized premiums or
discounts. The net amount of nonrefundable loan origination fees
and certain direct costs associated with the lending process are
deferred and amortized to interest income over the contractual
lives of the loans using methods which approximate the level
yield method. Discounts and premiums are amortized or accreted
to interest income over the estimated life of the loans using
methods that approximate the level yield method. Commercial
loans and substantially all installment loans accrue interest on
the unpaid balance of the loans.
The Company classifies loans as past due when the payment of
principal and interest based upon contractual terms is greater
than 30 days delinquent. In cases where a borrower
experiences financial difficulties and the Company may make
certain concessionary modifications to contractual terms, the
loan is classified as a restructured loan.
Modifications are intended to minimize the economic loss and to
avoid foreclosure or repossession of collateral. The allowance
for credit losses on restructured loans is determined by
discounting the restructured cash flows by the original
effective rate of the loan.
The Companys policies related to when loans are placed on
nonaccrual status conform to guidelines prescribed by regulatory
authorities. Loans are placed on nonaccrual status when it is
probable that principal or interest is not fully collectible, or
generally when principal or interest becomes 90 days past
due, whichever occurs first. Certain loans past due 90 days
or more may remain on accrual status if management determines
that it does not have concern over the collectability of
principal and interest because the loan is adequately
collateralized and in the process of collection. When loans are
placed on nonaccrual status, interest receivable is reversed
against interest income in the current period. Interest payments
received thereafter are applied as a reduction to the remaining
principal balance unless management believes that the ultimate
collection of the principal is likely, in which case payments
are recognized in earnings on a cash basis. Loans and leases are
removed from nonaccrual status
F-13
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
when they become current as to both principal and interest and
concern no longer exists as to the collectability of principal
and interest.
Generally, a nonaccrual loan that is restructured remains on
nonaccrual for a period of six months to demonstrate the
borrower can meet the restructured terms. However, performance
prior to the restructuring, or significant events that coincide
with the restructuring, are considered in assessing whether the
borrower can meet the new terms and may result in the loan being
returned to accrual status after a shorter performance period.
If the borrowers ability to meet the revised payment
schedule is not reasonably assured, the loan remains classified
as a nonaccrual loan.
Purchased
Loans
Loans acquired in a business combination are recorded at their
fair value at the acquisition date. Credit discounts are
included in the determination of fair value; therefore, an
allowance for loan losses is not recorded at the acquisition
date.
The Company aggregates purchased loans into pools of loans with
common characteristics in order to determine fair value on
acquisition date. The Company reviews each loan at acquisition
to determine if it should be accounted for as a loan that has
experienced credit deterioration and it is probable that at
acquisition, the Company will not be able to collect all the
contractual principal and interest due from the borrower. The
Company considers all loans acquired via FDIC assisted
transactions to meet the criteria of loans acquired with
evidence of impairment, unless the loan type is specifically
excluded from the scope of
ASC 310-30
Loans and Debt Securities acquired with deteriorated credit
quality. This policy is based on the following general
themes surrounding an FDIC assisted transaction: there is a high
degree of uncertainty surrounding the quality of underwriting of
the failed institutions that made the original loan, management
of the Company has limited due diligence time prior to deal
execution and in many instances loans were made in geographical
areas that have experienced significant economic hardships as
well as significant deterioration in collateral values. Loans
acquired with evidence of impairment are classified as Purchased
Credit Impaired, or PCI, loans.
The Company makes an estimate of the loans contractual
principal and contractual interest payments as well as the total
cash flows it expects to collect from the pools of loans, which
include undiscounted expected principal and interest. The excess
of contractual amounts over the total cash flows expected to be
collected from the loans is referred to as non-accretable
difference, which is not accreted into income. The excess of the
expected undiscounted cash flows over the fair value of the
loans is referred to as accretable discount. Accretable discount
is recognized as interest income on a level-yield basis over the
life of the loans. Judgmental prepayment assumptions are applied
to both contractually required payments and cash flows expected
to be collected at acquisition.
The Company continues to estimate cash flows expected to be
collected over the life of the loans. Subsequent increases in
total cash flows expected to be collected are recognized as an
adjustment to the accretable discount with the amount of
periodic accretion adjusted over the remaining life of the
loans. Subsequent decreases in cash flows expected to be
collected over the life of the loans are recognized as
impairment in the current period through the allowance for loan
losses.
F-14
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Allowance for
Loan Losses
The Companys allowance for loan losses (ALL)
is established for both performing loans and non-performing
loans. The Companys ALL is the amount considered adequate
to absorb probable losses within the portfolio based on
managements evaluation of the size and current risk
characteristics of the loan portfolio. Such evaluation considers
numerous factors including, but not limited to, internal risk
ratings, loss forecasts, collateral values, geographic location,
borrower FICO scores, delinquency rates, non-performing and
restructured loans, origination channels, product mix,
underwriting practices, industry conditions, economic trends and
net charge-off trends.
For PCI loans, a valuation allowance is established when it is
probable that the Company will be unable to collect all of the
cash flows expected at acquisition plus additional cash flows
expected to be collected arising from changes in estimate after
acquisition. A specific allowance is established when subsequent
evaluations of expected cash flows from PCI loans reflect a
decrease in those estimates. For all other loans, specific
allowances for loan losses are established for large commercial,
corporate and commercial real estate impaired loans that are
evaluated on an individual basis. The specific allowance
established for these loans is based on a thorough analysis of
the most probable source of repayment, including the present
value of the loans expected future cash flows, the
loans estimated market value or the estimated fair value
of the underlying collateral less costs of disposition. General
allowances are established for loans grouped based on similar
characteristics. In this process, general allowance factors
established are based on an analysis of historical loss trends
in the industry and expected loss given default rates derived
from the Companys internal risk rating process. Other
adjustments for qualitative factors may be made to the allowance
for the pools after an assessment of internal and external
influences on credit quality and loss severity that are not
fully reflected in the historical loss or risk rating data. For
these measurements, the Company uses assumptions and
methodologies that are relevant to estimating the level of
impairment and probable losses in the loan portfolio. To the
extent that the data supporting such assumptions has
limitations, managements judgment and experience play a
key role in recording the allowance estimates.
Additions to the ALL are made by provisions charged to earnings.
The allowance is decreased by charge-offs due to losses and
increased by recoveries. Losses on unsecured consumer loans are
recognized at 90 days past due. Residential real estate
loans and secured consumer loans are typically charged-off when
they become 120 to 180 days past due, depending on the
collateral type.
Secured loans may be written-down to the collaterals fair
value less estimated disposition costs, with previously accrued
unpaid interest reversed. Subsequent charge-offs may be required
as a result of changes in the fair value of collateral or other
repayment prospects. The Company reports recoveries on a cash
basis at the time received.
Recoveries on loans that have been previously charged-off
through a reduction of the non-accretable difference are
recognized in earnings as income from resolution of troubled
assets and do not affect the allowance for loan losses.
Loss-share
Indemnification Asset
Assets subject to loss sharing agreements with the FDIC are
labeled covered assets in the accompanying notes to
the consolidated financial statements and include certain loans
and other real estate owned.
F-15
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The loss-share indemnification asset is measured separately from
the covered assets acquired as it is not contractually embedded
in any of the covered assets. The fair value of the loss-share
indemnification asset represents the present value of the
estimated cash payments expected to be received from the FDIC
for future losses on covered assets, based on the credit
adjustment estimated for each covered asset and the loss sharing
percentages. These cash flows were then discounted using a
risk-free yield curve plus a premium reflecting the uncertainty
related to the timing and receipt of such cash flows. The amount
ultimately collected for this asset is dependent upon the
performance of the underlying covered assets, the passage of
time and claims submitted to the FDIC.
The loss-share indemnification asset will be reduced as claims
submissions are filed with the FDIC and collected. Decreases in
expected reimbursements from the FDIC resulting from an
improvement in the expected cash flows of covered loans are
recognized in earnings prospectively consistent with the
approach taken to recognize increases in cash flows on covered
loans. Increases in expected reimbursements from the FDIC are
recognized in earnings in the same period that the allowance for
credit losses for the related loans is recognized. Furthermore,
the resolution of covered assets for a value in excess of the
estimated value of the asset will result in a decrease of the
loss-share indemnification asset equal to the loss-share
percentage of the loss not incurred. Conversely, losses in
excess of estimates at the time of the loss will result in an
increase in the loss-share indemnification asset.
The loss sharing agreements with the FDIC contain provisions
under which the Bank will be reimbursed for a portion of certain
expenses associated with covered assets. The Bank recognizes an
increase to the loss-share indemnification asset through a
credit to non-interest income related to the loss-share
percentage of expenses incurred.
The loss sharing agreements also contain a potential obligation
to remit a portion of the cash received from the FDIC during the
Acquisitions. The amount payable to the FDIC is based on an
established formula included in the various Purchase and
Assumption Agreements. The Bank has recognized in other
liabilities an estimate, representing managements
projections on the expected amount that will be payable to the
FDIC. That liability is recognized using a discounted cash flow
model at a market rate, inclusive of the Banks credit risk.
Premises and
Equipment
Premises and equipment are stated at cost less accumulated
depreciation or amortization. Land is stated at cost. In
addition, purchased software and costs of computer software
developed for internal use are capitalized provided certain
criteria are met. Depreciation and amortization are computed
using the straight-line method over the estimated useful lives
of the related assets. Leasehold improvements are amortized on a
straight-line basis over the lesser of the lease terms,
including certain renewals that were deemed probable at lease
inception, or the estimated useful lives of the improvements.
Rent expense and rental income on operating leases are recorded
using the straight-line method over the appropriate lease terms.
Other Real Estate
Owned (OREO)
Real estate properties acquired through, or in lieu of,
foreclosure or in connection with the Acquisitions, are to be
sold or rented and are recorded at the fair value less
disposition costs at the date of acquisition, establishing a new
cost basis. OREO is subsequently carried at the lesser of cost
or fair value less disposition costs. The Company periodically
performs a
F-16
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
valuation of the property held; any excess of cost over fair
value less disposition costs is charged to earnings as
impairment. Routine maintenance costs, declines in market value
and net losses on disposal are included in earnings for the
period.
Intangible
Assets
Core deposit intangible (CDI) is a measure of
the value of checking and savings deposits acquired in a
business combination. The fair value of the CDI stemming from
any given business combination is based on the present value of
the expected cost savings attributable to the core deposit
funding relative to an alternative source of funding. CDI is
amortized over the estimated useful lives of the existing
deposit relationships acquired, but does not exceed
10 years. The Company evaluates such identifiable
intangibles for impairment when an indication of impairment
exists. If an impairment loss is determined to exist, the loss
is reflected as an impairment charge in the consolidated
statements of operations and other comprehensive income (loss)
for the period in which such impairment is identified. No
impairment charges were required to be recorded for the period
ended December 31, 2010. The core deposit intangible is
included in other assets in the accompanying consolidated
balance sheet.
Income
Taxes
Income tax expense consists of income taxes that are currently
payable and deferred income taxes. Deferred income tax expense
is determined by recognizing deferred tax assets and liabilities
for future tax consequences attributable to temporary
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates that are expected to apply to taxable income in years
in which those temporary differences are expected to be
recovered or settled. The Company assesses the deferred tax
assets and establishes a valuation allowance when realization of
a deferred asset is not considered to be more-likely-than-not.
The Company considers its expectation of future taxable income
in evaluating the need for a valuation allowance.
The Company files a consolidated federal income tax return
including the results of its wholly owned subsidiary, the Bank.
The Company estimates income taxes payable based on the amount
it expects to owe the various tax authorities (i.e., federal,
state and local). Income taxes represent the net estimated
amount due to, or to be received from, such tax authorities. In
estimating income taxes, management assesses the relative merits
and risks of the appropriate tax treatment of transactions,
taking into account statutory, judicial, and regulatory guidance
in the context of the Companys tax position. In this
process, management also relies on tax opinions, recent audits
and historical experience. Although the Company uses the best
available information to record income taxes, underlying
estimates and assumptions can change over time as a result of
unanticipated events or circumstances such as changes in tax
laws and judicial guidance influencing its overall tax position.
An uncertain tax position is recognized only if it is
more-likely-than-not to be sustained upon examination based on
the technical merits of the position. The amount of tax benefit
recognized in the financial statements is the largest amount of
benefit that is more than fifty percent likely to be sustained
upon ultimate settlement of the uncertain tax position. The
Company recognizes interest related to unrecognized tax benefits
in income tax expense (benefit) and penalties, if any, in
operating expenses.
F-17
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Stock-based
Compensation
The Company sponsors an incentive stock option plan established
in 2009 under which qualified stock options may be granted
periodically to key employees and directors of the Company or
its affiliates at a specific exercise price to acquire shares of
the Companys Class A common stock.
Compensation cost is measured based on the estimated fair value
of the award at the grant date and is recognized in the
consolidated financial statements on a straight-line basis over
the requisite service period. The fair value of stock options is
estimated at the date of grant using a Black-Scholes option
pricing model to calculate the fair values of options awarded.
This model requires assumptions as to expected volatility,
dividends, terms and risk- free rates. Since the Companys
common stock is not currently traded on an exchange, expected
volatility is measured based on the volatility of the common
stock of similar companies. The expected term represents the
period of time that options are expected to be outstanding from
the grant date. The risk-free interest rate is based on the
U.S. Treasury yield curve in effect at the time of grant
for the appropriate life of each option. The expected dividend
yield was determined based on the expected dividends to be
declared.
Reclassifications
Certain amounts presented for the prior period have been
reclassified to conform to the current period presentation.
Segment
Reporting
The Company operates one reportable segment of business,
Community Banking, which includes Premier American Bank,
National Association, the Companys sole banking
subsidiary. Through Premier American Bank, National Association,
the Company provides a broad range of retail and commercial
banking services. Management makes operating decisions and
assesses performance based on an ongoing review of these banking
operations, which constitute the Companys only operating
segment.
Accounting
Policies Recently Adopted and Pending Adoption
During April 2011, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update
(ASU)
2011-02,
A Creditors Determination of Whether a Restructuring Is
a Troubled Debt Restructuring, the ASU requires a creditor
to evaluate whether a restructuring constitutes a troubled debt
restructuring, by separately concluding that both (1) the
restructuring constitutes a concession and (2) the debtor
is experiencing financial difficulties. The update is effective
for the Company for annual periods ending on or after
December 15, 2012, including interim periods within those
annual periods.
In December 2010, the FASB issued guidance to provide further
clarification regarding the acquisition date that should be used
for reporting the pro forma financial information disclosures
when comparative financial statements are presented. This
statement also requires entities to provide a description of the
nature and amount of material, nonrecurring pro forma
adjustments that are directly attributable to the business
combination. This statement is effective prospectively for
business combinations occurring after December 31, 2010.
The impact of this statement will depend on the nature and
timing of any potential future business combinations.
F-18
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
In July 2010, the FASB issued new guidance to improve
transparency about an entitys allowance for credit losses
and the credit quality of its financing receivables. The update
is intended to provide additional information to assist
financial statement users in assessing an entitys credit
risk exposures and evaluating the adequacy of their allowance
for credit losses. This guidance is effective for the first
annual reporting period ending after December 15, 2010. The
adoption of this guidance did not have a significant impact on
the financial position of the Company.
In March 2010, the FASB issued new guidance impacting
receivables. The new guidance clarifies that a modification to a
loan that is part of a pool of loans that were acquired with
deteriorated credit quality should not result in the removal of
the loan from the pool. This guidance is effective for any
modifications of loans accounted for within a pool in the first
annual reporting period ending after July 15, 2010. The
adoption of this guidance did not have a material impact on the
Companys financial position, results of operations or cash
flows.
In January 2010, the FASB issued new guidance to improve
disclosures regarding fair value measurements and disclosures.
Fair value measurements and disclosures were enhanced to require
additional information regarding transfers to and from
Level 1 and Level 2, the reasons for the transfers and
a gross presentation of activity within the roll-forward of
Level 3. The guidance clarifies existing disclosure
requirements on the level of disaggregation of classes of assets
and liabilities. In addition, enhanced disclosure is required
concerning inputs and valuation techniques used to determine
Level 2 and Level 3 measurements. This guidance is
generally effective for interim and annual reporting periods
beginning after December 15, 2009; however, requirements to
separately disclose purchases, sales, issuances and settlements
in the Level 3 reconciliation are effective for fiscal
years beginning after December 15, 2010. The adoption of
this guidance did not have a material impact on the
Companys financial position, results of operations or cash
flows.
3 Acquisitions
On January 22, 2010, January 29, 2010, and
June 25, 2010, the Bank entered into Purchase and
Assumption Agreements with the FDIC, as receiver, to acquire
certain assets and assume certain liabilities, including
substantially all of the non-brokered deposits of Premier
American Bank, Florida Community Bank and Peninsula Bank,
respectively (collectively, the Acquired
Institutions), three failed depository institutions in
Florida. Prior to the Acquisitions, each of the Acquired
Institutions functioned as a community bank with offices in the
southern part of Florida.
Concurrently with the acquisitions and assumptions from the FDIC
of certain assets and liabilities, respectively, of Premier
American Bank on January 22, 2010 (the PAB
Acquisition), Florida Community Bank on January 29,
2010 (the FCB Acquisition), and Peninsula Bank on
June 25, 2010 (the Peninsula Acquisition), the
Bank entered into loss-sharing agreements with the FDIC covering
certain legacy assets of each such failed institution (covered
assets), including substantially all loan portfolios and OREO.
The Bank acquired other assets of each Acquired Institution that
are not covered by the loss sharing agreements with the FDIC
including cash balances, certain investment securities purchased
at fair market value and other tangible assets. Pursuant to the
terms of each loss-sharing agreement, the covered assets are
subject to a stated loss threshold, listed on the table below,
whereby the FDIC will reimburse the Bank for a percentage of the
losses (or in certain cases, a varying percentage of losses).
The Bank will reimburse the FDIC for its share of recoveries
with respect to losses for which the FDIC paid the Bank a
reimbursement under each of the loss-sharing agreements. The
F-19
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
FDICs obligation to reimburse the Bank for a percentage of
losses with respect to covered assets begins with the first
dollar of loss incurred. The expected reimbursements under each
of the loss-sharing agreements were recorded as a loss-share
indemnification asset at its estimated fair value on the
acquisition date. The loss-share indemnification asset reflects
the present value of the expected net cash reimbursement related
to the loss-sharing agreements described above.
The following table summarizes the loss-share percentages and
loss threshold for the Acquired Institutions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premier
|
|
|
Florida
|
|
|
Peninsula
|
|
|
|
American Bank
|
|
|
Community Bank
|
|
|
Bank
|
|
|
Loss share before loss threshold is met
|
|
|
80
|
%
|
|
|
80
|
%
|
|
|
80
|
%
|
Loss share after loss threshold is met
|
|
|
95
|
%
|
|
|
95
|
%
|
|
|
80
|
%
|
Loss threshold
|
|
$
|
94 million
|
|
|
$
|
141 million
|
|
|
|
N/A
|
|
The amounts covered by the loss-sharing agreements are the
pre-acquisition book values of the underlying covered assets,
the contractual balance of unfunded commitments that were
acquired, plus certain interest and expenses.
Each of the loss-sharing agreements is subject to certain
servicing procedures as specified in the relevant agreement with
the FDIC. The loss-sharing agreements applicable to single
family residential mortgage loans provide for FDIC loss sharing
and the Banks reimbursement of recoveries to the FDIC for
ten years. The loss-sharing agreements applicable to all other
covered assets provide for FDIC loss sharing for five years and
the Bank reimbursement of recoveries to the FDIC for eight years.
The Company has determined that the Acquisitions of the net
assets (liabilities) of the Acquired Institutions constitute
business combinations as defined by the FASB Accounting
Standards Codification Topic 805, Business
Combinations. Accordingly, the assets acquired and
liabilities assumed were recorded at their fair values. Fair
values were determined based on the requirements of FASB ASC
Topic 820, Fair Value Measurements. The
determination of the initial fair value of loans purchased in an
acquisition and the initial fair value of the related loss-share
indemnification asset involves a high degree of judgment and
complexity. The carrying value of the acquired loans and the
loss-share indemnification asset reflect managements best
estimate of the amount to be realized on each of these assets.
However, the amount the Bank realizes on these assets could
differ materially from the carrying value reflected in these
consolidated financial statements based upon the timing and
amount of collections on the acquired loans in future periods.
The fair value estimates require that management make
assumptions about discount rates, future expected cash flows,
market conditions and other future events that are highly
subjective in nature and subject to change.
As a result of the loss-share arrangements, the risks associated
with the loans and foreclosed real estate acquired from Premier
American Bank, Florida Community Bank and Peninsula Bank have
been completely altered, making the historical financial
information of Premier American Bank, Florida Community Bank and
Peninsula Bank immaterial to an understanding of the
Companys present and planned future operations. In
addition, the business of the Bank since January 22, 2010,
and for the immediate future relies heavily on its acquisition
activities and its loss-share resolution businesses and on the
income generated from the remediation and disposal of assets it
acquired from the FDIC as a receiver of Premier American Bank,
Florida Community Bank and Peninsula Bank and is fundamentally
different from the businesses of all such failed banks. In light
of the foregoing, the Company has
F-20
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
determined that neither Premier American Bank nor Florida
Community Bank is the predecessor entity of the Company because
the Company did not succeed to substantially all of the business
of either of such banks in the Acquisitions. The Company has,
therefore, omitted the historical financial statements of
Premier American Bank and Florida Community Bank in these
consolidated financial statements. Further, management believes
that the nature and magnitude of the federal assistance in the
Peninsula Acquisition is so pervasive, that the relevance of any
historic information to an assessment of future operations to
the Company is substantially reduced. Therefore, the Company has
also omitted the historical financial statements of Peninsula
Bank in these consolidated financial statements.
The Company believes that the Banks loss-sharing
agreements with the FDIC mitigate the Companys risk of
loss on covered assets acquired. Nonetheless, to the extent the
actual values realized for the covered assets are different from
the estimates, the loss-share indemnification asset will
generally be impacted in an offsetting manner due to the loss
sharing support from the FDIC. Additionally, the tax treatment
of FDIC assisted acquisitions is complex and subject to
interpretations that may result in future adjustments of
deferred taxes as of the acquisition date.
The following table summarizes the Acquisitions by Acquired
Institution (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premier
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
American
|
|
|
Community
|
|
|
Peninsula
|
|
|
|
|
|
|
Bank
|
|
|
Bank
|
|
|
Bank
|
|
|
Total
|
|
|
Balances prior to business combination adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
298,264
|
|
|
$
|
525,330
|
|
|
$
|
622,626
|
|
|
$
|
1,446,220
|
|
Total liabilities
|
|
|
263,040
|
|
|
|
643,100
|
|
|
|
655,955
|
|
|
|
1,562,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired (liabilities assumed)
|
|
|
35,224
|
|
|
|
(117,770
|
)
|
|
|
(33,329
|
)
|
|
|
(115,875
|
)
|
Discount on assets acquired
|
|
|
(60,082
|
)
|
|
|
(58,000
|
)
|
|
|
(45,264
|
)
|
|
|
(163,346
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of net liabilities assumed
|
|
|
(24,858
|
)
|
|
|
(175,770
|
)
|
|
|
(78,593
|
)
|
|
|
(279,221
|
)
|
Deposit premium
|
|
|
|
|
|
|
2,365
|
|
|
|
|
|
|
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due from FDIC
|
|
$
|
(24,858
|
)
|
|
$
|
(173,405
|
)
|
|
$
|
(78,593
|
)
|
|
$
|
(276,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration received from FDIC:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
24,835
|
|
|
$
|
163,500
|
|
|
$
|
80,401
|
|
|
$
|
268,736
|
|
Other assets
|
|
|
23
|
|
|
|
12,270
|
|
|
|
|
|
|
|
12,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration received
|
|
|
24,858
|
|
|
|
175,770
|
|
|
|
80,401
|
|
|
|
281,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration given to FDIC:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit premium
|
|
|
|
|
|
|
2,365
|
|
|
|
|
|
|
|
2,365
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
1,808
|
|
|
|
1,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consideration given
|
|
|
|
|
|
|
2,365
|
|
|
|
1,808
|
|
|
|
4,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net consideration received
|
|
$
|
24,858
|
|
|
$
|
173,405
|
|
|
$
|
78,593
|
|
|
$
|
276,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table summarizes the fair value adjustments and
determination of gain on FDIC assisted transactions of each of
the Acquired Institutions (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premier
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
American
|
|
|
Community
|
|
|
Peninsula
|
|
|
|
|
|
|
Bank
|
|
|
Bank
|
|
|
Bank
|
|
|
Total
|
|
|
Cost basis on assets (liabilities) prior to acquisition
|
|
$
|
35,224
|
|
|
$
|
(117,770
|
)
|
|
$
|
(33,329
|
)
|
|
$
|
(115,875
|
)
|
Net consideration received from FDIC
|
|
|
24,858
|
|
|
|
173,405
|
|
|
|
78,593
|
|
|
|
276,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired before fair value adjustments
|
|
|
60,082
|
|
|
|
55,635
|
|
|
|
45,264
|
|
|
|
160,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to fair value of assets acquired and liabilities
assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
(112,730
|
)
|
|
|
(87,415
|
)
|
|
|
(152,383
|
)
|
|
|
(352,528
|
)
|
Loss-share indemnification asset
|
|
|
82,509
|
|
|
|
86,485
|
|
|
|
135,785
|
|
|
|
304,779
|
|
OREO
|
|
|
(2,948
|
)
|
|
|
(26,599
|
)
|
|
|
(23,701
|
)
|
|
|
(53,248
|
)
|
Intangible assets
|
|
|
1,350
|
|
|
|
3,002
|
|
|
|
2,243
|
|
|
|
6,595
|
|
Other assets
|
|
|
68
|
|
|
|
(2,225
|
)
|
|
|
(1,502
|
)
|
|
|
(3,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments to assets
|
|
|
(31,751
|
)
|
|
|
(26,752
|
)
|
|
|
(39,558
|
)
|
|
|
(98,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
1,309
|
|
|
|
7,681
|
|
|
|
2,569
|
|
|
|
11,559
|
|
Borrowings
|
|
|
|
|
|
|
1,830
|
|
|
|
98
|
|
|
|
1,928
|
|
Deferred tax liabilities
|
|
|
9,514
|
|
|
|
5,561
|
|
|
|
137
|
|
|
|
15,212
|
|
Other liabilities
|
|
|
1,787
|
|
|
|
4,053
|
|
|
|
2,193
|
|
|
|
8,033
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments to liabilities
|
|
|
12,610
|
|
|
|
19,125
|
|
|
|
4,997
|
|
|
|
36,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustments to acquired assets
|
|
|
(44,361
|
)
|
|
|
(45,877
|
)
|
|
|
(44,555
|
)
|
|
|
(134,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on FDIC assisted transactions
|
|
$
|
15,721
|
|
|
$
|
9,758
|
|
|
$
|
709
|
|
|
$
|
26,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a description of the methods used to determine
the fair values of significant assets and liabilities presented
above.
Cash and Cash
Equivalents:
The carrying amount of these assets is a reasonable estimate of
fair value based on the short-term nature of these assets.
Investment
Securities:
Fair values for securities are based on quoted market prices,
where available. If quoted market prices are not available, fair
value estimates are based on observable inputs including quoted
market prices for similar instruments, quoted market prices that
are not in an active market or other inputs that are observable
in the market.
F-22
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Federal Home Loan
Bank Stock and Other Bank Stock:
Federal Home Loan Bank stock and other bank stock are recognized
at cost as a reasonable estimate for fair value, as these
instruments are only redeemable at par and had no evidence of
impairment.
Loans:
Fair values for loans were based on a discounted cash flow
methodology that considered factors including the type of loan
and related collateral, delinquency and credit classification
status, fixed or variable interest rate, term of loan and
whether or not the loan was amortizing, and current discount
rates. Additional assumptions used include default rates, loss
severity, payment curves, loss curves and prepayment speeds.
Loans were grouped together according to similar characteristics
and were treated in the aggregate when applying various
valuation techniques. The discount rates used for loans are
based on market rates for new originations of comparable loans
at the time of acquisition and include adjustments for liquidity
concerns.
Loss-share
Indemnification Asset:
Fair value was estimated using projected cash flows related to
the loss sharing agreements based on the expected reimbursements
of the losses and the applicable loss sharing percentages. These
cash flows were discounted using a risk-free yield curve plus a
premium reflecting the uncertainty related to the collection
amounts, timing of the cash flows and other liquidity concerns.
OREO:
OREO is presented at the estimated fair value, net of related
costs of disposal.
Deferred Tax
Liability, net:
Deferred tax liability, net, represents the net tax-effected
differences between the book basis and tax basis of certain
acquired assets and liabilities including the acquired
investment securities and loans, loss-share indemnification
asset, time deposits and FHLB advances.
Core Deposit
Intangible:
The fair value of this intangible asset was estimated based on
the present value of the expected cost savings attributable to
the core deposit funding relative to an alternative source of
funding. In determining the value, proper consideration was
given to expected customer attrition rates, cost of the deposit
base, reserve requirements and the net maintenance cost
attributable to customer deposits.
Other
Assets:
The fair value of other assets was determined based on
managements assessment of the collectability and
realizability of such assets at acquisition date.
Deposits:
The fair values used for the demand and savings deposits that
comprise the transaction accounts acquired equal the amount
payable on demand at the acquisition date. The fair
F-23
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
values for time deposits are estimated using a discounted cash
flow calculation that applies interest rates being offered at
the acquisition date to the contractual cash flows on such
deposits.
Advances from the
FHLB:
The fair values of advances from the FHLB are estimated using a
discounted cash flow calculation that applies interest rates
being offered at the acquisition date to the contractual cash
flows on such advances.
Other
Liabilities:
The fair value of other liabilities is based primarily on the
carrying amounts, which is a reasonable estimate based on the
short-term nature of these liabilities.
The following table summarizes the opening balances related to
the acquired assets and assumed liabilities of each of the
Acquired Institutions (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premier
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
American
|
|
|
Community
|
|
|
Peninsula
|
|
|
|
|
|
|
Bank
|
|
|
Bank
|
|
|
Bank
|
|
|
Total
|
|
|
Assets acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
27,749
|
|
|
$
|
266,347
|
|
|
$
|
161,011
|
|
|
$
|
455,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
securities
|
|
|
|
|
|
|
|
|
|
|
503
|
|
|
|
503
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
112,698
|
|
|
|
97,743
|
|
|
|
210,441
|
|
Federal Home Loan Bank and other bank stock
|
|
|
1,486
|
|
|
|
4,321
|
|
|
|
3,454
|
|
|
|
9,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
|
1,486
|
|
|
|
117,019
|
|
|
|
101,700
|
|
|
|
220,205
|
|
Loans receivable, net
|
|
|
174,492
|
|
|
|
176,145
|
|
|
|
239,782
|
|
|
|
590,419
|
|
Loss-share indemnification asset
|
|
|
82,509
|
|
|
|
86,485
|
|
|
|
135,785
|
|
|
|
304,779
|
|
Other real estate owned
|
|
|
2,945
|
|
|
|
8,866
|
|
|
|
13,332
|
|
|
|
25,143
|
|
Other assets
|
|
|
2,189
|
|
|
|
17,120
|
|
|
|
11,858
|
|
|
|
31,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
291,370
|
|
|
|
671,982
|
|
|
|
663,468
|
|
|
|
1,626,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
264,102
|
|
|
|
596,049
|
|
|
|
607,072
|
|
|
|
1,467,223
|
|
Advances from the Federal Home Loan Bank
|
|
|
|
|
|
|
51,830
|
|
|
|
50,098
|
|
|
|
101,928
|
|
Deferred taxes, net
|
|
|
9,514
|
|
|
|
5,561
|
|
|
|
137
|
|
|
|
15,212
|
|
Other liabilities
|
|
|
2,033
|
|
|
|
8,784
|
|
|
|
5,452
|
|
|
|
16,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
275,649
|
|
|
|
662,224
|
|
|
|
662,759
|
|
|
|
1,600,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on FDIC assisted transactions
|
|
$
|
15,721
|
|
|
$
|
9,758
|
|
|
$
|
709
|
|
|
$
|
26,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Acquisition-related costs associated with the Acquisitions were
expensed as incurred and totaled the following amounts (in
thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Premier American Bank
|
|
$
|
572
|
|
Florida Community Bank
|
|
|
692
|
|
Peninsula Bank
|
|
|
301
|
|
|
|
|
|
|
Total acquisition-related costs
|
|
$
|
1,565
|
|
|
|
|
|
|
The following is a summary of loans purchased in connection with
the PAB Acquisition (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Non-credit
|
|
|
|
|
|
|
Purchase Credit Impaired
|
|
|
Impaired
|
|
|
|
|
|
|
Carrying
|
|
|
Additional
|
|
|
Total
|
|
|
Unpaid
|
|
|
|
|
|
|
Value at
|
|
|
Contractual
|
|
|
Contractual
|
|
|
Principal
|
|
|
|
|
|
|
Acquisition
|
|
|
Cash Flows
|
|
|
Cash Flows
|
|
|
Balance
|
|
|
Total
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
204,235
|
|
|
$
|
26,525
|
|
|
$
|
230,760
|
|
|
$
|
524
|
|
|
$
|
231,284
|
|
Construction
|
|
|
35,456
|
|
|
|
5,302
|
|
|
|
40,758
|
|
|
|
|
|
|
|
40,758
|
|
1-4 single family residential
|
|
|
5,904
|
|
|
|
526
|
|
|
|
6,430
|
|
|
|
|
|
|
|
6,430
|
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,484
|
|
|
|
8,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
|
245,595
|
|
|
|
32,353
|
|
|
|
277,948
|
|
|
|
9,008
|
|
|
|
286,956
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
27,194
|
|
|
|
2,519
|
|
|
|
29,713
|
|
|
|
3,967
|
|
|
|
33,680
|
|
Consumer
|
|
|
540
|
|
|
|
57
|
|
|
|
597
|
|
|
|
596
|
|
|
|
1,193
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
323
|
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
27,734
|
|
|
|
2,576
|
|
|
|
30,310
|
|
|
|
4,886
|
|
|
|
35,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
273,329
|
|
|
$
|
34,929
|
|
|
|
308,258
|
|
|
|
13,894
|
|
|
|
322,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accretable difference
|
|
|
|
|
|
|
|
|
|
|
(115,348
|
)
|
|
|
|
|
|
|
(115,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected cash flows
|
|
|
|
|
|
|
|
|
|
|
192,910
|
|
|
|
13,894
|
|
|
|
206,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretable discount
|
|
|
|
|
|
|
|
|
|
|
(28,287
|
)
|
|
|
(4,025
|
)
|
|
|
(32,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
$
|
164,623
|
|
|
$
|
9,869
|
|
|
$
|
174,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following is a summary of loans purchased in connection with
the FCB Acquisition (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Non-credit
|
|
|
|
|
|
|
Purchase Credit Impaired
|
|
|
Impaired
|
|
|
|
|
|
|
Carrying
|
|
|
Additional
|
|
|
Total
|
|
|
Unpaid
|
|
|
|
|
|
|
Value at
|
|
|
Contractual
|
|
|
Contractual
|
|
|
Principal
|
|
|
|
|
|
|
Acquisition
|
|
|
Cash Flows
|
|
|
Cash Flows
|
|
|
Balance
|
|
|
Total
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
119,366
|
|
|
$
|
18,729
|
|
|
$
|
138,095
|
|
|
$
|
8,084
|
|
|
$
|
146,179
|
|
Construction
|
|
|
38,622
|
|
|
|
8,200
|
|
|
|
46,822
|
|
|
|
|
|
|
|
46,822
|
|
1-4 single family residential
|
|
|
48,640
|
|
|
|
5,738
|
|
|
|
54,378
|
|
|
|
|
|
|
|
54,378
|
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,449
|
|
|
|
2,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
|
206,628
|
|
|
|
32,667
|
|
|
|
239,295
|
|
|
|
10,533
|
|
|
|
249,828
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
32,325
|
|
|
|
3,590
|
|
|
|
35,915
|
|
|
|
7,051
|
|
|
|
42,966
|
|
Consumer
|
|
|
6,460
|
|
|
|
614
|
|
|
|
7,074
|
|
|
|
469
|
|
|
|
7,543
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
38,785
|
|
|
|
4,204
|
|
|
|
42,989
|
|
|
|
7,619
|
|
|
|
50,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
245,413
|
|
|
$
|
36,871
|
|
|
|
282,284
|
|
|
|
18,152
|
|
|
|
300,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accretable difference
|
|
|
|
|
|
|
|
|
|
|
(94,971
|
)
|
|
|
|
|
|
|
(94,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected cash flows
|
|
|
|
|
|
|
|
|
|
|
187,313
|
|
|
|
18,152
|
|
|
|
205,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretable discount
|
|
|
|
|
|
|
|
|
|
|
(25,063
|
)
|
|
|
(4,257
|
)
|
|
|
(29,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
$
|
162,250
|
|
|
$
|
13,895
|
|
|
$
|
176,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following is a summary of loans purchased in connection with
the Peninsula Acquisition (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
|
|
|
|
|
|
|
Non-credit
|
|
|
|
|
|
|
Purchase Credit Impaired
|
|
|
Impaired
|
|
|
|
|
|
|
Carrying
|
|
|
Additional
|
|
|
Total
|
|
|
Unpaid
|
|
|
|
|
|
|
Value at
|
|
|
Contractual
|
|
|
Contractual
|
|
|
Principal
|
|
|
|
|
|
|
Acquisition
|
|
|
Cash Flows
|
|
|
Cash Flows
|
|
|
Balance
|
|
|
Total
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
324,142
|
|
|
$
|
51,487
|
|
|
$
|
375,629
|
|
|
$
|
13,600
|
|
|
$
|
389,229
|
|
Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 single family residential
|
|
|
16,320
|
|
|
|
9,833
|
|
|
|
26,153
|
|
|
|
|
|
|
|
26,153
|
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,207
|
|
|
|
3,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
|
340,462
|
|
|
|
61,320
|
|
|
|
401,782
|
|
|
|
16,807
|
|
|
|
418,589
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
28,383
|
|
|
|
5,655
|
|
|
|
34,038
|
|
|
|
3,819
|
|
|
|
37,857
|
|
Consumer
|
|
|
1,717
|
|
|
|
271
|
|
|
|
1,988
|
|
|
|
958
|
|
|
|
2,946
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
30,100
|
|
|
|
5,926
|
|
|
|
36,026
|
|
|
|
4,796
|
|
|
|
40,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
370,562
|
|
|
$
|
67,246
|
|
|
|
437,808
|
|
|
|
21,603
|
|
|
|
459,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accretable difference
|
|
|
|
|
|
|
|
|
|
|
(182,373
|
)
|
|
|
|
|
|
|
(182,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expected cash flows
|
|
|
|
|
|
|
|
|
|
|
255,435
|
|
|
|
21,603
|
|
|
|
277,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretable discount
|
|
|
|
|
|
|
|
|
|
|
(32,388
|
)
|
|
|
(4,868
|
)
|
|
|
(37,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
$
|
223,047
|
|
|
$
|
16,735
|
|
|
$
|
239,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys assumptions utilized to determine the fair
value of assets acquired and liabilities assumed conform to
market conditions at the date of acquisition. Since acquisition,
management has updated these assumptions to incorporate the
effects, if any, from the occurrence of events subsequent to
acquisition that reflect better information on the initial
assumptions used to determine fair values.
Unpaid principal balances of PCI loans were reduced during the
period ended December 31, 2010, by approximately
$243.4 million since the Acquisitions through repayments by
borrowers, loan sales, transfers to OREO and charge-offs of
customer loan balances.
F-27
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table presents the components of the loss-share
indemnification asset at January 22, 2010, January 29,
2010, and June 25, 2010, the various acquisition dates of
Premier American Bank, Florida Community Bank and Peninsula
Bank, respectively (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premier
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
American
|
|
|
Community
|
|
|
Peninsula
|
|
|
|
|
|
|
Bank
|
|
|
Bank
|
|
|
Bank
|
|
|
Total
|
|
|
Estimated portion of gross losses subject to FDIC
indemnification:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial assets
|
|
$
|
81,173
|
|
|
$
|
76,605
|
|
|
$
|
134,292
|
|
|
$
|
292,070
|
|
1-4 single family residential assets
|
|
|
5,632
|
|
|
|
13,967
|
|
|
|
5,171
|
|
|
|
24,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated portion of gross losses subject to FDIC
indemnification:
|
|
|
86,805
|
|
|
|
90,572
|
|
|
|
139,463
|
|
|
|
316,840
|
|
Fair value discount
|
|
|
(4,296
|
)
|
|
|
(4,087
|
)
|
|
|
(3,678
|
)
|
|
|
(12,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss-share indemnification asset at acquisition dates
|
|
$
|
82,509
|
|
|
$
|
86,485
|
|
|
$
|
135,785
|
|
|
$
|
304,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the loss-share indemnification asset for the period
from the acquisition of Premier American Bank through
December 31, 2010, were as follows (in thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Balance arising from PAB acquisition on January 22,
2010
|
|
$
|
82,509
|
|
Additions to loss-share indemnification asset resulting from
additional acquisitions
|
|
|
222,268
|
|
Reimbursable expenses and charged-off interest
|
|
|
13,983
|
|
Accretion
|
|
|
5,302
|
|
Income resulting from impairments of covered assets
|
|
|
7,793
|
|
Loss resulting from dispositions of covered assets
|
|
|
(7,636
|
)
|
Reductions for claims submitted to FDIC
|
|
|
(161,623
|
)
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
162,596
|
|
|
|
|
|
|
As of December 31, 2010, the Company has included in other
liabilities approximately $9.3 million related to the
potential future obligation to the FDIC under the loss-share
agreements.
In connection with the Banks loss-sharing agreements with
the FDIC, the Company will be reimbursed for a portion of
certain expenses associated with covered assets. The Company
recognizes income from reimbursement of expenses associated with
qualifying expenses on loans that have not been charged-off but
for which a charge-off is expected. During the year ended
December 31, 2010, the Company recognized
$17.6 million of expenses subject to reimbursement under
the loss-sharing agreements and $14.0 million of
reimbursement income associated with such expenses. Included in
the $14.0 million, the Company has recognized approximately
an additional $5.0 million related to expenses incurred
during the period ended December 31, 2010, which are
expected to be filed for reimbursement with the FDIC in future
periods as charge-offs occur in the related loans.
The following table summarizes the components of the gains and
losses associated with covered assets, plus the provision for
loan losses on non-covered loans and income from resolution of
troubled non-covered loans, along with the related additions to
or (reductions in)
F-28
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
the amounts recoverable from the FDIC under the loss sharing
agreements (included in other non-interest expenses), as
reflected in the consolidated statements of operations and other
comprehensive income (loss) for the period from the PAB
acquisition through December 31, 2010 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
|
|
|
Loss-share
|
|
|
Net Impact
|
|
|
|
Income
|
|
|
Indemnification
|
|
|
to Pre-tax
|
|
|
|
(Loss)
|
|
|
Income (Loss)
|
|
|
Earnings
|
|
|
Provision for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans
|
|
$
|
(9,772
|
)
|
|
$
|
7,793
|
|
|
$
|
(1,979
|
)
|
Non-covered loans
|
|
|
(90
|
)
|
|
|
|
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(9,862
|
)
|
|
|
7,793
|
|
|
|
(2,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from reconciliation of troubled assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans
|
|
|
1,309
|
|
|
|
(994
|
)
|
|
|
315
|
|
Non-covered loans
|
|
|
185
|
|
|
|
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,494
|
|
|
|
(994
|
)
|
|
|
500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of covered OREO
|
|
|
8,293
|
|
|
|
(6,642
|
)
|
|
|
1,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(75
|
)
|
|
$
|
157
|
|
|
$
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 Investment
Securities
Investment securities at December 31, 2010, are summarized
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
|
$
|
512
|
|
|
$
|
36
|
|
|
$
|
|
|
|
$
|
548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies and sponsored enterprises obligations
|
|
$
|
1,414,061
|
|
|
$
|
110
|
|
|
$
|
(1,489
|
)
|
|
$
|
1,412,682
|
|
U.S. Government agencies and sponsored enterprises
mortgage-backed securities
|
|
|
80,765
|
|
|
|
292
|
|
|
|
(626
|
)
|
|
|
80,431
|
|
Sale and municipal obligations
|
|
|
1,439
|
|
|
|
2
|
|
|
|
(18
|
)
|
|
|
1,423
|
|
Corporate bonds and other securities
|
|
|
119,821
|
|
|
|
379
|
|
|
|
|
|
|
|
120,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,616,086
|
|
|
$
|
783
|
|
|
$
|
(2,133
|
)
|
|
$
|
1,614,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Investment securities at December 31, 2010, by contractual
maturity, and adjusted for anticipated prepayments, are shown
below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Value
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
Due after one year through five years
|
|
$
|
512
|
|
|
$
|
548
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity
|
|
$
|
512
|
|
|
$
|
548
|
|
|
|
|
|
|
|
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
Due within one year
|
|
$
|
766,567
|
|
|
$
|
766,315
|
|
Due after one year through five years
|
|
|
766,840
|
|
|
|
766,092
|
|
Due after five years through ten years
|
|
|
1,478
|
|
|
|
1,461
|
|
Due after ten years
|
|
|
81,201
|
|
|
|
80,868
|
|
|
|
|
|
|
|
|
|
|
Total available for sale
|
|
$
|
1,616,086
|
|
|
$
|
1,614,736
|
|
|
|
|
|
|
|
|
|
|
The expected life of mortgage-backed securities will differ from
contractual maturities because borrowers may have the right to
call or prepay the underlying mortgage loans with or without
call or prepayment penalties. For purposes of the maturity
table, mortgage-backed securities, which are not due at a single
maturity date, have been included in maturity groupings based on
the contractual maturity.
The following table presents the estimated fair values and the
gross unrealized loss on investment securities in an unrealized
loss position of less than 12 months (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Loss
|
|
|
Available for sale:
|
|
|
|
|
|
|
|
|
U.S. Government agencies and sponsored enterprises obligations
|
|
$
|
910,393
|
|
|
$
|
(1,489
|
)
|
U.S. Government agencies and sponsored enterprises
mortgage-backed securities
|
|
|
50,124
|
|
|
|
(626
|
)
|
State and municipal obligations
|
|
|
914
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
Total available for sale
|
|
$
|
961,431
|
|
|
$
|
(2,133
|
)
|
|
|
|
|
|
|
|
|
|
The Company monitors its investment securities for other than
temporary impairments (OTTI). Impairment is
evaluated on an individual security basis considering numerous
factors, and its relative significance varies depending on the
situation. The Company has evaluated the nature of unrealized
losses in the investment securities portfolio to determine if
OTTI exists. The unrealized losses relate to specific market
conditions and do not represent credit-related impairments.
Furthermore, it is more-likely-than-not that the Company will be
able to retain the securities for a period of time sufficient
for a recovery in value to the amortized cost basis. Management
has completed an assessment of each security for credit
impairment and has determined that no individual security had
OTTI as of December 31, 2010. The following describes the
basis under which the Company has evaluated OTTI:
U.S. Government
Agencies and Sponsored Enterprises Mortgage-Backed Securities
(MBS):
The unrealized losses associated with U.S. Government
agencies and sponsored enterprises MBS are primarily driven by
changes in interest rates. These securities have either an
explicit or implicit government guarantee.
F-30
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Corporate Bonds
and Other Securities:
Securities were generally underwritten in accordance with the
Companys own investment standards prior to the decision to
purchase, without relying on a bond issuers guarantee in
making the investment decision. These investments are investment
grade and will continue to be monitored as part of our ongoing
impairment analysis, but are expected to perform in accordance
with terms even if the rating agencies reduce the credit rating
of the bond issuers.
Proceeds from sale of investment securities available for sale
during the year ended December 31, 2010, amounted to
$5.9 billion, resulting in gross realized gains of
$7.0 million and gross realized losses of $789,000,
respectively, which are included in non-interest income in the
consolidated statements of operations and other comprehensive
income (loss).
As part of the Companys liquidity management strategy, the
Company pledges securities to secure borrowings from the FHLB.
The Company also pledges securities to collateralize public
deposits. The amortized cost and fair value of pledged
securities totaled $380.5 million and $367.6 million,
respectively, at December 31, 2010.
The following table shows the Companys loans receivable
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered Loans
|
|
|
Loans Not Covered
|
|
|
|
|
|
|
|
|
|
Purchase
|
|
|
|
|
|
Purchase
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
|
|
|
Other
|
|
|
Credit
|
|
|
Other
|
|
|
|
|
|
Percent
|
|
|
|
Impaired
|
|
|
Loans
|
|
|
Impaired
|
|
|
Loans
|
|
|
Total
|
|
|
of Total
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
361,433
|
|
|
$
|
20,561
|
|
|
$
|
|
|
|
$
|
2,457
|
|
|
$
|
384,451
|
|
|
|
72.3
|
%
|
1-4 single family residential
|
|
|
41,074
|
|
|
|
|
|
|
|
|
|
|
|
2,654
|
|
|
|
43,728
|
|
|
|
8.2
|
%
|
Construction
|
|
|
22,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,925
|
|
|
|
4.3
|
%
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
13,235
|
|
|
|
|
|
|
|
|
|
|
|
13,235
|
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
|
425,432
|
|
|
|
33,796
|
|
|
|
|
|
|
|
5,111
|
|
|
|
464,339
|
|
|
|
87.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
44,057
|
|
|
|
14,961
|
|
|
|
|
|
|
|
1,161
|
|
|
|
60,179
|
|
|
|
11.3
|
%
|
Consumer
|
|
|
3,402
|
|
|
|
1,447
|
|
|
|
1,265
|
|
|
|
970
|
|
|
|
7,084
|
|
|
|
1.3
|
%
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
262
|
|
|
|
262
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
47,459
|
|
|
|
16,408
|
|
|
|
1,265
|
|
|
|
2,393
|
|
|
|
67,525
|
|
|
|
12.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans held in portfolio
|
|
|
472,891
|
|
|
|
50,204
|
|
|
|
1,265
|
|
|
|
7,504
|
|
|
|
531,864
|
|
|
|
100.0
|
%
|
Unearned discount, premiums and deferred costs, net
|
|
|
|
|
|
|
(7,520
|
)
|
|
|
|
|
|
|
|
|
|
|
(7,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans held in portfolio, net of discounts, premiums and
deferred costs
|
|
|
472,891
|
|
|
|
42,684
|
|
|
|
1,265
|
|
|
|
7,504
|
|
|
|
524,344
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(8,933
|
)
|
|
|
|
|
|
|
|
|
|
|
(90
|
)
|
|
|
(9,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held in portfolio, net
|
|
$
|
463,958
|
|
|
$
|
42,684
|
|
|
$
|
1,265
|
|
|
$
|
7,414
|
|
|
$
|
515,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered loans represent loans acquired from the FDIC subject to
the loss-sharing agreements. Approximately 98.2% of the loan
portfolio at December 31, 2010, is covered by the FDIC
subject to the loss sharing agreements. All of the covered loans
acquired under the
F-31
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
loss-sharing agreements were considered purchased credit
impaired, or PCI loans, unless they were specifically excluded
from the scope of
ASC 310-30.
Loans originated by the Company in addition to certain acquired
consumer loans at Peninsula Bank are excluded from the loss
sharing agreements and are classified as not covered.
At December 31, 2010, the majority of all outstanding loans
were to customers domiciled in Florida (90.7%). No other state
represented borrowers with more than 3.0% of loans outstanding.
The accretable discount on PCI loans represents the amount by
which the undiscounted expected cash flows exceed the carrying
value. Changes in accretable discount for PCI loans for the
period ended December 31, 2010, were as follows (in
thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Balance arising from PAB acquisition on January 22,
2010
|
|
$
|
(28,287
|
)
|
Additions to accretable discount resulting from acquisitions
|
|
|
(57,451
|
)
|
Accretion
|
|
|
26,721
|
|
Reclassifications from non-accretable difference
|
|
|
(21,125
|
)
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
(80,142
|
)
|
|
|
|
|
|
The following table summarizes changes in the allowance for loan
losses for the twelve months ended December 31, 2010 (in
thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Allowance for loan losses at January 22, 2010
|
|
$
|
|
|
Provision for loan losses on covered loans
|
|
|
9,772
|
|
Provision for loan losses on non-covered loans
|
|
|
90
|
|
|
|
|
|
|
Provisions for loan losses
|
|
|
9,862
|
|
Charge-offs
|
|
|
(839
|
)
|
Recoveries
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
9,023
|
|
|
|
|
|
|
The total allowance reflects managements estimate of
credit losses inherent in the loan portfolio at the balance
sheet date. The computation of the allowance for loan losses
includes elements of judgment and high levels of subjectivity.
In evaluating credit risks the Company looks at multiple factors
including delinquencies. The following table summarizes the
carrying value of loans that are delinquent in excess of
30 days that are not classified as non-accrual (in
thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans Past
|
|
|
Total
|
|
|
|
Loans Past
|
|
|
Due 90
|
|
|
Loans in
|
|
|
|
Due 30 to
|
|
|
Days and
|
|
|
Delinquent
|
|
|
|
89 Days
|
|
|
Over
|
|
|
Status
|
|
|
Real estate
|
|
$
|
27,834
|
|
|
$
|
133,553
|
|
|
$
|
161,387
|
|
Commercial and industrial
|
|
|
2,938
|
|
|
|
4,779
|
|
|
|
7,717
|
|
Consumer
|
|
|
33
|
|
|
|
416
|
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
30,805
|
|
|
$
|
138,748
|
|
|
$
|
169,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Substantially all loans in delinquent status are covered under
loss-sharing agreements with the FDIC.
Certain loans have been classified as impaired based on the
Companys inability to collect all amounts due under the
contractual terms of the loan. The following table shows the
Companys investment in impaired and non-performing loans
as of and for the twelve months ended December 31, 2010 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific
|
|
|
Average
|
|
|
Interest
|
|
|
|
Impaired
|
|
|
Impaired
|
|
|
Allowance
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Loans in
|
|
|
Loans in
|
|
|
Allocated to
|
|
|
Investment in
|
|
|
Recognized
|
|
|
|
Accrual
|
|
|
Non-accrual
|
|
|
Impaired
|
|
|
Impaired
|
|
|
On Impaired
|
|
|
|
Status
|
|
|
Status
|
|
|
Loans
|
|
|
Loans
|
|
|
Loans
|
|
|
Real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
97,663
|
|
|
$
|
1,254
|
|
|
$
|
7,832
|
|
|
$
|
16,486
|
|
|
$
|
4,340
|
|
1-4 single family residential
|
|
|
12,225
|
|
|
|
|
|
|
|
256
|
|
|
|
2,037
|
|
|
|
326
|
|
Home equity loans and lines of credit
|
|
|
|
|
|
|
210
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
|
109,888
|
|
|
|
1,464
|
|
|
|
8,088
|
|
|
|
18,558
|
|
|
|
4,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
17,041
|
|
|
|
141
|
|
|
|
616
|
|
|
|
2,847
|
|
|
|
594
|
|
Consumer
|
|
|
1,265
|
|
|
|
|
|
|
|
247
|
|
|
|
211
|
|
|
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other loans
|
|
|
18,306
|
|
|
|
141
|
|
|
|
863
|
|
|
|
3,058
|
|
|
|
665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans held in portfolio, net
|
|
$
|
128,194
|
|
|
$
|
1,605
|
|
|
$
|
8,951
|
|
|
$
|
21,616
|
|
|
$
|
5,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in impaired loans in accrual status are PCI loans that
are being accounted for as pools and for which impairment is
evaluated on the cumulative cash flows of the pools. PCI loans
are classified as accruing loans due to discount accretion. In
addition, the total carrying value of PCI loans accounted for as
pools that are past due in excess of 90 days for either
principal, interest or both, amounts to $136.0 million at
December 31, 2010.
The major components of premises and equipment at
December 31, 2010, were as follows (in thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Bank premises
|
|
$
|
11,911
|
|
Bank land
|
|
|
5,124
|
|
Computer equipment and software
|
|
|
1,895
|
|
Other
|
|
|
1,435
|
|
|
|
|
|
|
Total
|
|
|
20,365
|
|
LessAccumulated depreciation
|
|
|
(742
|
)
|
|
|
|
|
|
Total
|
|
$
|
19,623
|
|
|
|
|
|
|
Total depreciation expense for the year ended December 31,
2010, was approximately $742,000.
F-33
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
|
|
7
|
Other Real Estate
Owned
|
An analysis of other real estate owned for the period from the
PAB Acquisition through December 31, 2010, follows (in
thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Balance arising from PAB acquisition on January 22,
2010
|
|
$
|
2,945
|
|
Additions from acquisitions
|
|
|
22,198
|
|
Transfers from loan portfolio
|
|
|
12,191
|
|
Sales
|
|
|
(14,115
|
)
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
23,219
|
|
|
|
|
|
|
The Company includes in other assets certain intangible assets
with definite lives which include core deposit and customer
relationship intangibles. These intangibles are amortized over
their respective estimated useful lives and reviewed at least
annually for impairment. The amortization expense represents the
estimated decline in the value of the underlying deposits or
loan customers acquired. An analysis of intangible assets as of
December 31, 2010, follows (in thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Core deposit intangible
|
|
$
|
6,121
|
|
Other
|
|
|
302
|
|
|
|
|
|
|
Total
|
|
$
|
6,423
|
|
|
|
|
|
|
During the period from the PAB Acquisition through
December 31, 2010, the Company recognized approximately
$608,000 of amortization of intangible assets. The Company
expects to amortize an additional $3.6 million of
intangibles within the next five years.
The following table sets forth average amounts and weighted
average rates paid on each of the Companys deposit
categories for the period ended December 31, 2010 (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Balance
|
|
|
Rates
|
|
|
Transaction accounts:
|
|
|
|
|
|
|
|
|
Demand deposits:
|
|
|
|
|
|
|
|
|
Non-interest bearing
|
|
$
|
83,865
|
|
|
|
|
|
Interest bearing
|
|
|
28,958
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
Total demand deposits
|
|
|
112,823
|
|
|
|
|
|
Money market accounts
|
|
|
144,876
|
|
|
|
0.7
|
%
|
Savings accounts
|
|
|
66,694
|
|
|
|
1.1
|
%
|
|
|
|
|
|
|
|
|
|
Total transaction accounts
|
|
|
324,393
|
|
|
|
|
|
Time deposits
|
|
|
915,695
|
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
Total average deposits
|
|
$
|
1,240,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Time deposit accounts with balances of $100,000 or more totaled
approximately $497.7 million at December 31, 2010,
including $113.6 million with balances of $250,000 or more.
The following table sets forth maturities of time deposits equal
to or greater than $100,000 as of December 31, 2010 (in
thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Three months or less
|
|
$
|
49,558
|
|
Over three months and through one year
|
|
|
199,113
|
|
Over one year and through three years
|
|
|
152,546
|
|
Over three years
|
|
|
96,433
|
|
|
|
|
|
|
Total time deposits over $100,000
|
|
$
|
497,650
|
|
|
|
|
|
|
Included in deposits are $25.0 million of time deposits to
the State of Florida which are collateralized by mortgage-backed
securities with a fair value of $60.6 million at
December 31, 2010.
Interest expense on deposits includes a reduction for
amortization of the fair value adjustment for time deposits
amounting to $7.8 million during the period from the PAB
Acquisition through December 31, 2010. The following table
summarizes interest expense on deposits for the period from the
PAB Acquisition through December 31, 2010 (in thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Transaction accounts
|
|
$
|
36
|
|
Savings and money market accounts
|
|
|
2,120
|
|
Time deposits
|
|
|
11,261
|
|
|
|
|
|
|
Total
|
|
$
|
13,417
|
|
|
|
|
|
|
The Bank holds deposits for the Company in the amount of
approximately $388 million. During the year, the Bank paid
interest on these deposits totaling approximately $43,000. The
deposit amount and interest earned was eliminated in the
consolidation of the Company and Bank.
|
|
10
|
Advances from the
FHLB
|
Advances from the FHLB outstanding as of December 31, 2010,
incur interest and have contractual repayments as follows
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Range of
|
|
|
Balance
|
|
|
Interest Rates
|
|
Repayable during the year ending December 31,
|
|
|
|
|
|
|
2011
|
|
$
|
40,000
|
|
|
0.6% - 4.6%
|
2012
|
|
|
115,316
|
|
|
0.5% - 4.1%
|
2014
|
|
|
20,000
|
|
|
3.8% - 3.8%
|
|
|
|
|
|
|
|
Total contractual outstanding
|
|
|
175,316
|
|
|
|
Fair value adjustment
|
|
|
1,373
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2010
|
|
$
|
176,689
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2010, the Company
maintained advances with the FHLB averaging $126.4 million,
with an average cost of approximately 1.1%, which includes
F-35
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
amortization of the premium on FHLB advances of approximately
$555,000. The fair value adjustment is being amortized as a
reduction to interest expense over the remaining term of the
advances using the effective yield method.
The Company and the Bank are subject to various regulatory
capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possibly additional discretionary
actions by regulators that, if undertaken, could have a direct
material effect on the Companys financial statements.
Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and Bank must meet
specific capital guidelines that involve quantitative measures
of its assets, liabilities and certain off-balance sheet items
as calculated under regulatory accounting practices. The capital
amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings
and other factors.
The ability of the Company to pay dividends is subject to
statutory and regulatory restrictions on the payment of cash
dividends, including the requirement under the Florida banking
laws that cash dividends be paid only out of undivided profits
and only if the Company has surplus of a specified level.
Quantitative measures established by regulation to ensure
capital adequacy require the Company and Bank to maintain
minimum amounts and ratios (set forth in the following table) of
total and Tier I capital (as defined) to average assets (as
defined). Management believes, as of December 31, 2010,
that the Company and Bank met all capital adequacy requirements
to which they are subject.
The Bank and Companys regulatory capital levels as of
December 31, 2010, are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required to be
|
|
Required to be
|
|
|
|
|
Considered Well
|
|
Considered Adequately
|
|
|
Actual
|
|
Capitalized
|
|
Capitalized
|
Bank Regulatory Capital
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Tier 1 leverage ratio
|
|
|
13.5
|
%
|
|
$
|
333,210
|
|
|
|
5.0
|
%
|
|
$
|
123,377
|
|
|
|
4.0
|
%
|
|
$
|
98,702
|
|
Tier 1 risk-based capital ratio
|
|
|
51.2
|
%
|
|
|
333,210
|
|
|
|
6.0
|
%
|
|
|
39,045
|
|
|
|
4.0
|
%
|
|
|
26,030
|
|
Total risk-based capital ratio
|
|
|
52.5
|
%
|
|
|
341,425
|
|
|
|
10.0
|
%
|
|
|
65,076
|
|
|
|
8.0
|
%
|
|
|
52,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required to be
|
|
Required to be
|
|
|
|
|
Considered Well
|
|
Considered Adequately
|
|
|
Actual
|
|
Capitalized
|
|
Capitalized
|
Company Regulatory Capital
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Tier 1 leverage ratio
|
|
|
29.4
|
%
|
|
$
|
723,122
|
|
|
|
5.0
|
%
|
|
$
|
122,813
|
|
|
|
4.0
|
%
|
|
$
|
98,250
|
|
Tier 1 risk-based capital ratio
|
|
|
104.1
|
%
|
|
|
723,122
|
|
|
|
6.0
|
%
|
|
|
41,670
|
|
|
|
4.0
|
%
|
|
|
27,780
|
|
Total risk-based capital ratio
|
|
|
105.4
|
%
|
|
|
731,808
|
|
|
|
10.0
|
%
|
|
|
69,451
|
|
|
|
8.0
|
%
|
|
|
55,561
|
|
F-36
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
In connection with the Banks operating agreements with the
OCC, the Bank agreed to maintain minimum capital ratios as
follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Ratio
|
|
Amount
|
|
Tier 1 leverage ratio
|
|
|
10.0
|
%
|
|
$
|
246,754
|
|
Tier 1 risk-based capital ratio
|
|
|
11.0
|
%
|
|
|
71,583
|
|
Total risk-based capital ratio
|
|
|
12.0
|
%
|
|
|
78,090
|
|
The Bank is subject to regulations of certain federal and state
agencies and can be periodically examined by those authorities.
As a consequence of the extensive regulation, the Banks
business is susceptible to the impacts of federal legislation
and regulations including but not limited to the Federal Reserve
Bank, OCC and FDIC.
12 Stockholders
Equity
The 2009
Offering
On November 4, 2009, Deutsche Bank Securities Inc., acting
as the initial purchaser/placement agent (the Placement
Agent), offered 18,569,519 members interests
consisting of Class A voting interests and Class B
non- voting interests (collectively, the Interests)
to qualified institutional buyers, accredited investors and
institutional accredited investors at a price of $20 per
Interest. In connection with the offering, the Company granted
the Placement Agent an option to purchase up to an additional
3,500,000 Interests (the Overallotment), which was
exercised by the Placement Agent. The Company raised a total of
$440.0 million from the offering and Overallotment.
The Company paid the Placement Agent a placement fee of
$16.8 million, or $0.80 per issued Interest. In addition,
the Company will record an additional placement fee to the
Placement Agent of $10.5 million, or $0.50 per issued
Interest in the event of a completed initial public offering,
raising at least $100.0 million of proceeds at a minimum
offering price of $20.00 per Interest (a Qualified
IPO). As this fee is contingent on a Qualifying Investment
Transaction (defined below) and a subsequent Qualified IPO, no
recognition took place at this time given the uncertainty of
these events. Pursuant to the registration rights agreement, the
Company was obligated to use its best efforts to file a
registration statement with the SEC within 180 days after
the date of the consummation of a Qualifying Investment
Transaction, but no such filing has yet been made.
As of December 31, 2009, in connection with the 2009
Offering, the Company was obligated to return unutilized funds
to the investors in the 2009 Offering in the event the Company
did not spend 50% or more of the offering proceeds in a
qualifying Investment Transaction within 18 months
following the consummation of the offering. The Company
fulfilled its obligation to spend such offering proceeds in June
2010 in connection with the acquisition of the assets of
Peninsula Bank and thus has no further obligation to return
funds to such investors.
Direct expenses associated with the 2009 offering, consisting
primarily of legal fees, were approximately $1.7 million at
December 31, 2009. The Company recognized the expenses as a
reduction of members equity. The Company allocated 2.0% of
the gross proceeds from the offering, which was
$10 million, to be used for certain eligible expenses. The
Company paid the Placement Agent a placement fee of
$16.8 million, or $0.80 per issued Interest. The Company
recognized this placement fee as a reduction of members
equity. In connection with the offering, the Company granted the
Placement Agent an Overallotment at $20 per Interest.
F-37
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Concurrently with the offering, the Company issued and sold
1,069,519 Class A interests to BSI at a discounted price of
$18.70 per Interest. The discount of $1.30 per Interest
represents an amount equal to the Placement Agents
placement fee for the offering. At this same time, the Founders
of the Company retained a 3% interest in the Company
(Founders Interest) consisting of 662,086 Class A
Interests. The Placement Agent exercised its Overallotment
option to purchase additional Interests (see table below for
details).
Below represents the Class A and B Interests outstanding
and expenses associated with the 2009 offering as of
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of
|
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Number of
|
|
|
|
|
Issuance
|
|
Issuance
|
|
|
Price
|
|
|
Interests
|
|
|
Interests
|
|
|
Interests
|
|
|
Total
|
|
|
Proceeds from investors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/12/2009 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering & overallotment
|
|
|
12/31/2009
|
|
|
$
|
20.00
|
|
|
|
18,634,050
|
|
|
|
2,365,950
|
|
|
|
21,000,000
|
|
|
$
|
420,000,000
|
|
Co-investment (BSI)
|
|
|
11/12/2009
|
|
|
$
|
18.70
|
|
|
|
1,069,519
|
|
|
|
|
|
|
|
1,069,519
|
|
|
|
20,000,005
|
|
Founders interest
|
|
|
11/12/2009
|
|
|
$
|
|
|
|
|
662,086
|
|
|
|
|
|
|
|
662,086
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
20,365,655
|
|
|
|
2,365,950
|
|
|
|
22,731,605
|
|
|
|
440,075,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct offering expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement agent fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,800,000
|
)
|
Direct expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,739,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct offering expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,539,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
20,365,655
|
|
|
|
2,365,950
|
|
|
|
22,731,605
|
|
|
$
|
421,535,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2010
Offering
On November 11, 2010, Deutsche Bank Securities Inc., acting
as the Placement Agent, offered 11,900,000 members
interests consisting of Class A voting interests and
Class B non-voting interests (collectively, the
Interests) to qualified institutional buyers,
accredited investors and institutional accredited investors at a
price of $21 per Interest. In connection with the offering, the
Company granted the Placement Agent an option to purchase up to
an additional 2,380,000 Interests (the
Overallotment), which was exercised by the Placement
Agent. The Company raised a total of $299.9 million from
the offering and Overallotment.
The Company paid the Placement Agent a placement fee of
$12.0 million, or $0.84 per issued Interest. In addition,
the Company will record an additional placement fee to the
Placement Agent of $3.1 million or $0.26 per issued
Interest in the event of a completed Qualified IPO. As this fee
is contingent on a Qualified IPO, no recognition took place at
this time given the uncertainty of this event. Pursuant to the
registration rights agreement, the Company has undertaken its
best efforts to file a registration statement with the SEC with
respect to a Qualified IPO, but has not yet made such filing.
Direct expenses associated with the 2010 offering, consisting
primarily of legal fees, were approximately $2.1 million at
December 31, 2010. The Company recognized the expenses as a
reduction of stockholders equity. The Company paid the
Placement Agent a placement fee of $12.0 million, or $0.84
per issued Interest. The Company recognized this placement fee
as a reduction of stockholders equity. In connection with
the offering, the Company granted the Placement Agent an
Overallotment at $21 per Interest. The Placement Agent exercised
its Overallotment option to purchase additional Interests (see
table below for details).
F-38
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Below represents the Class A and B shares sold and expenses
associated with the 2010 offering as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date of
|
|
|
|
|
|
Class A
|
|
|
Class B
|
|
|
Number of
|
|
|
|
|
Issuance
|
|
Issuance
|
|
|
Price
|
|
|
Shares
|
|
|
Shares
|
|
|
Shares
|
|
|
Total
|
|
|
Proceeds from investors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/6/2010 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering & overallotment
|
|
|
12/31/2010
|
|
|
$
|
21.00
|
|
|
|
12,183,251
|
|
|
|
2,096,742
|
|
|
|
14,279,993
|
|
|
$
|
299,879,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
12,183,251
|
|
|
|
2,096,742
|
|
|
|
14,279,993
|
|
|
|
299,879,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct offering expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement agent fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,995,194
|
)
|
Direct expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,148,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct offering expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,143,676
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
12,183,251
|
|
|
|
2,096,742
|
|
|
|
14,279,993
|
|
|
$
|
285,736,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2010, the Company had 32,548,906
Class A shares and 4,462,692 Class B shares issued and
outstanding.
In October 2010, Bond Street Holdings, LLC converted to Bond
Street Holdings, Inc where Class A and Class B
interests converted to Class A and Class B common
shares on a 1:1 ratio. Other than with respect to voting rights
and conversion provisions, each Class A and Class B
stock is treated identical for dividends, liquidation, and
preemptive rights. The holders of Class A common stock are
entitled to one vote for each share held of record on all
matters properly submitted to a vote of the stockholders,
including the election of directors. Holders of Class B
common stock do not have voting power except as required by
applicable law. Each share of Class B common stock can be
converted into one share of Class A common stock subject to
certain restrictions. Class A common stock may not be
converted into Class B common stock. Holders of both
Class A and Class B common stock are entitled to
receive ratably those dividends, if any as may be declared by
the Board of Directors out of legally available funds. Upon any
liquidation, dissolution or winding up, the holders of
Class A and Class B common stock will be entitled to
share ratably in the assets legally available for distribution
to stockholders after the payment of all debts and other
liabilities, subject to the prior rights of any preferred stock
then outstanding. Holders of Class A and Class B
common stock have no preemptive rights or conversion rights or
other subscription rights and there are no redemption or sinking
fund provisions applicable to the common stock.
There are 10 million preferred shares authorized and none
issued and outstanding at December 31, 2010. Preferred
stock has a par value of $.001.
The board of directors of the Company has not established a
formal dividend policy, although no dividends have been declared
nor are any contemplated for the foreseeable future.
13 Stock
Option Awards
During 2009, the Company approved the 2009 Equity Incentive Plan
(the 2009 Option Plan) covering its directors,
employees and affiliates. The 2009 Option Plan provides for the
grant of options to acquire shares of common stock up to an
aggregate of the lesser of 10% of issued common stock or
4.375 million shares of common stock.
During 2009, the Company granted 482,530 options with an
exercise price of $20 per Interest and a
10-year from
grant date expiration date where none can be exercised until
after
F-39
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
January 25, 2013. The options were set to vest at a rate of
331/3%
on June 9, 2010, December 9, 2010, and June 9,
2011. As of December 31, 2009, no options were vested and
no options had been exercised at such time. During 2010, in
connection with a regulatory review, these option agreements
were finalized to provide for immediate vesting of all of these
options. Therefore, as of December 31, 2010, all of these
2009 options were vested, yet none had been exercised at such
time. At December 31, 2009, the Company did not record an
expense as there was an immaterial value assigned to these
options as there existed a number of significant and material
uncertainties and conditions related to the future of the
Company.
At December 31, 2010, options to acquire a maximum of
3.7 million shares were available for award based on the
amount of issued stock. At December 31, 2010, the Company
had awarded option to purchase 550,000 and 804,599 shares
to employees and directors, respectively. The options can be
exercised for 10 years from grant date starting
January 25, 2013, and, if exercised, the shares issued upon
such exercise will be newly issued shares. At December 31,
2010, there were options to purchase up to 2.3 million
shares available for award from the 2009 Option Plan.
In 2010, the Company granted 322,069 stock options to directors
without vesting requirements and a weighted average exercise
price of $20.62. The fair value of these options was determined
utilizing the Black-Scholes pricing model methodology using the
assumptions of a weighted average risk-free interest rate of
1.90% (range of 1.48%2.60%), an expected term of six
years, volatility of 45.0%, no dividends paid and no
forfeitures. Since the options were fully vested at grant date,
the Company recognized the entire $1,806,938 of share-based
compensation expense during 2010.
On three different dates in 2010, the Company granted 550,000
stock options to employees with a three year vesting period and
an exercise price of $20. The fair value of these options was
determined utilizing the Black-Scholes pricing model methodology
using assumptions of a weighted average risk-free interest rate
of 1.80% (range of 1.37%2.60%), an expected term of six
years, volatility of 45.0%, no dividends paid and no
forfeitures. During 2010, the Company recognized $2,264,000 of
share-based compensation expense related to such stock option
awards. The remaining value of $2.7 million will be
amortized through earnings over a weighted average period of
1.61 years. A summary of the Companys options subject
to vesting as of December 31, 2010, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Term
|
|
|
Fair
|
|
|
Exercise
|
|
|
|
Quantity
|
|
|
Years
|
|
|
Value
|
|
|
Price
|
|
|
Balance at April 1, 2009
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Awarded
|
|
|
482,530
|
|
|
|
|
|
|
|
|
|
|
|
20.00
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
482,530
|
|
|
|
|
|
|
|
|
|
|
|
20.00
|
|
Awarded
|
|
|
872,069
|
|
|
|
1.61
|
|
|
|
5.68
|
|
|
|
20.23
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
|
1,354,599
|
|
|
|
1.04
|
|
|
$
|
3.66
|
|
|
$
|
20.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
14 Warrants
and Appreciation Agreements
During 2009 and 2010, the Company issued 5,452,428 warrants to
directors and employees that expire in November 2016 and August
2017, respectively. The warrants provide the recipient a right
to purchase one share of Class A common stock for an
exercise price ranging between $22 and $30 per warrant. The
recipients can only exercise the warrants on the six, eighteen
and thirty month anniversaries of the occurrence of an initial
public offering (IPO) and after August 13,
2013. The Company cannot currently determine the probability or
timing of an IPO event and as a result the Company has not
recognized any related expense in the accompanying financial
statements.
In connection with the acquisitions of the failed depository
institutions of Premier American Bank (Old Premier)
and Florida Community Bank (Old FCB) on
January 22, and January 29, 2010, respectively, the
Company entered into equity appreciation agreements with the
FDIC. These agreements provide that following the occurrence of
a qualified initial public offering or a sale of all or
substantially all of the Companys assets (where the
aggregate sale price exceeds the aggregate amount of all the
capital invested by the Companys equity holders), the FDIC
has the right to receive a cash payment in respect of each
acquisition.
The aggregate cash payment for the Old Premier acquisition is
equal to the applicable value of 50,000 shares of
Class A common stock (subject to certain adjustments for
stock splits or other similar transactions), depending on
whether the triggering event is an initial public offering or
sale event. The equity appreciation agreement further provides
that in no event shall the payment by the Company to the FDIC be
less than $1 million or more than $3.5 million. The
FDIC has sixty days following receipt of written notice from the
Company regarding the occurrence of a triggering event to
exercise its right to receive payment under the equity
appreciation agreement, provided that in no event shall the
FDICs right to receive payment continue beyond
January 22, 2020.
The aggregate cash payment for the Old FCB acquisition is equal
to the applicable value of 65,000 shares of Class A common
stock (subject to certain adjustments for stock splits or other
similar transactions), depending on whether the triggering event
is an initial public offering or sale event. The equity
appreciation agreement further provides that in no event shall
the payment by the Company to the FDIC be less than
$1.3 million or more than $4.55 million. The FDIC has
sixty days following receipt of written notice from the Company
regarding the occurrence of a triggering event to exercise its
right to receive payment under the equity appreciation
agreement, provided that in no event shall the FDICs right
to receive payment continue beyond January 29, 2020.
The equity appreciation instruments related to Old Premier and
Old FCB are contingent on a market driven event where the
probability and timing cannot currently be determined. As a
result, the Company has not recognized any related expense in
the accompanying financial statements.
In connection with the acquisition of the failed depository
institution, Peninsula Bank (Old Peninsula) on
June 25, 2010, the Company entered into a value
appreciation instrument agreement with the FDIC pursuant to
which, upon the occurrence of a qualified public float event or
sale of all or substantially all of the Companys assets
(where the aggregate sale price exceeds the aggregate amount of
all the capital invested by the Companys equity holders),
the FDIC has the right, which may be exercised in whole or in
part, to receive a payment in cash or in stock in respect of
65,000 shares of Class A Common Stock (subject to
certain adjustments for stock splits or other similar
transactions) as follows: (i) if payment in cash is
elected, the
F-41
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
payment shall be equal to the product of (X) the applicable
value per share minus $20.00 and (Y) the number of shares
of Class A Common Stock in respect of which the FDICs
right is being exercised; and (ii) if payment in stock is
elected, the payment shall be the number of shares of
Class A Common Stock equal to (X) the product of
(a) the number of shares of Class A Common Stock in
respect of which the FDICs right is being exercised and
(b) the applicable value per share minus $20.00, divided by
(Y) the applicable value per share.
The term of the agreement ends on the earlier to occur of the
first anniversary of a qualified public float event or
June 25, 2012. In the event that a triggering event does
not occur prior to the expiration of the term (or if the FDIC
does not otherwise fully exercise its right to receive payment
under the agreement), then upon the expiration of the term the
Company shall pay to the FDIC a cash fee equal to the product of
(1) the number of shares of Class A Common Stock
attributable to the unexercised payment right of the FDIC and
(2) the per share price equal to the product of
(x) the Companys tangible book value (as defined in
the agreement) per common share of the most recent quarter prior
to the expiration of the term and (y) the prevailing
average price to tangible book multiple of the components
underlying the Nasdaq Bank Index at such date, the determination
value, minus $20.00, the exercise price.
At December 31, 2010, the determination value per share is
$18.12 with an exercise price of $20.00, therefore the value
appreciation instrument would not be exercised and the Company
did not record any related liability.
15 Income
Taxes
The components of the provision for income taxes for the periods
ended December 31, 2010 and 2009, are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Current income tax expense:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax benefit:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(3,446
|
)
|
|
|
(581
|
)
|
State
|
|
|
(361
|
)
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred income tax benefit
|
|
|
(3,807
|
)
|
|
|
(640
|
)
|
Provision for valuation allowance on deferred tax asset
|
|
|
|
|
|
|
640
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit
|
|
$
|
(3,807
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
F-42
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
A reconciliation of the expected income tax expense at the
statutory federal income tax rate of 35% to the Companys
actual income tax expense and effective tax rate for the period
ended December 31, 2010, is as follows (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Percentage
|
|
|
Tax expense at federal income tax rate
|
|
$
|
6,239
|
|
|
|
(35.0
|
)%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
|
|
Gain on FDIC assisted transactions
|
|
|
(9,166
|
)
|
|
|
(51.4
|
)%
|
Tax basis difference in loan pools
|
|
|
(592
|
)
|
|
|
(3.3
|
)%
|
State tax, net of federal benefit
|
|
|
(268
|
)
|
|
|
(1.5
|
)%
|
Permanent differences
|
|
|
621
|
|
|
|
3.5
|
%
|
Other
|
|
|
(641
|
)
|
|
|
(3.6
|
)%
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(3,807
|
)
|
|
|
(21.4
|
)%
|
|
|
|
|
|
|
|
|
|
F-43
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Deferred income tax assets and liabilities result from temporary
differences between assets and liabilities measured for
financial reporting purposes and for income tax return purposes.
These assets and liabilities are measured using the enacted tax
rates and laws that are currently in effect and are reported net
in the accompanying consolidated balance sheet. The significant
components of the net deferred tax assets and liabilities at
December 31, 2010 and 2009, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Excess tax basis over carrying value of assets:
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
29,099
|
|
|
$
|
|
|
Other real estate owned
|
|
|
12,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess carrying value over tax basis of liabilities:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,449
|
|
|
|
|
|
FHLB advances
|
|
|
530
|
|
|
|
|
|
Clawback liability
|
|
|
3,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,493
|
|
|
|
|
|
Amortization
|
|
|
12,719
|
|
|
|
|
|
Unrealized losses on securities available for sale
|
|
|
508
|
|
|
|
|
|
Provision for loan losses
|
|
|
761
|
|
|
|
|
|
Net operating loss carry forward
|
|
|
9,990
|
|
|
|
640
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax asset
|
|
|
71,351
|
|
|
|
640
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Restricted securities
|
|
|
(2,240
|
)
|
|
|
|
|
Loss-share indemnification asset
|
|
|
(62,721
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64,961
|
)
|
|
|
|
|
Deferred tax gain
|
|
|
(13,825
|
)
|
|
|
|
|
Net OREO expense
|
|
|
(3,347
|
)
|
|
|
|
|
Other
|
|
|
(142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax liability
|
|
|
(82,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability (asset), net
|
|
|
(10,924
|
)
|
|
|
640
|
|
Valuation allowance for deferred tax liability (asset),
net
|
|
|
|
|
|
|
(640
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax liability (asset), net
|
|
$
|
(10,924
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Realization of tax benefits for deductible temporary differences
depends on having sufficient taxable income of an appropriate
character within the carry-forward periods. Sources of taxable
income that may allow for the realization of these tax benefits
include: (1) taxable income for the period ended
December 31, 2010, which would be available through
carry-back in future years, (2) future taxable income that
will result from reversal of existing taxable temporary
differences, including the negative tax on goodwill, and
(3) taxable income generated from future operations.
F-44
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
As of December 31, 2010, the Company has federal and state
net operating loss carryforwards of approximately
$24.3 million and $23.7 million, respectively, which
begin to expire in 2029. The utilization of the federal and
state net operating loss carry forwards may be subject to
limitation under the rules regarding a change in stock ownership
as determined by the applicable federal and state income tax
statutes.
As of December 31, 2009 the Company has a deferred tax
asset of approximately $0.7 million and has recorded a full
valuation allowance. Although the Company generated net
operating losses from its operations, no income tax benefits
have been recorded. In 2009, the recognition of income tax
benefits and corresponding recognition of a deferred tax asset
was not recorded since at that time the Company was in a
development stage without any banking operation and it was
unknown when Companys future operations would allow the
realization of such benefits.
16 Commitments
and Contingencies
The Company issues off-balance sheet financial instruments in
connection with its lending activities and to meet the financing
needs of its customers. These financial instruments include
commitments to fund loans, lines of credit and commercial and
standby letters of credit. These commitments expose the Company
to varying degrees of credit and market risk which are
essentially the same as those involved in extending loans to
customers and are subject to the Companys credit policies.
The Company follows the same credit policies in making
commitments as it does for instruments recorded on the
Companys consolidated balance sheet. Collateral is
obtained based on managements assessment of the
customers credit risk. The Companys exposure to
credit loss is represented by the contractual amount of these
commitments.
Amounts funded under non-cancelable commitments in effect at the
date of acquisition are covered under the loss-sharing
agreements if certain conditions are met.
Financial
Instruments Commitments
Total commitments at December 31, 2010, were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Covered
|
|
|
Not Covered
|
|
|
Total
|
|
|
|
|
|
Commitments to fund loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$
|
2,434
|
|
|
$
|
|
|
|
$
|
2,434
|
|
|
|
|
|
Commercial and commercial real estate
|
|
|
1,206
|
|
|
|
492
|
|
|
|
1,698
|
|
|
|
|
|
Construction
|
|
|
234
|
|
|
|
|
|
|
|
234
|
|
|
|
|
|
Unfunded commitments under lines of credit
|
|
|
19,636
|
|
|
|
4,855
|
|
|
|
24,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commitments to fund loans
|
|
|
23,510
|
|
|
|
5,347
|
|
|
|
28,857
|
|
|
|
|
|
Commercial and standby letters of credit
|
|
|
|
|
|
|
6,628
|
|
|
|
6,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,510
|
|
|
$
|
11,975
|
|
|
$
|
35,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to
fund loans:
These are agreements to lend funds to customers as long as there
is no violation of any condition established in the contract.
Commitments to fund loans generally have fixed expiration dates
or other termination clauses and may require payment of a fee.
Many of these
F-45
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
commitments are expected to expire without being funded and,
therefore, the total commitment amounts do not necessarily
represent future liquidity requirements.
The Company evaluates each customers creditworthiness on a
case-by-case
basis. The amount of collateral required in connection with an
extension of credit is based on managements credit
evaluation of the counterparty.
To accommodate the financial needs of customers, the Company
makes commitments under various terms to lend funds to consumers
and businesses. Unfunded commitments under lines of credit
include consumer, commercial and commercial real estate lines of
credit to existing customers. Many of these commitments have
fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of these commitments are
expected to expire without being funded, the total commitment
amounts do not necessarily represent future liquidity
requirements. The amount of collateral obtained, if it is deemed
necessary by the Company, is based on managements credit
evaluation of the customer.
Commercial and
standby letters of credit:
Letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third
party. Those letters of credit are primarily issued to support
trade transactions or guarantee arrangements. Fees collected on
standby letters of credit represent the fair value of those
commitments and are deferred and amortized over their term,
which is typically one year or less. The credit risk involved in
issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. The Company
generally holds collateral supporting those commitments if
deemed necessary.
Other Commitments
and Contingencies
Legal
Proceedings
The Company, from time to time, is involved as plaintiff or
defendant in various legal actions arising in the normal course
of business. While the ultimate outcome of any such proceedings
cannot be predicted with certainty, it is the opinion of
management, based upon advice of legal counsel, that no
proceedings exist, either individually or in the aggregate,
which, if determined adversely to the Company, would have a
material effect on the Companys consolidated balance
sheet, results of operations or cash flows.
Leases
The Company and its subsidiaries lease premises and equipment
under cancelable and non-cancelable leases, some of which
contain renewal options under various terms. The leased
properties are used primarily for banking purposes. Total rental
expense on operating leases for the period ended
December 31, 2010, was approximately $1.6 million.
F-46
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
As of December 31, 2010, the Company had entered into
non-cancelable operating leases with approximate minimum future
rentals as follows (in thousands):
|
|
|
|
|
|
|
Amount
|
|
|
Years ending December 31,
|
|
|
|
|
2011
|
|
$
|
1,453
|
|
2012
|
|
|
1,258
|
|
2013
|
|
|
945
|
|
2014
|
|
|
812
|
|
2015
|
|
|
713
|
|
Thereafter
|
|
|
5,970
|
|
|
|
|
|
|
Total
|
|
$
|
11,151
|
|
|
|
|
|
|
17 Parent
Company Financial Data
The following summarizes the major categories of Bond Street
Holding, Inc.s (holding company only) Balance Sheets at
December 31, 2010 and 2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
388,689
|
|
|
$
|
7,168
|
|
Investment in bank
|
|
|
338,790
|
|
|
|
|
|
Restricted cash
|
|
|
|
|
|
|
413,200
|
|
Other Assets
|
|
|
3,437
|
|
|
|
693
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
730,916
|
|
|
$
|
421,061
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Due to bank
|
|
$
|
2,153
|
|
|
$
|
|
|
Other liabilities
|
|
|
60
|
|
|
|
1,186
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,213
|
|
|
|
1,186
|
|
Stockholders equity
|
|
|
728,703
|
|
|
|
419,875
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
730,916
|
|
|
$
|
421,061
|
|
|
|
|
|
|
|
|
|
|
F-47
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following summarizes the major categories of Bond Street
Holding, Inc.s (holding company only) Statements of
Operations for the year ended December 31, 2010 and for the
period April 1, 2009 (inception date) to December 31,
2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Non-interest income:
|
|
|
|
|
|
|
|
|
Equity in income of subsidiary
|
|
$
|
24,175
|
|
|
$
|
|
|
Other income
|
|
|
56
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Total interest and non-interest income
|
|
|
24,231
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense:
|
|
|
|
|
|
|
|
|
Employee compensation
|
|
|
1,807
|
|
|
|
|
|
Professional services
|
|
|
1,313
|
|
|
|
1,607
|
|
Other expense
|
|
|
959
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expense
|
|
|
4,079
|
|
|
|
1,665
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
20,152
|
|
|
|
(1,661
|
)
|
Income tax benefit
|
|
|
1,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
21,633
|
|
|
$
|
(1,661
|
)
|
|
|
|
|
|
|
|
|
|
F-48
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following summarizes the major categories of Bond Street
Holding, Inc.s (holding company only) Statements of Cash
Flows for the year ended December 31, 2010 and for the
period April 1, 2009 (inception date) to December 31,
2009 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
21,633
|
|
|
$
|
(1,661
|
)
|
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Equity in undistributed earnings of subsidiary
|
|
|
(24,175
|
)
|
|
|
|
|
Compensation expense on non-vested stock options
|
|
|
1,807
|
|
|
|
|
|
Deferred tax expense
|
|
|
(1,481
|
)
|
|
|
|
|
Increase in due to subsidiary
|
|
|
2,153
|
|
|
|
|
|
Increase in other assets
|
|
|
(1,252
|
)
|
|
|
(692
|
)
|
(Decrease) Increase in other liabilities
|
|
|
(1,126
|
)
|
|
|
1,185
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(2,441
|
)
|
|
|
(1,168
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Capital contribution in Subsidiary
|
|
|
(315,000
|
)
|
|
|
|
|
Purchase of equipment
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(315,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from capital raise
|
|
|
285,773
|
|
|
|
421,536
|
|
Change in restricted cash
|
|
|
413,200
|
|
|
|
(413,200
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
698,973
|
|
|
|
8,336
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
381,521
|
|
|
|
7,168
|
|
Cash and cash equivalents, beginning of year
|
|
|
7,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
388,689
|
|
|
$
|
7,168
|
|
|
|
|
|
|
|
|
|
|
18 Fair
Value Measurements
The Company groups its assets and liabilities measured at fair
value in three levels, based on the markets in which the assets
and liabilities are traded and the reliability of the
assumptions used to determine fair value. These levels are as
follows:
Level 1Assets or liabilities for which the
identical item is traded on an active exchange, such as
publicly-traded instruments or futures contracts.
Level 2Assets and liabilities valued based on
observable market data for similar instruments.
Level 3Assets or liabilities for which
significant valuation assumptions are not readily observable in
the market; instruments valued based on the best available data,
some of which is internally-developed, and considers risk
premiums that a market participant would require.
Valuation techniques include use of option pricing models,
discounted cash flow models and similar techniques.
F-49
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
In instances where there is limited or no observable market
data, fair value measurements for assets and liabilities are
based primarily upon independent vendor or broker pricing and
valuation. When determining the fair value measurements for
assets and liabilities and the related fair value hierarchy, the
Company considers the principal or most advantageous market in
which it would transact and considers assumptions that market
participants would use when pricing the asset or liability
(observable inputs). When possible, the Company looks to active
and observable markets to price identical assets or liabilities
and when identical assets and liabilities are not traded in
active markets, the Company looks to market observable data for
similar assets and liabilities. It is the Companys policy
to maximize the use of observable inputs and minimize the use of
unobservable inputs. Unobservable inputs are only used to
measure fair value to the extent that observable inputs are not
available. The need to use unobservable inputs generally results
from the lack of market liquidity, resulting in diminished
observability of both actual trades and assumptions that would
otherwise be available to value these instruments, or the value
of the underlying collateral is not market observable. Although
third party price indications may be available for a security,
limited trading activity would make it difficult to support the
observability of these quotations.
Financial
Instruments Carried at Fair Value on a Recurring Basis
The following is a description of the valuation methodologies
used for financial instruments measured at fair value on a
recurring basis, as well as the general classification of each
instrument under the valuation hierarchy.
Investment securities available for sale are carried at fair
value on a recurring basis. When available, fair value is based
on quoted prices in an active market and as such, would be
classified as Level 1 (e.g., U.S. Government agency
securities, preferred stock of U.S. Government agencies and
mutual funds included). If quoted market prices are not
available, fair values are estimated using quoted prices of
securities with similar characteristics, discounted cash flows
or other pricing models. Investment securities available for
sale that the Company classifies as Level 2 include
U.S. Government agencies mortgage-backed securities and
collateralized mortgage obligations, preferred stock of other
issuers and state and municipal obligations. All other
investment securities available for sale are classified as
Level 3 and include private label mortgage pass-through
certificates, collateralized debt obligations and other debt
securities for which fair value estimation requires the use of
unobservable inputs. The Company values these securities using
third party proprietary pricing models that incorporate
observable and unobservable inputs.
F-50
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The following table presents the financial instruments measured
at fair value on a recurring basis as of December 31, 2010,
on the consolidated balance sheet utilizing the hierarchy
discussed above (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government agencies and sponsored enterprises debt
obligations
|
|
$
|
411,250
|
|
|
$
|
1,001,432
|
|
|
$
|
|
|
|
$
|
1,412,682
|
|
U.S. Government agencies and sponsored enterprises
mortgage-backed securities
|
|
|
|
|
|
|
80,431
|
|
|
|
|
|
|
|
80,431
|
|
State and municipal obligations
|
|
|
|
|
|
|
1,423
|
|
|
|
|
|
|
|
1,423
|
|
Corporate bonds and other securities
|
|
|
|
|
|
|
120,200
|
|
|
|
|
|
|
|
120,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
411,250
|
|
|
$
|
1,203,486
|
|
|
$
|
|
|
|
$
|
1,614,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Instruments Measured at Fair Value on a Non-Recurring
Basis
Loans that are collateral dependent and other real estate owned
are measured for impairment using the fair value of the
collateral or real estate owned less disposition costs and they
are carried at the lower of cost or estimated fair value less
disposition costs. Fair value of the loan collateral or real
estate owned property is primarily determined using estimates
which generally use the market and income approach valuation
technique and use observable market data to formulate an opinion
of the estimated fair value. When current appraisals are not
available, the Company uses its judgment regarding changes in
market conditions, based on observable market inputs, to adjust
the latest appraised value available. As a result, the estimated
fair value is considered Level 3. As of December 31,
2010, the Company had $23.2 million of other real estate
owned.
Other intangible assets and the loss-share indemnification asset
are initially recorded at estimated fair value and measured for
impairment on a non-recurring basis. These assets are reviewed
for impairment at least annually, or whenever events or changes
in circumstances indicate the carrying amount may not be
recoverable. These fair value adjustments use significant
assumptions that are unobservable in the market. As a result,
the estimated fair value is considered Level 3.
F-51
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
19 Fair
Value of Financial Instruments
The following table presents the carrying value and fair value
of financial instruments as of December 31, 2010 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
Fair
|
|
|
Value
|
|
Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
43,412
|
|
|
$
|
43,412
|
|
Investments securities
|
|
|
1,615,248
|
|
|
|
1,615,284
|
|
Loans receivable
|
|
|
515,321
|
|
|
|
593,307
|
|
Loss-share indemnification asset
|
|
|
162,596
|
|
|
|
162,596
|
|
Due from FDIC
|
|
|
28,621
|
|
|
|
28,621
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
1,514,259
|
|
|
|
1,502,566
|
|
Advances from the Federal Home Loan Bank
|
|
|
176,689
|
|
|
|
177,152
|
|
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments.
Certain financial instruments are carried at amounts that
approximate fair value due to their short-term nature and
generally negligible credit risk. Financial instruments for
which fair value approximates the carrying amount at
December 31, 2010, include cash and cash equivalents,
loss-share indemnification asset, due from FDIC, accrued
interest receivable, other assets and other liabilities.
Investment
Securities Available for Sale:
Fair value measurement is based upon quoted market prices, when
available (Level 1). If quoted market prices are not
available, fair values are measured utilizing independent
valuation techniques of identical or similar investment
securities (Level 2). Any investment securities not valued
based upon the methods above are considered Level 3.
Loans
Receivable:
Fair values for loans were based on a discounted cash flow
methodology that considered various factors, including the type
of loan and related collateral, classification status, fixed or
variable interest rate, term of loan and whether or not the loan
was amortizing and current discount rates. Loans were grouped
together according to similar characteristics and were treated
in the aggregate when applying various valuation techniques. The
discount rates used for loans are based on current market rates
for new originations of comparable loans and include adjustments
for liquidity concerns. The discount rate does not include a
factor for credit losses as that has been included in the
estimated cash flows.
Deposits:
The fair value of demand deposits, savings accounts and money
market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit
is estimated using discounted cash flow analysis and using the
rates currently offered for deposits of similar remaining
maturities.
F-52
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Advances from the
FHLB:
The fair value of the borrowings is estimated by discounting the
future cash flows using the current rate at which similar
borrowings with similar remaining maturities could be made.
20 Earnings
per Share
Basic earnings per common share are computed by dividing income
available to common shareholders by the weighted-average number
of common shares outstanding during each period. Diluted
earnings per common share are based on the weighted-average
number of common shares outstanding during the period, plus the
dilutive effect of securities or other contracts to issue common
shares (Common Stock Equivalents, or
CSE). CSE are excluded from the computation of
earnings per common share in periods in which they have an
anti-dilutive effect. Outstanding stock options and warrants are
potentially dilutive securities, but are not included in the
calculation of diluted earnings per common share because to do
so would be anti-dilutive at December 31, 2010 and 2009.
Therefore, at December 31, 2010 and 2009, the weighted
average number of shares used to compute basic and diluted
earnings per common share is the same.
21 Subsequent
Events
Subsequent events have been evaluated through the date that the
consolidated financial statements were available to be issued,
May 12, 2011. Except for the following, the Bank has not
identified any events that would have a material impact on the
financial position, result of operations or cash flows of the
Bank as of and for the period ended December 31, 2010.
On February 11, 2011, the Bank entered into a Purchase and
Assumption Agreement with the FDIC, as receiver, to acquire
certain assets and assume certain liabilities, including
substantially all of the deposits, of Sunshine State Community
Bank (SSCB), a failed depository institution
headquartered in Port Orange, Florida. This transaction was
accomplished without a loss-share agreement with the FDIC. Prior
to this acquisition, SSCB functioned as a community bank with
five branches in the area of Daytona, Florida. The Bank acquired
$115.0 million of assets and assumed $117.3 million of
liabilities related to this acquisition. The Bank received a
one-time payment of $34.2 million from the FDIC in
connection with the acquisition of this institution.
On April 29, 2011, the Bank entered into a Purchase and
Assumption Agreement with the FDIC, as receiver, to acquire
certain assets and assume certain liabilities, including
substantially all of the deposits, of First National Bank of
Central Florida (FNBCF) a failed depository
institution headquartered in Winter Park, Florida. The Bank also
entered into loss sharing agreement covering most of the loans
and all OREO properties of FNBCF. Pursuant to the terms of the
FNBCF loss sharing agreement, the FDIC will cover 80% of losses
on the first $80 million of losses and cover 50% of losses
exceeding $80 million on all FNBCFs Covered Assets.
The loss sharing arrangements for non-single family residential
and single family residential loans are in effect for
5 years and 10 years, respectively, and the loss
recovery provisions are in effect for 8 years and
10 years, respectively, from the respective acquisition
dates. Prior to this acquisition, FNBCF functioned as a
community bank with five branches in the area of Winter Park and
Orlando, Florida. The Bank acquired $346.0 million of
assets and assumed $325.7 million of liabilities related to
this acquisition.
On April 29, 2011, the Bank entered into a Purchase and
Assumption Agreement with the FDIC, as receiver, to acquire
certain assets and assume certain liabilities, including
F-53
BOND STREET
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS(Continued)
substantially all of the deposits, of Cortez Community Bank
(CCB) a failed depository institution headquartered in
Brooksville, Florida. The Bank also entered into loss sharing
agreement covering most of the loans and all OREO properties of
CCB. Pursuant to the terms of the CCB loss sharing agreement,
the FDIC will cover 80% of losses on all CCB Covered Assets. The
loss sharing arrangements for non-single family residential and
single family residential loans are in effect for 5 years
and 10 years, respectively, and the loss recovery
provisions are in effect for 8 years and 10 years,
respectively, from the respective acquisition dates. Prior to
this acquisition, CCB functioned as a community bank with two
branches in the area of Brooksville, Florida. The Bank acquired
$68.8 million of assets and assumed $67.1 million of
liabilities related to this acquisition.
On May 6, 2011, the Bank entered into a Purchase and
Assumption Agreement with the FDIC, as receiver, to acquire
certain assets and assume certain liabilities, including
substantially all of the deposits, of Coastal Bank
(CB) a failed depository institution headquartered
in Cocoa Beach, Florida. The Bank also entered into loss sharing
agreement covering most of the loans and all OREO properties of
CB. Pursuant to the terms of the CB loss sharing agreement, the
FDIC will cover 80% of losses on the first $29 million of
losses and cover 50% of losses exceeding $29 million on all
CB Covered Assets. The loss sharing arrangements for non-single
family residential and single family residential loans are in
effect for 5 years and 10 years, respectively, and the
loss recovery provisions are in effect for 8 years and
10 years, respectively, from the respective acquisition
dates. Prior to this acquisition, CB functioned as a community
bank with two branches in the area of Cocoa Beach, Florida. The
Bank acquired $130.5 million of assets and assumed
$122.8 million of liabilities related to this acquisition.
The Bank paid the FDIC approximately $12.6 million related
to the acquisitions of the net assets of FNBCF, CCB and CB after
submitting bid discounts on the assets of each institution of
$12.4 million, $4.5 million and $5.2 million,
respectively.
F-54
Bond Street Holdings,
Inc.
Shares
Class A Common
Stock
Deutsche Bank
Securities
J.P. Morgan
BofA Merrill Lynch
Goldman, Sachs &
Co.
Sandler ONeill +
Partners, L.P.
Prospectus
, 2011
Until , 2011 (25 days after the date of this
prospectus), all dealers that effect transactions in these
securities, whether or not participating in the offering, may be
required to deliver a prospectus. This is in addition to the
dealers obligation to deliver a prospectus when acting as
an underwriter and with respect to unsold allotments or
subscriptions.
PART II
INFORMATION NOT
REQUIRED IN PROSPECTUS
|
|
Item 13.
|
Other Expenses
of Issuance and Distribution.
|
The following table sets forth the estimated costs and expenses,
other than underwriting discounts and commissions, to be paid by
us in connection with the issuance and distribution of the
shares of Class A Common Stock being registered hereby.
|
|
|
|
|
Securities and Exchange Commission registration fee
|
|
$
|
17,415
|
|
FINRA filing fee
|
|
$
|
15,500
|
|
New York Stock Exchange listing fees and expenses
|
|
$
|
|
|
Accounting fees and expenses
|
|
$
|
|
|
Legal fees and expenses
|
|
$
|
|
|
Printing fees and expenses
|
|
$
|
|
|
Blue Sky qualification fees and expenses
|
|
$
|
|
|
Transfer agent and registrar fees and expenses
|
|
$
|
|
|
Miscellaneous expenses
|
|
$
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
|
|
|
|
|
|
|
*
|
|
estimated and subject to amendment
|
|
|
Item 14.
|
Indemnification
of Directors and Officers
|
Delaware
General Corporation Law
The General Corporation Law of the State of Delaware (DGCL) at
Section 102(b)(7) enables a corporation in its original
certificate of incorporation or an amendment thereto to
eliminate or limit the personal liability of a director to the
corporation or its stockholders for monetary damages for breach
of the directors fiduciary duty, except (i) for any
breach of the directors duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the
DGCL (providing for liability of directors for unlawful payment
of dividends or unlawful stock purchases or redemptions), or
(iv) for any transaction from which the director derived an
improper personal benefit.
The DGCL, at Section 145, provides, in pertinent part, that
a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the corporation), by reason of the fact that he is
or was a director, officer, employee or agent of the corporation
or is or was serving another corporation, partnership, joint
venture, trust or other enterprise, at the request of the
corporation, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement, actually and
reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest
of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. Lack of good faith, or lack of a reasonable belief
that ones actions are in or not opposed to the best
interest of the corporation, or with respect to any criminal
action or proceeding, lack of reasonable cause to believe
ones conduct was unlawful is not presumed from the
termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or nolo contendere plea or its
equivalent. In addition, the indemnification of expenses
(including attorneys fees) is allowed in derivative
actions, except no indemnification is allowed in respect of any
claim, issue or
II-1
matter as to which any such person has been adjudged to be
liable to the corporation, unless and only to the extent the
Court of Chancery or the court in which such action or suit was
brought decides that indemnification is proper. To the extent
that any such person succeeds on the merits or otherwise in
defense of any of the above described actions or proceedings, he
shall be indemnified against expenses (including attorneys
fees). The determination that the person to be indemnified met
the applicable standard of conduct, if not made by a court, is
made by the board of directors of the corporation by a majority
vote of a quorum consisting of directors not party to such an
action, suit or proceeding or, if a quorum is not obtainable or
a disinterested quorum so directs, by independent legal counsel
in a written opinion or by the stockholders. Expenses may be
paid in advance upon the receipt of undertakings to repay. A
corporation may purchase indemnity insurance.
Certificate of
Incorporation
The certificate of incorporation of Bond Street Holdings, Inc.
(the Company) provides that the Company, to the
fullest extent permitted by the provisions of Section 145
of the DGCL, as the same may be amended and supplemented, shall
indemnify each person who is or was an officer or director of
the Company and each person who serves or served as an officer
or director of any other corporation, partnership, joint
venture, trust or other enterprise at the request of the Company
and may indemnify any and all other persons whom it shall have
power to indemnify under said section, each, an authorized
representative, from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said
section. Our certificate of incorporation further provides that
a director, officer or other authorized representative of the
Company shall not be liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director,
officer or other authorized representative, except to the extent
that exculpation from liability is not permitted under the DGCL
as in effect at the time such liability is determined.
Expenses actually and reasonably incurred by any person
indemnified under our certificate of incorporation in defending
a third party proceeding or corporate proceeding shall be paid
by the Company in advance of the final disposition of such third
party proceeding or corporate proceeding and within 30 days
of receipt by the secretary of the Company, if required by law,
of an undertaking by or on behalf of such person to repay such
amount if it shall ultimately be determined that such person is
not entitled to be indemnified by the Company as authorized in
the certificate of incorporation. Any person receiving
indemnification payments shall reimburse the Company for such
indemnification payments to the extent that such person also
receives payments under an insurance policy in respect of such
matter.
Our certificate of incorporation provides that the Company will
use commercially reasonable efforts to purchase and maintain
directors and officers liability insurance (or its
equivalent) for the Company and its subsidiaries with
financially responsible insurers in such amounts and against
such losses and risks as are customary for the business
conducted by the Company and its subsidiaries. We maintain
insurance policies under which our directors and officers are
insured, within the limits and subject to the limitations of the
policies, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain
liabilities which might be imposed as a result of such actions,
suits or proceedings, to which they are parties by reason of
being or having been such directors or officers which could
include liabilities under the Securities Act of 1933, as
amended, or Securities Act, or the Securities Exchange Act of
1934, as amended, or Exchange Act.
Indemnification
Agreements
Prior to completion of the offering, we intend to enter into
separate indemnification agreements with each of our directors
and officers. Each indemnification agreement will provide, among
other things, for indemnification to the fullest extent
permitted by law and our
II-2
certificate of incorporation against any and all expenses and
liabilities, including judgments, fines, penalties, interest and
amounts paid in settlement of any claim with our approval and
counsel fees and disbursements. The indemnification agreements
will provide for the advancement or payment of expenses to the
indemnitee and for reimbursement to us if it is found that such
indemnitee is not entitled to such indemnification under
applicable law and our certificate of incorporation.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling us pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is
therefore unenforceable.
|
|
Item 15.
|
Recent Sales
of Unregistered Securities
|
No shares of common stock have been issued within the past three
years pursuant to the exercise of stock options under the
Companys equity compensation plans and no shares of common
stock have been issued within the past three years pursuant to
the exercise of outstanding warrants to purchase shares of the
Companys common stock.
In the three years preceding the filing of this registration
statement, we have sold and issued the following unregistered
securities in reliance on Section 4(2) of the Securities
Act:
On November 11, 2009, the 100% equity ownership of Bond
Street Holdings LLC (the predecessor entity to the Company) held
by our founders was denominated as an aggregate of 662,086
Class A limited liability company interests (each of which
was converted into one share of our Class A voting common
stock, par value $.001 per share, or Class A Common Stock,
on October 1, 2010), all of which were deemed to be exempt
from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act.
On November 12, 2009, Bond Street Holdings LLC issued an
aggregate of 15,834,050 Class A limited liability company
interests and 1,665,950 Class B limited liability company
interests, each at a purchase price of $20.00 per interest, and
each of which was converted into one share of our Class A
Common Stock or Class B non-voting common stock, par value
$.001 per share, or Class B Common Stock, as applicable, on
October 1, 2010. Of the 17,500,000 limited liability
company interests issued, 10,912,077 Class A limited
liability company interests and 1,115,047 Class B limited
liability company interests were deemed to be exempt from
registration under the Securities Act in reliance on
Rule 144A under the Securities Act, 2,859,370 Class A
limited liability company interests and 213,050 Class B
limited liability company interests were deemed to be exempt
from registration under the Securities Act in reliance on
Regulation S under the Securities Act and 2,062,603
Class A limited liability company interests and 337,853
Class B limited liability company interests were deemed to
be exempt from registration under the Securities Act in reliance
on Rule 501(a) under the Securities Act. In addition, on
November 12, 2009, Bond Street Holdings LLC issued an
aggregate of 1,069,519 Class A limited liability company
interests at a purchase price of $18.70 per interest, each of
which was converted into one share of our Class A Common
Stock on October 1, 2010, all of which were deemed to be
exempt from registration under the Securities Act in reliance on
Rule 501(a) under the Securities Act.
On November 20, 2009, Bond Street Holdings LLC issued an
aggregate of 1,383,750 Class A limited liability company
interests at a purchase price of $20.00 per interest, each of
which was converted into one share of our Class A Common
Stock on October 1, 2010. Of the 1,383,750 Class A
limited liability company interests issued, 208,750 Class A
limited liability company interests were deemed to be exempt
from registration under the Securities Act in reliance on
Rule 144A under the Securities Act, 925,000 Class A
limited liability company interests were deemed to be exempt
from registration under the Securities Act in reliance on
II-3
Regulation S under the Securities Act and 250,000
Class A limited liability company interests were deemed to
be exempt from registration under the Securities Act in reliance
on Rule 501(a) under the Securities Act.
On November 30, 2009, Bond Street Holdings LLC issued an
aggregate of 1,316,250 Class A limited liability company
interests and 550,000 Class B limited liability company
interests, each at a purchase price of $20.00 per interest, and
each of which was converted into one share of our Class A
Common Stock or Class B Common Stock, as applicable, on
October 1, 2010. Of the 1,866,250 limited liability company
interests issued, 950,000 Class A limited liability company
interests and 550,000 Class B limited liability company
interests were deemed to be exempt from registration under the
Securities Act in reliance on Rule 144A under the
Securities Act and 366,250 Class A limited liability
company interests were deemed to be exempt from registration
under the Securities Act in reliance on Rule 501(a) under
the Securities Act.
On December 3, 2009, Bond Street Holdings LLC issued an
aggregate of 100,000 Class A limited liability company
interests and 150,000 Class B limited liability company
interests at a purchase price of $20.00 per interest, each of
which was converted into one share of our Class A Common
Stock or Class B Common Stock, as applicable, on
October 1, 2010, all of which were deemed to be exempt from
registration under the Securities Act in reliance on
Rule 501(a) under the Securities Act.
On August 13, 2010, Bond Street Holdings LLC issued an
aggregate of 12,173,741 Class A limited liability company
interests and 823,942 Class B limited liability company
interests, each at a purchase price of $21.00 per interest, and
each of which was converted into one share of our Class A
Common Stock or Class B Common Stock, as applicable, on
October 1, 2010, all of which were deemed to be exempt from
registration under the Securities Act in reliance on
Rule 501(a) under the Securities Act.
On November 12, 2010, we issued an aggregate of 1,030,824
shares of Class A Common Stock and 241,976 shares of
Class B Common Stock, each at a purchase price of $21.00
per share, and all of which were deemed to be exempt from
registration under the Securities Act in reliance on
Rule 501(a) under the Securities Act.
On November 15, 2010, we issued an aggregate of
9,510 shares of Class A Common Stock at a purchase
price of $21.00 per share, all of which were deemed to be exempt
from registration under the Securities Act in reliance on
Rule 501(a) under the Securities Act.
Other than with respect to the denomination of interests held by
our founders on November 11, 2009 (as to which there was no
initial purchaser or placement agent), Deutsche Bank Securities
Inc. was the initial purchaser or placement agent, as
applicable, in all of the aforementioned issuances.
In connection with the 2009 private placement of limited
liability company interests of Bond Street Holdings LLC,
Deutsche Bank Securities Inc. received aggregate initial
purchaser or placement agent discounts and commissions
of . In connection with (i) the August
2010 private placement of limited liability company interests of
Bond Street Holdings LLC and (ii) the November 2010 private
placement of shares of Class A Common Stock and
Class B Common Stock of the Company, Deutsche Bank
Securities Inc. received cash compensation for acting as
placement agent, a portion of which was paid at the time of the
closing of the private placement financings,
and million of which in the aggregate was
taken out of the proceeds of the private placement financings,
and held aside to be paid at the time of a qualified initial
public offering. We expect the offering to constitute a
qualified initial public offering and to pay the funds held
aside to Deutsche Bank Securities Inc. upon completion of the
offering. None of the proceeds from the offering will be used to
pay any portion of the withheld placement fee.
II-4
Warrants
In the three years preceding the filing of this registration
statement, we have issued the following warrants in reliance on
Section 4(2) of the Securities Act:
On November 12, 2009, prior to the Companys initial
private placement financing, the Company issued, as a
distribution in respect of its existing equity, warrants (the
2009 Warrants) to purchase an aggregate of
3,310,428 shares of Class A Common Stock, at per share
exercise prices of $24.24, $26.18 and $28.28 each for one-third
of such shares exercisable in three substantially equal portions
on each of the
6-month,
18-month and
30-month
anniversaries of the consummation of a Qualified IPO, but in no
event prior to January 25, 2013. The 2009 Warrants expire
on November 12, 2016. We expect the offering to constitute
a Qualified IPO.
On August 13, 2010 and November 12, 2010, the Company
issued warrants (the 2010 Warrants) to purchase an
aggregate of 2,142,000 shares of Class A Common Stock,
at a per share exercise price of between $26.45 and $35.99
(depending on the date of exercise). The first one-third of the
2010 Warrants are exercisable upon the later to occur of
(i) one half year (183 days) following the
consummation of a Qualified IPO and (ii) August 13,
2013, the second one-third of the 2010 Warrants are exercisable
upon the later to occur of (i) one and one half years
(548 days) following the consummation of a Qualified IPO
and (ii) August 13, 2013, and the final one-third of
the 2010 Warrants are exercisable upon the later to occur of
(i) two year and one half years (913 days) following
the consummation of a Qualified IPO and
(ii) August 13, 2013. Each of the 2010 Warrants will
expire on August 13, 2017 and may not be exercised prior to
August 13, 2013. The exercise price of such warrants
increases continuously, based on the actual number of days
elapsed from August 13, 2010 until August 13, 2017
according to the formula: $21.00*(1.08)^(number of days
elapsed from August 13, 2010 to the date of exercise
divided by 365). For example, the minimum exercise price would
be $26.45 per share at the earliest time that a portion of such
warrants might first become exercisable on August 13, 2013,
and the maximum exercise price would be $35.99 per share when
such warrants expire on August 13, 2017. We expect the
offering to constitute a Qualified IPO.
In each case, warrants issued prior to our conversion from a
limited liability company to a corporation on October 1,
2010 initially represented rights to acquire limited liability
company interests, and after October 1, 2010 represent
rights to acquire an equivalent number of shares of common stock.
Issuances
Pursuant to the 2009 Option Plan
In the three years preceding the filing of this registration
statement, we have granted the following options to certain
directors, officers and employees of the Company pursuant to the
Bond Street Holdings LLC 2009 Option Plan, as amended, all of
which were deemed to be exempt from registration under the
Securities Act in reliance on Rule 701 promulgated under
Section 3(b) of the Securities Act as transactions pursuant
to a compensatory benefit plan approved by our Board of
Directors:
On December 9, 2009, we granted options to purchase an
aggregate of 482,530 shares of Class A Common Stock at
an exercise price of $20.00 per share.
On February 23, 2010, we granted options to purchase an
aggregate of 300,000 shares of Class A Common Stock at
an exercise price of $20.00 per share.
On March 29, 2010, we granted options to purchase an
aggregate of 222,069 shares of Class A Common Stock at
an exercise price of $20.00 per share.
On June 2, 2010, we granted options to purchase
150,000 shares of Class A Common Stock at an exercise
price of $20.00 per share.
II-5
On September 16, 2010, we granted options to purchase
200,000 shares of Class A Common stock at an exercise
price of $21.00 per share.
On January 10, 2011, we granted options to purchase
1,345,902 shares of Class A Common Stock at an
exercise price of $21.00 per share.
Options granted prior to our conversion from a limited liability
company to a corporation on October 1, 2010 initially
represented rights to acquire limited liability company
interests, and after October 1, 2010 represent rights to
acquire an equivalent number of shares of common stock.
None of the outstanding options are exercisable prior to
January 25, 2013, the third anniversary of the acquisition
of certain assets of Premier American Bank.
Value
Appreciation Instruments
In the three years preceding the filing of this registration
statement, we have entered into the following agreements with
the FDIC providing for equity appreciation rights, all of which
were deemed to be exempt from registration in reliance on
Section 4(2) of the Securities Act:
Old Peninsula
Value Appreciation Instrument Agreement
In connection with the acquisition of Peninsula Bank, or Old
Peninsula, the Company entered into a value appreciation
instrument agreement with the FDIC pursuant to which, upon the
occurrence of a qualified public offering or sale of all or
substantially all of the Companys assets (where the
aggregate sale price exceeds the aggregate amount of all the
capital invested by the Companys equity holders), the FDIC
has the right, which right may be exercised in whole or in part,
to receive a payment in cash or in stock in respect of up to
65,000 shares of Class A Common Stock (subject to
certain adjustments for stock splits or other similar
transactions). If payment in stock is elected by the FDIC, the
payment shall be the number of shares of Class A Common
Stock equal to (X) the product of (a) the number of
shares of Class A Common Stock in respect of which the
FDICs right is being exercised and (b) the applicable
value per share minus $20.00, divided by (Y) the
applicable value per share. The FDIC also received certain
registration rights with respect to the shares under the
agreement.
The term of the agreement ends on the earlier to occur of the
first anniversary of a qualified public offering or
June 25, 2012. We believe that the offering will be a
qualified public offering under the Old Peninsula value
appreciation instrument agreement.
Old Sunshine
Value Appreciation Instrument Agreement
In connection with the acquisition of Sunshine State Community
Bank, or Old Sunshine, the Company entered into a value
appreciation instrument agreement with the FDIC pursuant to
which, upon the occurrence of a qualified public offering or
sale of all or substantially all of the Companys assets
(where the aggregate sale price exceeds the aggregate amount of
all the capital invested by the Companys equity holders),
the FDIC has the right, which right may be exercised in whole or
in part, to receive a payment in cash or in stock in respect of
up to 25,000 shares of Class A Common Stock (subject
to certain adjustments for stock splits or other similar
transactions). If payment in stock is elected by the FDIC, the
payment shall be the number of shares of Class A Common
Stock equal to (X) the product of (a) the number of
shares of Class A Common Stock in respect of which the
FDICs right is being exercised and (b) the applicable
value per share minus $19.86, divided by (Y) the
applicable value per share. The FDIC also received certain
registration rights with respect to the shares under the
agreement.
II-6
The term of the agreement ends on the earlier to occur of the
first anniversary of a qualified public offering or
February 11, 2013. We believe that the offering will be a
qualified public offering under the Old Sunshine value
appreciation instrument agreement.
Old FNBCF Value
Appreciation Instrument Agreement
In connection with the acquisition of First National Bank of
Central Florida, or Old FNBCF, the Company entered into a value
appreciation instrument agreement with the FDIC pursuant to
which, upon the occurrence of a qualified public offering or
sale of all or substantially all of the Companys assets
(where the aggregate sale price exceeds the aggregate amount of
all the capital invested by the Companys equity holders),
the FDIC has the right, which right may be exercised in whole or
in part, to receive a payment in cash or in stock in respect of
up to 100,000 shares of Class A Common Stock (subject
to certain adjustments for stock splits or other similar
transactions). If payment in stock is elected by the FDIC, the
payment shall be the number of shares of Class A Common
Stock equal to (X) the product of (a) the number of
shares of Class A Common Stock in respect of which the
FDICs right is being exercised and (b) the applicable
value per share minus $19.66, divided by (Y) the
applicable value per share. The FDIC also received certain
registration rights with respect to the shares under the
agreement.
The term of the agreement ends on the earlier to occur of the
first anniversary of a qualified public offering or
April 29, 2013. We believe that the offering will be a
qualified public offering under the Old FNBCF value appreciation
instrument agreement.
|
|
Item 16.
|
Exhibits and
Financial Statement Schedules.
|
(a) The following exhibits are filed herewith:
|
|
|
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement.*
|
|
3
|
.1
|
|
Certificate of Incorporation.*
|
|
3
|
.2
|
|
Bylaws.*
|
|
4
|
.1
|
|
Form of Class A Common Stock Certificate.*
|
|
4
|
.2
|
|
Form of Class B Common Stock Certificate.*
|
|
4
|
.3
|
|
Registration Rights Agreement, dated November 12, 2009, by
and between Bond Street Holdings LLC and Deutsche Bank
Securities Inc.*
|
|
4
|
.4
|
|
Form of Registration Rights Agreement, dated August 13,
2010, by and among Bond Street Holdings LLC and the other
signatories to the agreement thereto.*
|
|
5
|
.1
|
|
Opinion of Kramer Levin Naftalis & Frankel LLP.*
|
|
5
|
.2
|
|
Opinion of Willkie Farr & Gallagher LLP.*
|
|
10
|
.1
|
|
Stock Option Plan.*
|
|
10
|
.2
|
|
Form of Stock Option Grant Agreement.*
|
|
10
|
.3
|
|
Amended and Restated Employment Agreement, dated as of
January 24, 2011, between Premier American Bank, National
Association (the Bank) and Timothy Johnson.*
|
|
10
|
.4
|
|
Amended and Restated Employment Agreement, dated as of
January 10, 2011, between the Bank and Kent Ellert.*
|
|
10
|
.5
|
|
Amended and Restated Employment Agreement, dated as of
January 31, 2011, between the Bank and James Baiter.*
|
|
10
|
.6
|
|
Amended and Restated Employment Agreement, dated as of
January 31, 2011, between the Bank and Juan Castro.*
|
|
10
|
.7
|
|
Purchase and Assumption Agreement, dated as of January 22,
2010, among FDIC, Receiver of Premier American Bank, Miami,
Florida, FDIC and the Bank.*
|
II-7
|
|
|
|
|
|
10
|
.8
|
|
Purchase and Assumption Agreement, dated as of January 29,
2010, among FDIC, Receiver of Florida Community Bank, Immokalee,
Florida, FDIC and the Bank.*
|
|
10
|
.9
|
|
Purchase and Assumption Agreement, dated as of June 25,
2010, among FDIC, Receiver of Peninsula Bank, Englewood,
Florida, FDIC and the Bank.*
|
|
10
|
.10
|
|
Purchase and Assumption Agreement, dated as of February 11,
2011, among FDIC, Receiver of Sunshine State Community Bank,
Port Orange, Florida, FDIC and the Bank.*
|
|
10
|
.11
|
|
Purchase and Assumption Agreement, dated as of April 29,
2011, among FDIC, Receiver of First National Bank of Central
Florida, Winter Park, Florida, FDIC and the Bank.*
|
|
10
|
.12
|
|
Purchase and Assumption Agreement, dated as of April 29,
2011, among FDIC, Receiver of Cortez Community Bank,
Brooksville, Florida, FDIC and the Bank.*
|
|
10
|
.13
|
|
Purchase and Assumption Agreement, dated as of May 6, 2011,
among FDIC, Receiver of Coastal Bank, Cocoa Beach, Florida, FDIC
and the Bank.*
|
|
10
|
.14
|
|
Form of Director and Officer Indemnification Agreement.*
|
|
10
|
.15
|
|
Equity Appreciation Agreement, dated as of January 22,
2010, between the Company and FDIC.*
|
|
10
|
.16
|
|
Equity Appreciation Agreement, dated as of January 29,
2010, between the Company and FDIC.*
|
|
10
|
.17
|
|
Value Appreciation Instrument Agreement, dated as of
February 11, 2011, between the Company and FDIC, Receiver
of Peninsula Bank, Englewood, Florida.*
|
|
10
|
.18
|
|
First Amendment to Peninsula Bank Value Appreciation Instrument
Agreement, dated as of February 11, 2011, between the
Company and the FDIC, as Receiver of Peninsula Bank, Englewood,
Florida.*
|
|
10
|
.19
|
|
Value Appreciation Instrument Agreement, dated as of
February 11, 2011, between the Company and FDIC, Receiver
of Sunshine State Community Bank, Port Orange, Florida.*
|
|
10
|
.20
|
|
First Amendment to Sunshine State Community Bank Value
Appreciation Instrument Agreement, dated as of May 11,
2011, between the Company and FDIC, Receiver of Sunshine State
Community Bank, Port Orange, Florida.*
|
|
10
|
.21
|
|
Value Appreciation Instrument Agreement, dated as of
April 29, 2011, between the Company and FDIC, Receiver of
First National Bank of Central Florida, Winter Park, Florida.*
|
|
10
|
.22
|
|
First Amendment to First National Bank of Central Florida Value
Appreciation Instrument Agreement, dated as of May 11,
2011, between the Company and FDIC, Receiver of First National
Bank of Central Florida, Winter Park, Florida.*
|
|
10
|
.23
|
|
Registration Rights Agreement, dated as of ,
2011, between the Company and FDIC.*
|
|
10
|
.24
|
|
Registration Rights Agreement, dated as of ,
2011, between the Company and FDIC.*
|
|
21
|
.1
|
|
List of Subsidiaries of the Company*
|
|
23
|
.1
|
|
Consent of Grant Thornton, LLP.
|
|
23
|
.2
|
|
Consent of Kramer Levin Naftalis & Frankel LLP
(included in Exhibit 5).*
|
|
24
|
.1
|
|
Power of Attorney (included on Signature Page).
|
|
|
|
*
|
|
To be filed by amendment.
|
|
|
|
Previously filed.
|
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable
accounting regulation of the SEC are not required under the
related instructions or are inapplicable and therefore have been
omitted.
II-8
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting
agreements certificates in such denominations and registered in
such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.
(2) For purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on
May 13, 2011.
BOND STREET HOLDINGS, INC.
Daniel M. Healy
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Daniel M. Healy, Timothy
Johnson and Stuart I. Oran, and each of them,
his/her true
and lawful attorneys-in-fact and agents with full power of
substitution and re-substitution, for him/her and in
his/her
name, place and stead, in any and all capacities to sign any or
all amendments (including, without limitation, post-effective
amendments) to this Registration Statement, any related
Registration Statement filed pursuant to Rule 462 under the
Securities Act of 1933 and any or all pre- or post-effective
amendments thereto, and to file the same, with all exhibits
thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully for all intents and
purposes as he or she might or could do in person, hereby
ratifying and confirming that said attorney-in-fact and agent,
or any substitute or substitutes for him, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated:
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Daniel
M. Healy
Daniel
M. Healy
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
May 13, 2011
|
|
|
|
|
|
/s/ Timothy
Johnson
Timothy
Johnson
|
|
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
|
|
May 13, 2011
|
|
|
|
|
|
/s/ Vincent
S. Tese
Vincent
S. Tese
|
|
Director
|
|
May 13, 2011
|
|
|
|
|
|
/s/ Leslie
J. Lieberman
Leslie
J. Lieberman
|
|
Director
|
|
May 13, 2011
|
|
|
|
|
|
/s/ Kent
S. Ellert
Kent
S. Ellert
|
|
Director
|
|
May 13, 2011
|
|
|
|
|
|
/s/ Stuart
I. Oran
Stuart
I. Oran
|
|
Director
|
|
May 13, 2011
|
II-10
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Alan
Bernikow
Alan
Bernikow
|
|
Director
|
|
May 13, 2011
|
|
|
|
|
|
/s/ Thomas
E. Constance
Thomas
E. Constance
|
|
Director
|
|
May 13, 2011
|
|
|
|
|
|
/s/ Howard
R. Curd
Howard
R. Curd
|
|
Director
|
|
May 13, 2011
|
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/ William
L. Mack
William
L. Mack
|
|
Director
|
|
May 13, 2011
|
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
/s/ Frederic
Salerno
Frederic
Salerno
|
|
Director
|
|
May 13, 2011
|
II-11
EXHIBIT INDEX
|
|
|
|
|
|
1
|
.1
|
|
Form of Underwriting Agreement.*
|
|
3
|
.1
|
|
Certificate of Incorporation.*
|
|
3
|
.2
|
|
Bylaws.*
|
|
4
|
.1
|
|
Form of Class A Common Stock Certificate.*
|
|
4
|
.2
|
|
Form of Class B Common Stock Certificate.*
|
|
4
|
.3
|
|
Registration Rights Agreement, dated November 12, 2009, by
and between Bond Street Holdings LLC and Deutsche Bank
Securities Inc.*
|
|
4
|
.4
|
|
Form of Registration Rights Agreement, dated August 13,
2010, by and among Bond Street Holdings LLC and the other
signatories to the agreement thereto.*
|
|
5
|
.1
|
|
Opinion of Kramer Levin Naftalis & Frankel LLP.*
|
|
5
|
.2
|
|
Opinion of Willkie Farr & Gallagher LLP.*
|
|
10
|
.1
|
|
Stock Option Plan.*
|
|
10
|
.2
|
|
Form of Stock Option Grant Agreement.*
|
|
10
|
.3
|
|
Amended and Restated Employment Agreement, dated as of
January 24, 2011, between Premier American Bank, National
Association (the Bank) and Timothy Johnson.*
|
|
10
|
.4
|
|
Amended and Restated Employment Agreement, dated as of
January 10, 2011, between the Bank and Kent Ellert.*
|
|
10
|
.5
|
|
Amended and Restated Employment Agreement, dated as of
January 31, 2011, between the Bank and James Baiter.*
|
|
10
|
.6
|
|
Amended and Restated Employment Agreement, dated as of
January 31, 2011, between the Bank and Juan Castro.*
|
|
10
|
.7
|
|
Purchase and Assumption Agreement, dated as of January 22,
2010, among FDIC, Receiver of Premier American Bank, Miami,
Florida, FDIC and the Bank.*
|
|
10
|
.8
|
|
Purchase and Assumption Agreement, dated as of January 29,
2010, among FDIC, Receiver of Florida Community Bank, Immokalee,
Florida, FDIC and the Bank.*
|
|
10
|
.9
|
|
Purchase and Assumption Agreement, dated as of June 25,
2010, among FDIC, Receiver of Peninsula Bank, Englewood,
Florida, FDIC and the Bank.*
|
|
10
|
.10
|
|
Purchase and Assumption Agreement, dated as of February 11,
2011, among FDIC, Receiver of Sunshine State Community Bank,
Port Orange, Florida, FDIC and the Bank.*
|
|
10
|
.11
|
|
Purchase and Assumption Agreement, dated as of April 29,
2011, among FDIC, Receiver of First National Bank of Central
Florida, Winter Park, Florida, FDIC and the Bank.*
|
|
10
|
.12
|
|
Purchase and Assumption Agreement, dated as of April 29,
2011, among FDIC, Receiver of Cortez Community Bank,
Brooksville, Florida, FDIC and the Bank.*
|
|
10
|
.13
|
|
Purchase and Assumption Agreement, dated as of May 6, 2011,
among FDIC, Receiver of Coastal Bank, Cocoa Beach, Florida, FDIC
and the Bank.*
|
|
10
|
.14
|
|
Form of Director and Officer Indemnification Agreement.*
|
|
10
|
.15
|
|
Equity Appreciation Agreement, dated as of January 22,
2010, between the Company and FDIC.*
|
|
10
|
.16
|
|
Equity Appreciation Agreement, dated as of January 29,
2010, between the Company and FDIC.*
|
|
10
|
.17
|
|
Value Appreciation Instrument Agreement, dated as of
February 11, 2011, between the Company and FDIC, Receiver
of Peninsula Bank, Englewood, Florida.*
|
|
10
|
.18
|
|
First Amendment to Peninsula Bank Value Appreciation Instrument
Agreement, dated as of February 11, 2011, between the
Company and the FDIC, as Receiver of Peninsula Bank, Englewood,
Florida.*
|
|
10
|
.19
|
|
Value Appreciation Instrument Agreement, dated as of
February 11, 2011, between the Company and FDIC, Receiver
of Sunshine State Community Bank, Port Orange, Florida.*
|
II-12
|
|
|
|
|
|
10
|
.20
|
|
First Amendment to Sunshine State Community Bank Value
Appreciation Instrument Agreement, dated as of May 11,
2011, between the Company and FDIC, Receiver of Sunshine State
Community Bank, Port Orange, Florida.*
|
|
10
|
.21
|
|
Value Appreciation Instrument Agreement, dated as of
April 29, 2011, between the Company and FDIC, Receiver of
First National Bank of Central Florida, Winter Park, Florida.*
|
|
10
|
.22
|
|
First Amendment to First National Bank of Central Florida Value
Appreciation Instrument Agreement, dated as of May 11,
2011, between the Company and FDIC, Receiver of First National
Bank of Central Florida, Winter Park, Florida.*
|
|
10
|
.23
|
|
Registration Rights Agreement, dated as of ,
2011, between the Company and FDIC.*
|
|
10
|
.24
|
|
Registration Rights Agreement, dated as of ,
2011, between the Company and FDIC.*
|
|
21
|
.1
|
|
List of Subsidiaries of the Company*
|
|
23
|
.1
|
|
Consent of Grant Thornton, LLP.
|
|
23
|
.2
|
|
Consent of Kramer Levin Naftalis & Frankel LLP
(included in Exhibit 5).*
|
|
24
|
.1
|
|
Power of Attorney (included on Signature Page).
|
|
|
|
*
|
|
To be filed by amendment.
|
|
|
|
Previously filed.
|
(b) Financial Statement Schedules
II-13