ITEM 1. BUSINESS
GENERAL
Valrico Bancorp, Inc (the "Company") is a one-bank holding company, which was a newly-formed corporation on May 31, 1995 with its principal place of business in Valrico, Florida. The Company subsequently acquired all of the outstanding common stock of Valrico State Bank (the "Bank"), a wholly-owned subsidiary. All shares held by the Bank's shareholders were exchanged on a one-to-one basis for Company shares. The Company's common stock, no par value, authorized 1,000,000 shares, had 304,728 shares outstanding as of December 31, 2001.
The Company derives substantially all of its income from dividends and a lease from the bank. The Bank and Company share the same board of directors, which is comprised of nine individuals. Those individuals are LeVaughn Amerson, Jerry L. Ball, C. Dennis Carlton, H. Leroy English, Gregory L. Henderson, Douglas A. Holmberg, Charles E. Jennings, Jr., J.E. McLean, III, Justo Noriega, Jr..
SUBSIDIARY BANK
Valrico State Bank (the "Bank") was incorporated under the laws of the state of Florida on August 29, 1988. The Bank was chartered as a Florida state bank effective June 23, 1989 after receiving approval to organize from the Florida Department of Banking and Finance (the "Florida Department"). The Bank commenced operations on June 23, 1989. The Bank is supervised, regulated and regularly examined by the Florida State Banking Department and the Federal Deposit Insurance Corporation. The Bank is not currently a member of the Federal Reserve Bank.
DESCRIPTION OF BUSINESS
The Company, through its subsidiary bank, conducts a general commercial banking business from its main office located at 1815 East State Road 60, Valrico, Florida 33594-3623 and its four branch facilities located at 102 West Robertson Street, Brandon, Florida 33511, 305 South Wheeler Street, Plant City, Florida 33566, 2602 Jim Redman Parkway, Plant City, Florida 33566 and 10101 Bloomingdale Ave, Riverview, Florida 33569. The Company's primary telephone number is (813) 689-1231. Valrico is a community located in the eastern portion of Hillsborough County, Florida, and is approximately 14 miles east of Tampa, Florida, which is located on the west coast of the state of Florida. While the Bank's overall market area extends throughout Hillsborough County, it expects to draw most of its business from eastern Hillsborough County (the Brandon/Valrico/Dover/Plant City/Riverview area) and estimates that more than 75% of its business will come from customers whose businesses or residences are located in an area within a radius of approximately five miles of the Bank's principle offices (the "Bank's Assessment Area"). The Company, through its subsidiary bank, intends for the near future, to service (with few exceptions) only residents and businesses located in Hillsborough County, but may choose to accept some business from outside of Hillsborough County.
The principal business of the Bank is to attract deposits from the general public, and to invest those funds in various types of loans and other interest-earning assets. Funds provide for the operations of the Bank through proceeds from the sale of investments and loans, from amortization and repayment of outstanding loans, from borrowings, and from working capital. Earnings of the Bank depend primarily upon the difference between (1) the interest and fees received by the Bank from loans, the securities held in its investment portfolio, and other investments, and (2) expenses incurred by the Bank in connection with obtaining funds for lending (including interest paid on deposits and other borrowings) and expenses relating to day-to-day operations.
As of December 31, 2001, the Bank has been in operation for twelve and one-half years. Management believes that there is some seasonality in its deposit base due primarily to its agricultural relationships. The seasonality in these deposits, however, has not been substantial to impact the core base of deposits, therefore, management does not believe its deposit relationship is affected. In its lending portfolio, the Bank sees a greater affect on this seasonal business during the period from September to May reflecting larger outstandings in the agricultural portfolio.
BRANCH BANKING AND LOCATIONS OF OFFICES
The Bank's main office is located on East State Road 60, a primary east-west artery in the Bank's Assessment Area, and 800 feet west of Valrico Road, a primary north-south artery in the Bank's Assessment Area. The Brandon branch facility is located in the center of Brandon, the Plant City branch facility is located in the center of Plant City, and the Jim Redman Parkway branch is located in the eastern section of Plant City. The North Riverview Branch is located at the intersection of US 301 and Bloomingdale Ave in the Riverview community.
The Bank's second branch was opened in 1995 in the Plant City market and the Bank expanded in this market area with an in-store branch which opened on June 23, 1997 within a Walmart Supercenter on Jim Redman Parkway. This location is in a growing area and a very active shopping center with an estimated 50,000 plus customers per week. This Wal-Mart is one of their largest supercenters in Florida. The bank expanded its market area with the opening of its fourth branch on January 22, 1999 in Riverview area.
Brandon Office
The Bank received approval in January 1994 from the Federal Deposit Insurance Corporation and the Florida Department of Banking and Finance to open a branch located at 102 West Robertson Street, Brandon, Florida 33511. Therefore, the Bank successfully opened its first branch on April 29, 1994, which is located approximately one and a half miles west of the main office and located in our current community and assessment area. The location is in the center of Brandon, extremely convenient to many businesses and professional offices.
Plant City Office
The Bank, after receiving regulatory approval, opened its second branch on September 15, 1995, in Plant City located at 305 South Wheeler Street (corner of Renfro and Wheeler). The Bank purchased, from Barnett Bank, a former Glendale Federal Bank branch, a free standing building with approximately 2,400 square feet including the land and furniture. This positioned the Bank to better service the Plant City market in which the Bank was already servicing a small customer base.
Jim Redman Office
The Bank, after receiving regulatory approval, opened its third branch on June 23, 1997 as an in-store branch facility in the Wal-Mart Supercenter on Jim Redman Parkway in Plant City, Florida. The Bank leases the facilities at this site.
North Riverview Office
The Bank, after receiving regulatory approval, opened its fourth branch on January 22, 1999, in Riverview located at 10101 Bloomingdale Ave (corner of Bloomingdale and US 301). The Bank purchased, from Nationsbank, a free standing building with approximately 6,000 square feet, the purchased included the land surrounding the building.
SERVICES
The Company, through it subsidiary, conducts substantially the same business operations as a typical independent commercial bank with special emphasis on retail banking. The Bank offers a wide range of consumer and commercial banking services traditionally offered by commercial banks, such as personal and commercial checking accounts, regular negotiable order of withdrawal ("NOW") accounts, certificates of deposits, money market accounts, savings accounts, IRA accounts, foreign currency exchanges, credit cards, debit cards, money orders, travelers' cheques, notary service, safe deposit boxes and wire transfers. It also offers discounted brokerage services, profit sharing programs, 401(k)s and other similar programs. The depository services are further complemented by direct deposit programs, night depository services, and bank by mail also provided by the Bank.
The Bank offers a complete brokerage service through a third party which permits its customers to buy and sell stocks and bonds and otherwise trade in securities at a discount with full accountability of their transactions. The
Bank offers, through third parties, standard and self-directed IRA, the new Roth and Educational IRA, qualified pension plans, SEPs, Keogh and profit-sharing plans, including 401(k) plans, etc.
HOURS
The Bank's Main, Brandon and the new North Riverview offices lobby hours are from 9:00 a.m. to 4:00 p.m., Mondays through Thursdays, 9:00 a.m. to 6:00 p.m. on Fridays, and 9:00 a.m. to 12:00 p.m. on Saturdays. The Bank also offers drive-up teller facilities which are open from 8:00 a.m. to 6:00 p.m., Mondays through Fridays, and 9:00 a.m. to 12:00 p.m. on Saturdays. The Wheeler Street branches have the same office hours, except they have no Saturday lobby hours. The Jim Redman Parkway branch offers extended hours of service from 10:00 a.m. to 8:00 p.m. Monday through Saturday. The Bank does currently own four automatic teller machines (ATM) at the Jim Redman Parkway, Main, Brandon and North Riverview offices and may purchase additional machines in the immediate future. It also offers ATM and Mastermoney Debit cards to its customers, which can be used at ATM machines which are members of the Southeast Switch, which includes HONOR Network (Florida and other southeastern states) and CIRRUS (a worldwide network).
OPERATIONS
The Bank uses a computer system to handle all accounting and statement processing. In addition, the Bank makes extensive use of personal computers in its teller and lobby locations, which allows for efficient handling and tracking of new accounts, loans and other paper intensive services, and provides every employee of the Bank access to complete customer profiles at all times. We have recently upgraded many of our desktop systems in order to effectively utilize many of the newer programs available today.
PHILOSOPHY
Management of the Company believes that the emerging dominance of large regional holding companies in the banking industry has created a need for more locally-owned institutions with personalized banking services. The Bank was organized as a locally-owned, locally-managed community financial institution, owned and managed by people who are actively involved in the Bank's market area and committed to its economic growth and development. With local ownership, management and directors, the Bank believes it can be more responsive to the community it serves and tailor services to its customers' needs rather than the standardized services that large holding companies tend to offer. Local ownership and operation will allow faster, more responsive and flexible decision-making, which may not be available at the majority of financial institutions in or near the Bank's Assessment Area which are branch offices of large regional holding company banks with headquarters located elsewhere in Florida or in the United States.
LOANS
The Bank originates a wide range of loans including, but not limited to, commercial and consumer loans, as well as loans secured by deposit accounts and other marketable collateral. As of December 31, 2001, commercial and consumer loans accounted for approximately 63.2%and 10.8%, respectively, of the Bank's loan portfolio. Loans are also made to enable borrowers to purchase, refinance, construct or improve residential or other real estate and usually are secured by mortgages on such real estate. As of December 31, 2001, residential real estate mortgage loans accounted for approximately 8.0% of the Bank's loan portfolio. To service the agricultural segment of the Bank's market area, the Bank employs an agricultural lender. As of December 31, 2001, 18.0% of the total loan portfolio was comprised of agricultural loans. All loans are made in compliance with applicable Federal and state regulations.
DEPOSITS
The primary sources of the Bank's funds for lending and for other general business purposes are the Bank's capital, deposits, loan repayments, borrowings and funds provided from operations. The Bank expects that loan repayments and funds provided from operations will be relatively stable sources of funds, while deposit inflows and outflows will be significantly influenced by prevailing interest rates, money market and general economic conditions. Generally, short-term borrowings are used to compensate for reductions in
normal sources of funds while longer-term borrowings are used to support expanded lending activities. The Bank's customers are primarily individuals, professionals, small and medium size businesses, and citrus and agricultural enterprises located predominantly in eastern and southern Hillsborough County, Florida. The Bank's business is not dominated by a single customer or by a few customers. The loss of any one or more would not have a materially adverse effect on the business of the Bank. The Bank attempts to tailor its services to the needs of its customers since there is a heavy emphasis on retail and service-oriented businesses in the Company's market area. Moreover, the Bank's main office location is on a major east-west artery in one of eastern Hillsborough County's faster growing areas in terms of the number of new residents. The exposure provided by the site and the population growth of the area are expected to contribute to the growth of the Company.
As of December 31, 2001, total deposits of the Bank were distributed among demand deposits (15.0%), savings and time deposits (55.1%) and NOW and money market deposits (29.9%). The Bank's deposits are attracted primarily from individuals, professionals, small and medium size businesses and citrus and agricultural enterprises located predominantly in eastern Hillsborough County, Florida. As of December 31, 2001, approximately 23.8% of the Bank's total deposits were from businesses and 76.2% were from individuals. Management of the Bank has no reason to believe that the loss of any one or a few of its deposit accounts would have a material adverse effect upon the operations of the Bank or erode its deposit base.
NEW BUSINESS DEVELOPMENT
The Bank continually seeks to develop new business through an ongoing program of personal calls on both present and potential customers. As a local independent bank, the Bank utilizes traditional local advertising media, as well as direct mailings, telephone contacts, and brochures to promote the Bank and develop loans and deposits. In addition, the Company's directors all have worked and/or lived in or near eastern Hillsborough County for a number of years. The Bank believes that this factor, coupled with the past and continued involvement of the directors in various local community activities, will further promote its image as a locally-oriented independent institution, which management believes is an important factor to its targeted customer base.
COMPETITION
The banking business in Florida in general, and in Hillsborough County in particular, is highly competitive with respect to both loans and deposits. The Bank competes with other commercial banks in Hillsborough County and the surrounding area for all services customarily provided by commercial banks. In addition, the Bank competes with savings and loan associations, finance companies, insurance companies, money market mutual funds, credit unions, other financial institutions and various other non-bank competitors. Many of these competitors are larger and have greater resources, including more personnel and a larger asset base, than the Bank and provide certain services, such as trust services, which the Bank does not currently provide.
As of December 31, 2001, there were 17 commercial banks (including the Company's subsidiary bank) with 42 offices and 1 savings and loan association with 3 offices; at least 10 credit unions; and various other financial entities as competitors in the Bank's Assessment Area. The Company expects to receive substantial competition from most of these financial institutions.
The Bank is one of only four financial institutions, which have their headquarters in eastern Hillsborough County. The other financial institutions, being Sunshine State Savings and Loan, Hillsboro Bank in Plant City, and Platinum Bank in Brandon. All others are branches of institutions, which have their headquarters in other parts of Hillsborough County or elsewhere in Florida. Several of the institutions are actually owned by banks with headquarters in Georgia, Alabama, North Carolina, Ohio, and New Jersey.
In order to compete with major financial institutions and others in the Bank's Assessment Area, the Bank will continue to emphasize specialized services, local promotional activity and personal contacts by the Bank's officers, directors and employees. The Bank believes that its local ownership and
community-oriented operating philosophy and personalized banking services are competitive factors in which it has strength.
REGULATION
The Company is regulated under both State and Federal law. The Company is regulated by the Federal Reserve Bank of Atlanta and is subject to the rules and regulations of the Securities and Exchange Commission. The Company's subsidiary bank is not a member of the Federal Reserve System, but is subject to the rules and regulations of the Federal Deposit Insurance Corporation ("FDIC") which agency also insures the Bank's deposits up to applicable limits. As a state-chartered bank, the Bank is subject to the regulations of the Florida Department. The Bank will be subject to periodic examinations by both the FDIC and the Florida Department focusing on fund reserves, loans and loan policy, investments, management policy and practices, and various other aspects of the Bank's operations.
PATENTS, TRADEMARKS AND OTHER INTANGIBLE ASSETS
Neither the Company nor its subsidiary hold any patents, registered trademarks, licenses (other than licenses which have been obtained from appropriate banking regulatory agencies), franchises or concessions.
BUSINESS DEVELOPMENT
Prior to the organization of the Bank, the organizers of the Bank conducted economic and other surveys to evaluate the banking needs for the community of Valrico and its immediate environs. The results of those surveys were used to support the application to the Florida Department for permission to organize the Bank and the application to the FDIC for insurance of the Bank's accounts. Since it commenced operations, officers of the Bank have engaged continually in marketing activities, including the evaluation of development of new services, to enable the Bank to improve its competitive position in the Bank's Assessment Area. The cost to the Bank for these marketing activities cannot be calculated with any degree of certainty. In the fourth quarter of 1993, the Bank gathered and reviewed new economic data for the purpose of supporting an application to the Florida Department for permission to open a full service branch facility in Brandon, Florida, and performed similar research in the summer of 1995 to support an application to the Florida Department for permission to open a full service branch in Plant City, Florida. The cost of collecting and evaluating this information likewise cannot be determined with any degree of certainty, as most of the information was collected from public sources and other sources already utilized by the Company for its day-to-day evaluations. In the fourth quarter of 1996, the Bank reviewed data submitted by International Banking Technologies for the purpose of supporting the application for the in-store branch in Plant City. In the fourth quarter of 1998, the Bank gathered and reviewed new economic data for the purpose of supporting an application to the Florida Department for permission to open a full service branch facility in Riverview, Florida.
EMPLOYEES
As of December 31, 2001, the Bank employed 46 full-time employees, of which two were executive officers, and 18 part-time employees, of which one is a bank officer. The Bank's employees are not represented by a collective bargaining group, and the Bank considers its relations with its employees to be excellent. The Bank also maintains training and educational programs designed to equip employees for positions of increasing responsibility in both management and operating positions. The Bank provides employees certain benefits customary in the banking industry, which includes major medical insurance, group term life insurance and normal vacation and sick leave. The Bank implemented a K-SOP plan in 1997.
ITEM 2.
ITEM 2. PROPERTIES
The Company, through its subsidiary, has a principal office located at 1815 East State Road 60 in Valrico, Florida, in a traditional, southern, Greek neo-classical two-story building with 9,860 square feet. The Brandon office, located at 102 West Robertson Street in Brandon, Florida, is in a leased 3,000 square foot end unit in a retail plaza at a major intersection in the center of Brandon. The Plant City office is located at 305 South Wheeler Street in
facilities purchased in July 1995. The Jim Redman office, located at 2606 Jim Redman Parkway, is in a leased 507 square foot unit located within the Wal-Mart Supercenter in Plant City. The North Riverview Office, located at the intersection of US 301 and Bloomingdale Avenue in Riverview was purchased in October of 1998.
MAIN OFFICE
In January, 1997, the premises, previously leased from Roy J. and Ann M. Winter, were purchased by Valrico Bancorp, Inc. for approximately $1,683,000. The annual lease payments from the Bank to the Company is $204,000.
BRANDON OFFICE
The Bank leases its Brandon branch office space pursuant to an agreement dated March 31, 1994 (the "Lease") with J. "Bill" Noriega, Jr. (the "Lessor"). Mr. Noriega currently serves as a director of the Bank. This lease expired March 31, 2000 and was renewed with a new expiration date of March 31, 2003 at an annual rental of $42,000. The Bank has the option to renew the lease for three additional three-year terms at rentals to be negotiated at the time of the renewal.
PLANT CITY OFFICE
The Company, through its subsidiary, purchased from Barnett Bank, a former Glendale Federal Bank branch with approximately 2,400 square feet. The purchase included building and land located at 305 South Wheeler Street (corner of Renfro and Wheeler). On September 15, 1995, the Bank opened its second branch at this location.
JIM REDMAN OFFICE
The Bank leases its Jim Redman Parkway branch office space pursuant to an agreement dated December 31, 1996 (the "Walmart Lease").
NORTH RIVERVIEW OFFICE
The Company, through its subsidiary, purchased from Nationsbank, a building with approximately 6,000 square feet. The purchase included building and land located at 10101 Bloomingdale Avenue (corner of US 301 and Bloomingdale). On January 22, 1999 the bank opened its fourth branch at this location.
OTHER PROPERTIES
The Company, through its subsidiary, owns a parcel of land for future expansion. The partially improved property, totaling approximately one acre, is immediately adjacent to the Company's main office property on the west side. The site is ideally located for the development of an Operations Center when the growth of the Company will require additional space beyond that which is available in the existing Company facility.
During 1999, the Bank purchased three parcels of land adjacent to the main office facility.
LEASE EXPENSE
The aggregate lease expense paid by the Bank under these leases, excluding the Bank building lease, totaled $67,000 for the fiscal year ended December 31, 2001.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
As of the date of this Annual Report, the management of the Company has no knowledge of any material pending legal proceedings, including proceedings contemplated by governmental authorities, to which the Company and its subsidiary or any of its property is subject.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to votes of the stockholders of the Company during the last quarter of 2001
ITEM 5.
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
There is no trading market at the current time for the Common Stock of the Company, and it is not expected that a trading market will develop for shares of the Company's Common Stock in the near future. The Company is aware of 7 sale transactions that occurred during fiscal year 2001 at prices ranging from $20.00 to $25.00 per share, exclusive of commissions. The Bank is also aware of 14 sale transactions that occurred during fiscal year 2000 at prices ranging from $20.00 to $24.00 per share, exclusive of commissions. As of December 31, 2001, there were 491 holders of record of the Common Stock of the Company.
Holders of Common Stock are entitled to share pro rata in the distribution of dividends when and as declared by the Board of Directors from funds legally available for such purpose. The Bank cannot pay dividends in any one year in which its net income from the current year, combined with its retained net income for the preceding two years, is a loss or which would cause the capital accounts of the Bank to fall below the minimum amount required by law. Additionally, under certain circumstances, approval of the FDIC and the Florida Department may be required prior to the payment of a dividend.
At the discretion of the Board of Directors of the Company and after careful review of certain factors, such as results of operations, capital requirements, regulatory restrictions, tax considerations and general economic conditions, the Board declared its first dividend in September 1993 at ten cents per share and paid said dividend on October 5, 1993. It likewise paid a similar dividend in 1994, 1995, 1996 and 1997. In 1998 and 1999, the dividend paid increased to twelve cents per share. In 2000 and 2001, the Company increased the dividend to fourteen cents a share. The dividends were based on respective year earnings and paid on October 1 of each year.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, in summary form, certain comparative financial data of the Company for a five year period encompassing the periods ended December 31, 1997, December 31, 1998, December 31, 1999, December 31, 2000 and December 31, 2001. This information should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations, and Other Statistical Disclosure" and the audited financial statements of the Company for the years ended December 31, 1999, 2000 and 2001, and related notes thereto included elsewhere herein.
(1) Based on average shares outstanding during the period.
(2) Net loans means total loans net of allowance for possible future loan losses.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The purpose of this discussion is to focus on significant changes in the financial condition and results of the operations of the Company and it's subsidiary during the past three years. This discussion and analysis is intended to supplement and highlight information contained in the accompanying financial statements and the selected financial data presented elsewhere in this report, and is based on the fiscal years of 2001, 2000, and 1999. The company's fiscal year runs from January 1st through December 31st of each respective year.
RESULTS OF OPERATIONS
The company had a net income after taxes of $744,000, $934,000 and $639,000 during the years 2001, 2000, and 1999. This corresponds to per share amounts of $2.44, $3.09 and $2.09 during those three years respectively.
NET INTEREST INCOME
The bank had a decrease of net interest income between the years 2001 and 2000 of $380,000 or 8.69%, this decrease can be linked to the low demand of loans and a large increase in deposits during the recessionary period, forcing the bank to turn to lower yielding assets such as federal fund or investment securities. The bank had increases of 16.82% and 11.99% during the years 2000 and 1999 respectively. The net interest margin for the three years respectfully was $3,995,000, $4,375,000 and $3,745,000. The net interest margin is a major component of the Bank's earning capacity and is the difference or spread between interest income and interest expense. The spread is considered positive when the Interest income exceeds the Interest expense and negative when the expense exceeds the income, At the year ending December 31, 2001, the Bank had a positive spread of 4.06% as compared to 4.45% and 4.56% for 2000 and 1999 respectively. The Net Interest yield is calculated by taking the net interest income and dividing it by the average earning assets. During 2001, the Bank had a Net Interest Yield of 4.32% as compared to 2000 and 1999 yields of 5.13% and 5.00%. To the extent possible, the bank follows a strategy to insulate the Bank's interest rate spread from adverse changes in interest rates by maintaining spreads through the adjustability of its earning assets and interest-bearing liabilities.
Net interest income is also affected by changes in interest rates earned and interest rates paid and by changes in the volume of interest earning assets and interest bearing liabilities. This relationship is expressed in Table I of this report. In 2001, the net interest income was $3,995,000, which is a decrease of $380,000 from the previous year end of $4,375,000. The net interest income increase $630,000 over the 1999 year end amount of $3,745,000.
The recent decrease is mostly due to the low demand on loans during the 2001 year, coupled with a strong growth in deposits moving the bank to invest in more liquid, but lower earning assets. Management, at this time, does not feel that this will be a continued decrease, and is stepping up plans to improve loan production during the 2002 year.
INTEREST INCOME
Interest income is derived from certain interest earning assets, commonly referred to as "earning assets", and primarily consist of loans, federal funds sold, and investment securities. Federal funds sold are overnight funds, lent to other financial institutions through our correspondent bank, Independent Bankers Bank. The tables below references these earning assets and their respective interest income for the year ending December 31, 2001 and 2000.
Interest Income Break Down For Year Ending 2001 (All Dollars in Thousands)
Interest Income Break Down For Year Ending 2000 (All Dollars in Thousands)
As can be seen by the Tables, there was a marked change in both rate and volume of Earning Assets between the years 2000 and 2001. This is a significant reason for why earnings are down in comparison to last year.
Loan Interest decreased from $5,932,000 in 2001, down $274,000 or 4.42% from the $6,206,000 in 2000. That was an increase of $922,000 or 17.45% from the $5,284,000 at year end 1999. Federal Funds Sold decreased $73,000 or 14.20% from the year end amount of $441,000 in 2001, the year ending 2000 saw an increased $37,000 or 7.76% from the $477,000 at year end 1999. Investment securities realized an increase of $295,000 with earnings of $830,000 at year end 2001. This increase was 55.14% higher than the $535,000 earned at year end 2000. The $535,000 at year end 2000 was $29,000 or 5.73% higher than the $506,000 earned for year end 1999.
INTEREST EXPENSE
Interest expense is derived from the interest bearing liabilities, which consists of Checking accounts, Now accounts, Savings Accounts, Money Market accounts, and Certificates of Deposits ("CDs"), Federal Funds Sold, Repurchase accounts and other borrowings. During the year 2001, Interest expense totaled $3,208,000, an increase of $328,000 or 11.38% from the 2000 year end total of $2,880,000. This was in increase of 358,000 or 14.20% from the 1999 year end total of $2,522,000. The tables below provides a break out of the two years ending 2001 and 2000 respectively.
Interest Expense Break Down For Year Ending 2001 (All Dollars in Thousands)
Interest Expense Break Down For Year Ending 2000 (All Dollars in Thousands)
NON INTEREST EXPENSE
The Bank's non-interest expenses for the fiscal year 2001 were $3,768,000 or approximately $314,000 average per month as compared to $3,693,000 or approximately $308,000 average per month for 2000. Non-interest expense for 1999 was $3,519,000 or approximately $293,000 average per month. The amount of $3,768,000 for 2001 consisted primarily of $2,102,000 in salaries and benefits, $361,000 of occupancy expense for all its offices, equipment expenses of $316,000 and $989,000 of other operating expenses. Other operating expenses primarily consisted of marketing expense, taxes (intangible and sales), insurance (FDIC, blanket bond and property), state assessments, professional fees (accounting, audit and legal), office supplies, postage and delivery, service fees and amortization of capitalized expenses.
NON INTEREST INCOME
The Bank's non-interest income for fiscal year 2001 was $1,008,000. The sources reflected in non-interest income were from service charges on deposit accounts of $896,000 and non-deposit income of $112,000. This is an increase of $68,000 compared to the $940,000 of non-interest income reported for the twelve month period ended December 31, 2000.
INCOME TAXES
For 2001, net income before taxes was $1,115,000 and after taxes of $371,000, the net income was $744,000. See Note N of Notes to Consolidated Financial Statements. The Bank has adopted FAS109 for the accounting of Income Taxes (Please see Adopted Financial Standards for an explanation).
DEPOSITS
The bank experienced deposit growth during 2001, resulting in a net increase for the fiscal year of 11.0%, as compared to the previous two years of growth of 13.8% in 1999 and 4.0% in 1998. Being the primary source for the funding of investment and financing activities, thus the breakdown of deposits is of vital importance to the Bank and Management. As of the end of 2001, the Bank's total deposits were $93,169,000, a $9,244,000 increase. Approximately 85.0% of the Bank's deposits are in interest-bearing accounts at the end of the current fiscal year, which is typical in the Bank's market area. Also note that included in interest-bearing accounts are the Bank's now accounts, which are the only type of personal checking account offered by the Bank. Of this $21,145,000, only a small percentage maintains a sufficient minimum balance to earn interest. Non-Interest-bearing accounts made up 15.0% and NOW and Money Market Accounts were 29.9% of total deposits compared to 17.4% and 28.9% in the previous year respectively. In time deposits, the Bank held 55.1% in time
deposits, which comprise savings accounts and Certificates of Deposits. This was a decrease from the approximately 50.3% the year before.
FHLB
Effective August 15, 1995, the Federal Housing Finance Board approved Valrico State Bank's membership to the Federal Home Loan Bank of Atlanta. Being a member offers alternative funding sources for the Bank.
LOANS
Loans comprise the major asset of the Bank, as of December 31, 2001 the bank had $67,860,000 in Total Loans, the Table below breaks out the categories the bank tracks.
Residential Real Estate
At the conclusion of the fiscal year 2001, residential (1-4 family) real estate loans totaled $5,420,000, an increase from the previous year amount of $4,336,000, but this is a decrease from the total residential real estate loans at the end of the fiscal year 1999, which was $4,651,000. The $5,420,000 at year-end represents approximately 8.0% of the total loans outstanding, a slight decrease from the 6.4% for the year ending 2000, and a slight increase from the 7.4% for the year ending 1999. These real estate loans consist primarily of intermediate term loans secured by real estate and payable in periodic installments.
Consumer
Consumer loans consist of loans made to individuals and business for consumer purposes. These loans represented $7,363,000 or 10.9% of the total loan portfolio. In 2000 and 1999, these loans represented $9,579,000 and $9,073,000 or 14.1% and 13.4% of the total loan portfolio respectively.
Commercial and Industrial
The commercial and industrial loans comprised $42,907,000 $41,217,000 and $36,259,000 as of December 31, 2001, 2000, and 1999 respectively. The commercial and industrial purpose loans include commercial real estate loans that are secured by anything other that farmland or farm equipment. The $42,907,000 at year-end represents approximately 63.2% of the total loans outstanding, a slight increase from the 60.75% for the year ending 2000, and a slight increase from the 57.3% for the year ending 1999.
Agricultural
The commercial loans that have a purpose of agriculture or are secured by any farmland or equipment are classified as Agricultural. The agricultural loans for the same periods were $12,170,000, $12,713,000 and $12,780,000. The $12,170,000 at year-end represents approximately 17.9% of the total loans outstanding, a slight increase from the 18.7% for the year ending 2000, and a slight decrease from the 20.2% for the year ending 1999.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management of the Bank believes that the collectibility of the principal on such loans is unlikely. The allowance is an amount that management of the Bank believes will be adequate to absorb losses inherent in existing loans and commitments to extend credit, based on evaluations of the collectibility of outstanding loans and prior loan loss experience relating to
loans and commitments to extend credit. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrowers' ability to pay. Subsequent recoveries, if any, on loans charged against the allowance will be credited to the allowance.
The Bank derives its loan loss reserve based on several methods. One is to review the Bank's historical loss percentages calculated by dividing year-to-date charge-offs by the amount of reservable loans. Secondly, a review of classified loans based on a specific reserve allocation method, a percentage method, and a blended reserve based on specific and percentage methods. The reserve allocation is based on the overall assessment of all the methods to determine the appropriate amount to charge to the provision for loan losses.
Additionally, the Bank's loan portfolio is periodically reviewed by Federal and State regulators as a normal part of their examination process. Governmental examination procedures require individual judgments about a borrower's ability to repay loans, sufficiency of collateral values and the effects of changing economic circumstances. These procedures are similar to those employed by the Bank in determining the adequacy of the allowance for loan losses and in classifying loans.
As a result of their examinations, regulators may propose adjustments to the allowance for loan losses or in the loan classifications. As a practical matter, management and Board of Directors of the Bank promptly consider and implement those proposed adjustments.
The Bank charged to operations $120,000 for provision for loan losses in 2001 and $250,000 and $101,000, respectively, for 2000 and 1999. The amount of $120,000 was added to the beginning balance of $943,000 for the period ended December 31, 2000 for a total accumulated provision before net charge-offs for the period ended December 31, 2001 of $1,063,000. The Bank charged off loans during the fiscal year 2001 in the amount of $116,000 and reflected recoveries of $31,000 leaving a net balance in the allowance for loan losses for the period ended December 31, 2001 of $978,000, which was 1.44% of total loans outstanding of $67,860,000.
NON ACCRUAL LOANS
Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is discontinued either when reasonable doubt exists as to the full and timely collection of interest or principal or both, or when a loan becomes contractually past due by 90 days or more with respect to interest or principal. When a loan is placed on non-accrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgement of management, the loans are estimated to be fully collectible as to both principal and interest. At December 31, 2001 and December 31, 2000, the Bank's loans designated as non-accrual totaled $530,000 and $638,000, respectively. The Bank has adopted FASB 114 (please see Adopted Financial Accounting Standards for an explanation).
IMPAIRED LOANS
At December 31, 2001 and December 31, 2000, loans totaling $240,000 and $253,000, respectively, had been classified as impaired. The bank has adopted FAS114 for its accounting procedures dealing with Impaired Loans (please see Adopted Financial Accounting Standards for an explanation).
INVESTMENT SECURITIES
The Bank's investment portfolio at December 31, 2001 of $21,946,000(based on securities held available for sale marked to approximate fair market value) comprised approximately 23.5% of the Bank's total earning assets, as compared to 10.4% at December 31, 2000. The investment securities are primarily concentrated in U. S. Treasury securities, obligations of other U. S.
Government agencies, municipals and corporations. As of December 31, 2000, the Bank's investment portfolio had 14.8% adjustable rate securities.
As of December 31, 2001, the Bank's investment portfolio, consisted of $7,128,000 in AFS and $1,724,000, in HTM. The net effect to stockholders' equity as of December 31, 2000 was a net loss in reserve for securities of $42,000.
Reclassifying of securities as to available for sale and held-to-maturity took place at December 1995, based upon a regulatory change which allowed a window of opportunity to reclassify the investment portfolio.
The market value of securities fluctuates during the investment period and is determined on the basis of market quotations. The Bank reprices its securities on a monthly basis. The Bank invests in securities for interest income and liquidity.
The Bank adopted FASB 115 and FAS 130 for accounting of Investments (please see Adopted Financial Accounting Standards for an explanation).
EARNING ASSETS
When calculating total earning assets, the amount of $1,066,000 and $1,023,000 as of December 31, 2001 and 2000 were added to total earning assets. This amount represents the cash surrender value of whole life insurance policies purchased primarily to fund a deferred benefit pension plan implemented in 1993 for officers of the Bank who qualified for the program.
NON EARNING ASSETS
Non-interest earning assets accounted for approximately 11.5% of the Company's total assets at December 31, 2000, a decrease from the approximately 10.8% at December 31, 1999. The total non-interest earning assets primarily consisted of cash and funds placed on deposit in accounts with other banks. Of the total $12,145,000 of non-interest earning assets, cash and non-interest bearing deposits totaled $6,417,000. Other significant non-interest earning assets consisted of fixed assets and interest receivable.
CAPITAL
A good capital position, which is vital to the continued profitability of the Company, also promotes depositor and shareholder confidence and provides a solid foundation for the future growth of the Bank. The Bank has provided for its capital requirements through the retention of earnings. At December 31, 2001, the Bank's Tier 1 capital position was 6.98% ($7,462,000 shareholders' equity divided by total assets of $106,973,000) and the Bank's Tier 2 capital was 7.87% determined by adding loan loss reserves of $943,000 to shareholders' equity of $7,462,000 and dividing by total assets of $106,973,000). Total Tier 1 capital to total risk-weighted assets as of December 31, 2001 was 9.34% and total capital (Tier 2) to total risk-weighted assets was 10.57% compared to 9.15% and 10.41%, respectively, in 2000.
INTEREST RATE RISK
Interest rate sensitivity is a function of the re-pricing characteristics of the Bank's portfolio of assets and liabilities. These re-pricing characteristics are the time frames within which the interest-bearing assets and liabilities are subject to change in interest rates. The change in interest rates can be either at replacement, re-pricing or maturity during the life of the assets or liabilities. Interest rate sensitivity management is to concentrate on the maturities of assets and liabilities as they re-price during time periods of changes in market interest rates. Effective management is to ensure that both assets and liabilities respond to changes in interest rates within an acceptable time frame while minimizing the effect of interest rate changes on net interest income.
The major elements used to manage interest rate risk include the mix of fixed and variable rate assets and liabilities and the maturity pattern of assets and liabilities. The Bank performs a monthly review of assets and liabilities that re-price and the time bands within which the re-pricing occurs. Through such
analysis, the Bank monitors and manages its interest sensitivity gap to minimize the effects of changing interest rates.
The interest rate sensitivity structure within the Bank's balance sheet at December 31, 2001, indicated a net interest sensitive liability gap of 133.5% when projecting out one year. In the near term, defined as 90 days, the Bank had a net interest sensitivity asset gap of 142.6%. This information represents a general indication of re-pricing characteristics over time; however, the sensitivity of certain deposit products may vary during extreme swings in interest rates. Since all interest rates and yields do not adjust at the same velocity, the interest rate sensitivity gap is only a general indicator of the potential effects of interest rate changes on net interest income.
LIQUIDITY
Liquidity is the ability of the Bank to meet present and future financial obligations either through the sale or maturity of existing assets or by the acquisition of funds through asset and liability management. Management of the Bank continually evaluates its liquidity position and seeks to achieve its desired liquidity objectives from both assets and liabilities. Asset liquidity is achieved through the continuous maturing of earning assets and by investing in short-term marketable assets. Liability liquidity is available through continued deposit growth, maturity structure and accessibility to market sources of funds.
As of December 31, 2001, the Bank's liquidity ratio was 34.12% derived by dividing net cash, short-term, and marketable assets of $31.7 million by net deposits of $92.9 million. The Bank's dependency ratio as of December 31, 2000 was 9.26%. This ratio is determined by taking the Bank's volatile liabilities (primarily Jumbo certificates) of $13.0 million less short-term investments of $4.9 million divided by adjusted total earning assets of $87.5 million. In 1999 and 1998, the Bank had maintained a liquidity ratio on an average of 20% to 35%. As noted in "Funding Sources" above, management of the Bank believes that the high concentration of time deposits is primarily due to customer relationships and not the attraction of the higher than market rates typically offered by certificates of deposits.
REGULATORY MATTERS
On June 19, 2001, the Bank and the FDIC entered into a Memorandum of Understanding under which the Bank would institute a corrective action program to eliminate compliance problems at the Bank. Management believes that the Bank is in substantial compliance with the Memorandum.
ADOPTED FINANCIAL ACCOUNTING STANDARDS
FAS 109 Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes," which uses the asset and liability method of accounting for income taxes. Provisions for income taxes are based on amounts reported in the statements of operations, after exclusion of nontaxable income, such as interest on state and municipal securities, tax-exempt loans, and includes deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes. Deferred taxes are computed on the liability method pursuant in FAS 109, Accounting for Income Taxes.
FASB 114 In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 114 ("FASB 114"), Accounting by Creditors for Impairment of a Loan, which sets the standard for recognition of loan impairment and the measurement methods for certain impaired loans and loans whose terms are modified in troubled debt restructurings.
Under FASB 114, a loan is impaired when it is probable that a creditor will be unable to collect the full amount of principal and interest due according to the contractual terms of the loan agreement. When a loan is impaired, a creditor has a choice of ways to measure the impairment. The measurement of impairment may be based on (1) the present value of the expected future cash
flows of the impaired loan discounted at the loan's original effective interest rate, (2) the observable market price of the impaired loan, or (3) the fair value of the collateral of a collateral-dependent loan. Creditors may select the measurement method on a loan-by-loan basis, except that collateral-dependent loans for which foreclosure is probable must be measured at the fair value of the collateral. A creditor in a troubled debt restructuring involving a restructured loan should measure impairment by discounting the total expected future cash flows at the loan's original effective rate of interest.
FASB 115 The FASB 115 rule regarding "Accounting For Certain Investments in Debt and Equity Securities" was implemented the first quarter of 1994. The new rule required financial institutions to segregate their investment portfolio into three categories; 1) securities held-to-maturity (HTM), 2) securities available for sale (AFS), and 3) trading securities. Securities available for sale are to be marked to a fair market value. Unrealized holding gains and losses for AFS securities are excluded from earnings and reported as a net amount in a separate component of shareholders' equity until realized. Unrealized holding gains and losses for trading securities are included in earnings.
FAS 119 The Bank does not have any financial instruments which would be affected by Financial Accounting Standard Boards Statement No. 119 ("FAS 119"). FAS 119 requires new qualitative disclosures regarding derivative financial instruments (e.g. futures, forwards, swaps and options).
FAS 121 FAS 121, which was effective for the first quarter of 1996, did not have any significant effect on the Company.
FAS 130 In June 1997, the Financial Accounting Standards Board issued Statement No., 130 ("FAS130"), Reporting Comprehensive Income, establishes standards for reporting comprehensive income in financial statements. It requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Some of the items included in comprehensive income are unrealized gains or losses on securities available-for-sale, underfunded pension obligations and employee stock options. FAS 130 is effective for periods beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. Implementation of FAS 130 will require additional disclosures in the financial statements but will not have an impact on the Company's balance sheet or Statement of Income.
FORWARD LOOKING STATEMENTS
This filing contains forward-looking statements that involve risks and uncertainties, and there are certain important factors that could cause actual results to differ materially from those anticipated. These important factors include, but are not limited to, economic conditions (both generally and more specifically in the Bank's market), competition for customers from other providers of financial services, government legislation and regulation which changes from time to time and over which the Company and the Bank have no control, changes in interest rates, the impact of the Bank's growth, and other risks detailed in the Annual Report on Form 10-K and in the Company's other filings with the Securities and Exchange Commission, all of which are difficult to predict and many of which are beyond the control of the Company.
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TABLES TO ITEM 7.
The following tables attached to this Form 10-K in response to Item 7 are intended to be supplementary information to be read in conjunction with management's discussion and analysis of financial condition and result of operations.
TABLE I - Distribution of Assets, Liabilities, and stockholder's Equity; Interest Rates and Interest Differentials TABLE II - Investment Portfolio TABLE III - Loan Portfolio TABLE IV - Summary of Loan Loss Experience TABLE V - Deposits TABLE VI - Return on Equity and Assets TABLE VII - Short-Term Borrowings
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TABLE I
AVERAGE BALANCES, INTEREST, AND YIELD/RATE (Dollars in Thousands)
The following table sets forth the extent to which changes in volume and rates of earning assets and interest-bearing liabilities affected the change in interest income or interest expense in the indicated time periods. For each major balance sheet category, information is provided relating to 1) changes in volume (changes in average balance multiplied by the prior year's average interest rate), 2) changes in rate (changes in average interest rate multiplied by the prior year's average balance), and 3) the total change in interest income/expenses. Changes attributable jointly to volume and rate have been allocated proportionately.
TABLE I CONTINUED
Interest Rate Sensitivity (Dollars in Thousands)
TABLE II Investment Portfolio (amortized cost, in thousands)
Investment Securities Maturity Schedule (Dollars in Thousands) Maturity Schedule
TABLE II CONTINUED
TABLE III LOAN PORTFOLIO (Dollars in Thousands)
Selected Loan Maturity and Interest Rate Sensitivity Schedules (Dollars in Thousands)
Table III Continued Rate Structure for Loans Maturing Over One Year (Dollars in thousands)
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TABLE IV SUMMARY OF LOAN LOSS EXPERIENCE
Allocation of the allowance for loan losses
TABLE V Deposits (Dollars in Thousands)
MATURITIES OF TIME DEPOSITS OVER $100,000 (DOLLARS IN THOUSANDS)
TABLE VI RETURN ON EQUITY AND ASSETS
LEVERAGE RATIO CALCULATIONS
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders Valrico Bancorp, Inc. and Subsidiary Valrico, Florida
We have audited the accompanying consolidated balance sheets of Valrico Bancorp, Inc. and Subsidiary as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Valrico Bancorp, Inc. and Subsidiary at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
Rex Meighen & Company, LLP Certified Public Accountants
Tampa, Florida January 18, 2002
VALRICO BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
See Accompanying notes to Consolidated Financial Statements
VALRICO BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
See Accompanying notes to Consolidated Financial Statements
VALRICO BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
See Accompanying notes to Consolidated Financial Statements
VALRICO BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
See Accompanying notes to Consolidated Financial Statements
VALRICO BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
See Accompanying notes to Consolidated Financial Statements
VALRICO BANCORP, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
General:
The consolidated financial statements include the accounts and transactions of Valrico Bancorp, Inc. (Company) and its wholly-owned subsidiary, Valrico State Bank (Bank). All significant intercompany accounts and transactions have been eliminated in consolidation.
The Bank provides a wide range of banking services to individual and corporate customers primarily in Hillsborough County, Florida.
The Company and the Bank are subject to regulations issued by certain regulatory agencies and undergo periodic examinations by those agencies.
Basis of Financial Statement Presentation:
The accounting and reporting policies of the Company conform with generally accepted accounting principles and with general practices within the banking industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of foreclosed assets. Additionally, management has made extensive estimates in determining fair values of financial instruments.
Management believes that the allowance for losses on loans is adequate. While management uses available information to recognize losses on loans, including independent appraisals for significant properties, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for losses on loans. Such agencies may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination.
Investments:
Statement of Financial Accounting Standards No. 115 ("FAS 115"), Accounting for Certain Investments in Debt and Equity Securities, sets the standard for classification of and accounting for investments in equity securities that have readily determinable fair values, and all investments in debt securities which are to be classified as held-to-maturity securities, available-for-sale securities, or trading securities.
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
Debt securities that an enterprise has the positive intent and ability to hold-to-maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in net income. Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses included as accumulated other comprehensive income in a separate component of stockholders' equity.
The Bank classifies its investments at the purchase date in accordance with the above-described guidelines. Premiums or discounts on securities at the date of purchase are being amortized or accreted, respectively, over the estimated life of the security using a method which approximates the level yield method. Gains and losses realized on the disposition of securities are based on the specific identification method and are reflected in other income.
Loans:
Loans receivable are stated at unpaid principal balance, less the allowance for loan losses and net deferred loan origination fees and costs.
Interest on loans is accounted for on the accrual basis. Generally, the Company's policy is to discontinue the accrual of interest on loans delinquent over ninety days unless fully secured and in the process of collection. The accrued and unpaid interest is reversed from current income and thereafter interest is recognized only to the extent payments are received. A non-accrual loan may be restored to accrual basis when interest and principal payments are current and prospects for future recovery are no longer in doubt.
Statement of Financial Accounting Standards No. 114 ("FAS 114"), Accounting by Creditors for Impairment of a Loan, sets the standard for recognition of loan impairment and the measurement methods for certain impaired loans and loans whose terms are modified in troubled debt restructurings.
Under FAS 114, a loan is impaired when it is probable that a creditor will be unable to collect the full amount of principal and interest due according to the contractual terms of the loan agreement. When a loan is impaired, a creditor has a choice of ways to measure the impairment. The measurement of impairment may be based on (1) the present value of the expected future cash flows of the impaired loan discounted at the loan's original effective interest rate, (2) the observable market price of the impaired loan, or (3) the fair value of the collateral of a collateral-dependent loan. Creditors may select the measurement method on a loan-by-loan basis, except that collateral-dependent loans for which foreclosure is probable must be measured at the fair value of the collateral. A creditor in a troubled debt restructuring involving a restructured loan should measure impairment by discounting the total expected future cash flows at the loan's original effective rate of interest.
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
Facilities:
Facilities are stated at cost, less accumulated depreciation and amortization. Charges to income for depreciation and amortization are computed on the straight-line method over the assets' estimated useful lives.
When properties are sold or otherwise disposed of, the gain or loss resulting from the disposition is credited or charged to income. Expenditures for maintenance and repairs are charged against income and renewals and betterments are capitalized.
Allowance for Loan Losses:
The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged-off against the allowance when management believes that the collectibility of principal is unlikely. Recoveries of amounts previously charged-off are credited to the allowance. The allowance for loan losses is based on management's evaluation of various factors including prevailing and anticipated economic conditions, diversification and size of the loan portfolio, current financial status and credit standing of the borrower, the status and level of non-performing assets, past and expected loan loss experience, adequacy of collateral, specific impaired loans and economic conditions. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows.
Off Balance Sheet Financial Instruments:
In the ordinary course of business, the Bank has entered into off balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.
Income Taxes:
The Bank accounts for income taxes under the asset and liability method as prescribed in FAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Comprehensive Income:
The Company accounts for comprehensive income in accordance with FAS 130, Reporting Comprehensive Income. FAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. It requires an enterprise to classify items of other comprehensive income by their nature and to display the accumulated balance of other comprehensive income separately in the equity section of a statement of financial position.
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (CONTINUED)
Earnings:
Basic EPS is computed by dividing net income by the weighted average shares of common stock outstanding during the year.
Statement of Cash Flows:
For purposes of reporting cash flows, cash includes cash on hand and amounts on deposit in non-interest bearing accounts with other commercial banks.
Reclassification of Accounts:
Certain items in the consolidated financial statements for prior years have been reclassified to conform to classifications used in the current year.
NOTE B - INVESTMENT SECURITIES
The amortized cost and estimated fair value of investments in securities at December 31, 2001, are as follows:
NOTE B - INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated fair value of investments in securities at December 31, 2000, are as follows:
The fair value of securities fluctuates during the investment period. No provision for loss has been made in connection with the decline of fair value below book value, because the securities are purchased for investment purposes and the decline is not deemed to be other than temporary. The estimated fair value of securities is determined on the basis of market quotations. Securities with amortized cost of approximately $678,000 and $765,000, and market values of approximately $706,000 and $773,000 were pledged to secure repurchase agreements and deposit accounts at December 31, 2001 and 2000, respectively.
At December 31, 1995, securities with an amortized cost of approximately $1,646,000 were transferred to held-to-maturity from available-for-sale due to a one-time opportunity to reassess security classifications in accordance with guidelines issued by the FASB. These securities had a net unrealized loss of $1,852 at December 31, 2001.
The cost and estimated fair value of debt securities at December 31, 2001, by contractual maturities, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
NOTE B - INVESTMENT SECURITIES (CONTINUED)
NOTE C - LOANS
The loan portfolio is classified as follows:
The following is a summary of the transactions in the allowance for loan losses:
Loans on which interest was not being accrued totaled $530,000 at December 31, 2001, and $638,000 at December 31, 2000. Had interest been accrued on these non-accrual loans at originally contracted rates, interest income (before income taxes) would have been increased by approximately $31,800 and $38,000 for 2001 and 2000, respectively.
A loan is considered impaired when it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the agreement. At December 31, 2001 and 2000, the Bank had classified loans in the amounts of $240,400 and $252,500 as impaired loans, respectively. The allowance for loan losses includes amounts applicable to impaired loans. These allowances are not significant to the Bank's financial statements.
NOTE D - FACILITIES
Facilities are summarized as follows:
Other expenses for the years ended December 31, 2001, 2000, and 1999, included depreciation and amortization of facilities of $258,000, $265,000, and $274,000, respectively.
NOTE E - TIME DEPOSITS
At December 31, 2001, scheduled maturities (in thousands) of time deposits are as follows:
NOTE F - ADVANCES UNDER LINE-OF-CREDIT
The Company entered into an open end loan agreement with Independent Banker's Bank of Florida which provides for maximum borrowings of $1,000,000 at the prime interest rate. The security for the loan agreement consists of the Bank's common stock and a security interest in other Company assets.
At December 31, 2001, the outstanding balance was $969,950. Interest expense was $60,000, $92,000 and $68,000 for the years ended December 31, 2001, 2000 and 1999, respectively.
NOTE G - NOTES PAYABLE
Long-term debt consists of the following:
Estimated maturities (in thousands) on long-term debt are as follows:
Interest expense was $198,890, $209,012 and $210,721 for the years ended December 31, 2001, 2000 and 1999, respectively.
NOTE H - STOCK OPTION PLAN
The Company adopted the 1998 Stock Option Plan on December 15, 1998, replacing its previous stock option plan. All options under the old plan have been terminated. Under the new plan, 65,000 shares of the Company's common stock have been reserved to grant to officers, directors and other key personnel of the Bank. Option prices per share are set by a committee of the Board of Directors at the time of the grant, but the price cannot be less than the fair market value of the stock at the date of the grant. The options are generally non-transferable and expire following termination of employment with the Bank, except in the event of death or disability.
At December 31, 1998 options for 59,910 shares had been granted with an exercise price of $16 per share. All such options expire December 14, 2008. At December 31, 2001, options on 5,090 shares remain available for grant.
The Company accounts for these options based upon APB Opinion No. 25. Accordingly, no compensation cost has been recognized for its stock options. Had the compensation cost been determined based upon FAS Opinion No. 123, the Company's net income would have been reduced approximately $37,100 for 2001, $40,720 for 2000, and $38,000 for 1999.
NOTE I - EMPLOYEE BENEFIT PLANS
The Bank has an Employee Stock Ownership Plan containing Internal Revenue Code Section 401(k) provisions. The Plan became effective January 1, 1997, and is for the benefit of employees who have completed six months of service and attained age 18. The Plan provides for three types of Company contributions:
(1) Basic contributions - discretionary contribution made for all non-highly compensated participants in order to satisfy the non-discrimination requirements of the Internal Revenue Code.
(2) Matching contribution - the Bank matches 25% of salary reduction contributions up to 6% of compensation.
(3) Optional contributions - additional discretionary contribution made by the Bank allocated to the accounts of participants on the basis of total relative compensation.
Bank contributions to the Plan were $15,284 in 2001, $14,120 in 2000, and $11,551 in 1999.
NOTE J - REGULATORY CAPITAL MATTERS
The Federal Reserve Board and other bank regulatory agencies have adopted risk-based capital guidelines for banks and bank holding companies. The main objectives of the risk-based capital framework are to provide a more consistent system for comparing capital positions of banking organizations and to take into account the different risks among banking organizations' assets, liabilities and off-balance sheet items. Bank regulatory agencies have supplemented the risk-based capital standard with a leverage ratio for Tier I capital to total reported assets.
Failure to meet the capital adequacy guidelines and the framework for prompt corrective actions could initiate actions by the regulatory agencies which could have a material effect on the financial statements.
As of December 31, 2001, the most recent notification from the FDIC, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, it will have to maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as disclosed in the table below. There are no conditions or events since the most recent notification that management believes have changed the prompt corrective action category.
On June 19, 2001, the Bank and the FDIC entered into a Memorandum of Understanding under which the Bank would institute a corrective action program to eliminate compliance problems at the Bank. Management believes that the Bank is in substantial compliance with the Memorandum.
NOTE K - OPERATING LEASES
The Bank leases two branch locations. One branch is leased from a director of the Bank. This lease expires March 31, 2003, and provides for annual rents of $42,000. The Bank has the option to renew the lease for three additional three-year terms at rents to be negotiated at the time of the renewal. The second branch is located in Wal-Mart. This lease provides for a monthly rental of $2,083 for five years. The Bank has the option to renew the lease for two additional five-year terms, with annual rents of $31,250 and $39,062, respectively. Rental expense under said leases was approximately $67,000, $67,000, and $67,000 for each of the years ended December 31, 2001, 2000, and 1999.
These leases are accounted for as operating leases.
The future minimum rental commitment for said leases are as follows:
NOTE L - DEFERRED COMPENSATION AGREEMENTS
The Bank entered into deferred compensation agreements with certain executive officers. The agreements provide for a flat annual retirement benefit at the time the employee participates in the agreement. The benefit may be increased by a cost of living adjustment annually and is to be paid for 15 years. Provisions under these agreements for 2001, 2000, and 1999 were $36,318, $40,931, and $28,819, respectively.
NOTE M - OTHER EXPENSES
Miscellaneous expenses were as follows:
NOTE N - INCOME TAXES
The provision for income taxes is summarized as follows:
A reconciliation of the income tax computed at the Federal statutory rate of 34% and the income tax provision shown on the statement of income follows:
The components of the deferred income tax asset included in other assets are as follows:
NOTE N - INCOME TAXES (CONTINUED)
The tax effects of each type of significant item that gave rise to deferred taxes are:
NOTE O - COMMITMENTS AND CONTINGENCIES
The financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of business and which involve elements of credit risk, interest rate risk and liquidity risk. These commitments and contingent liabilities are commitments to extend credit and standby letters of credit. A summary of these commitments and contingent liabilities follows:
The Bank uses the same credit policies in making commitments to extend credit and in issuing standby letters-of-credit as it does for extensions of credit shown on the balance sheets.
The Bank is party to litigation, outstanding commitments and other contingent liabilities arising in the normal course of business. In the opinion of management, the resolution of such matters will not have a material effect on the financial statements.
The Bank has a $7,000,000 unused line-of-credit with Federal Home Loan Bank, and a $1,500,000 unused line-of-credit with Independent Banker's Bank of Florida for the purchase of Federal funds.
NOTE P - CONCENTRATIONS OF CREDIT
Substantially all of the Bank's loans, commitments and standby letters-of-credit have been granted to customers in Hillsborough County, Florida. The concentrations of credit by type of loan are set forth in Note C. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Standby letters-of-credit were granted primarily to commercial borrowers.
At December 31, 2001, the Bank had $2,825,325 in excess of FDIC deposit insurance in non-interest bearing accounts with other financial institutions.
NOTE Q - RELATED PARTIES
Certain officers, directors, employees of the Bank, and certain corporations and individuals related to such persons have deposits and indebtedness, in the form of loans, as customers. The total of such deposits at December 31, 2001, was $3,151,000. Total loans to such persons and their affiliates amounted to $4,416,000, and $3,747,000 at December 31, 2001 and 2000, respectively. During 2001, originations of related party loans totaled $4,167,000 and payments on related party loans totaled $3,498,000.
NOTE R - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and Short-term Investments: For those short-term instruments, the carrying amount is a reasonable estimate of fair value.
Investment Securities: For securities held as investments, fair value equals quoted market price, if available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.
Loans Receivable: For loans subject to repricing and loans intended for sale within six months, fair value is estimated at the carrying amount plus accrued interest.
The fair value of other types of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Deposit Liabilities: The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. The fair value of long-term fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.
NOTE R - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Short-term Debt: For short-term debt, including accounts and demand notes payable, the carrying amount is a reasonable estimate of fair value.
Long-term Debt: The fair value of long-term debt is estimated by discounting the future cash flows using the current rates for similar debt.
The estimated fair values of the Bank's financial instruments at December 31, 2001, are as follows:
NOTE S - PARENT COMPANY FINANCIAL INFORMATION
Presented below are condensed financial statements for Valrico Bancorp, Inc. (parent only):
Condensed Balance Sheets as of December 31:
NOTE S - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS AND STOCKHOLDERS' EQUITY YEAR ENDED DECEMBER 31:
NOTE S - PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31:
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statement of the Company and the related notes thereto required by Subpart F have been included immediately following Item 13 of this Annual Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in accountants, nor were there any disagreements with accountants on accounting and financial disclosure.
ITEM 10.
ITEM 10. DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
DIRECTORS OF THE COMPANY
The information required by Item 10 pertaining to directors of the Company is incorporated herein by reference to the sections entitled "Election of Directors" in the Company's definitive proxy statement for its 2002 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange within 120 days of the end of the Company's fiscal year ended December 31, 2001.
PRINCIPAL OFFICERS OF THE COMPANY AND ITS SUBSIDIARY BANK
All principal officers of the Company are elected by the Board of Directors and serve at the pleasure of the Board. There are no arrangements or understanding between the Company and any principal officer pursuant to which any such person was elected as a principal officer of the Company.
J. E. "BOB" MCLEAN, III, 65, is Chairman of the Bank and Company and was elected President and CEO in May 1997 of the Company. Mr. McLean is the owner and President of J. E. McLean & Sons, a family business he took over in 1967. He is a citrus grower who also harvests and ships fruit. Prior to that, Mr. McLean was a banker at Marine Bank of Tampa and was employed with Tampa Electric for three and a half years. He is a third generation of Valrico, attending Brandon High School and the University of Florida for a couple of years. Mr. McLean served in the Army. He has served as Chairman of the Board of the Bank since its inception in 1989 and has served as Chairman of the Board for the Company since May 1995.
JERRY L. BALL, 49, The President and CEO of the Bank is also the Executive Vice President of the Company. In May 1997, Mr. Ball was promoted to his current position. In 1995, Mr. Ball was promoted to Executive Vice President. From 1989 to May 1995, Mr. Ball served in the position of Senior Vice President and Cashier. From 1980 to April 1989, Mr. Ball was an Assistant Vice President and Branch Manager for First Union National Bank of Florida. Mr. Ball attended King College and received a B.A. degree in Business and Economics. He is a graduate of the School of Banking at the University of Florida. Mr. Ball has over 23 years of banking experience.
DONALD WEAVER, 59, joined the Company and Bank in November 1995. He was hired as Senior Vice President of Commercial Loans of the Bank. In May 1997, he was promoted to Executive Vice President and Director of Commercial Loans and was elected to the position of Secretary to the Company. He has over 35 years in commercial banking, all within the Hillsborough County area. He attended Hillsborough Community College and has attended a number of banking schools. He has been a resident of the Brandon area for over 25 years.
Set forth below are the names and ages of the other principal officers of the Company's subsidiary bank, giving their principal occupation and business experience of each such principal officer during the past six years. All of such information has been furnished by each such person.
GLENN J. CHASTEEN, 50, is currently serving as Senior Vice President-Consumer Loans. He has been the Bank's installment lender since June 1989. From January 1987 to October 1988, Mr. Chasteen served as Senior Vice President of San Antonio Citizens Federal Credit Union. From February 1980 to January 1987, Mr. Chasteen served as Vice President-Consumer Lending with Sun Bank of Tampa Bay (formerly known as Brandon State Bank).
CAROL TODD JOHNSON, 70, has served as Vice President and Business Development Officer of the Bank since June 1991. Mrs. Johnson serves in this position on a part-time basis and was promoted in 1995 to Vice President-Business Development. From 1972 to May 1991, Mrs. Johnson was Vice President of Business and Community Development Officer at the Brandon office of Barnett Bank.
SUSAN L. RADFORD, 44, is currently serving as a Vice President - Cashier/Compliance Officer. She was promoted to this position in July 1999. Ms. Radford has 24 years of banking experience, 15 years in bank operations.
GLENDA C. PEACOCK, 62, is currently serving as a Vice President - Loan Officer/Branch Coordinator . She has been serving in this capacity since August 1, 1999. Prior to this, she served as a branch manager of our Brandon location since March 1994. Mrs. Peacock was hired by the Bank in August 1993 where she served as an AVP - Loan Officer.
MELISSA B. OVERTON, 44, is currently serving as a commercial loan officer of our Plant City locations as a Vice President - Commercial Loan Officer. She has been serving in this capacity since August 1999. Mrs. Overton was hired by the bank as a commercial lender in March 1999. Prior to being hired by us, Mrs. Overton has worked for Suntrust and Barnett Banks as a commercial lender and also for a small community bank in southern Florida as a commercial lender/Branch manager. Also during 1997-1998, Mrs. Overton worked as a Human Resource Coordinator for a restaurant chain in southern Florida.
MICHAEL A. GOTTESMAN, 53, is currently serving as Vice President in commercial loans of our main office. He has been serving in that capacity since joining the bank in March of 2001. Prior to joining the bank Mr. Gottesman spent 13 years as Vice President and branch manager with Barnett Banks, and has been in banking for 26 years. Mr. Gottesman is a Graduate of National Commercial lending School in Norman Oklahoma and has taken numerous courses in banking.
ITEM 11.
ITEM 11. MANAGEMENT COMPENSATION AND TRANSACTIONS
The information required by Item 11 pertaining to management compensation and transactions with management of the Company is incorporated herein by reference to the sections entitled "Executive Compensation and Other Information" and "Certain Transactions" in the Company's definitive proxy statement for its 2002 Annual Meeting of Shareholders, which will be filed with the Federal Deposit Insurance Corporation within 120 days of the end of the Company's fiscal year ended December 31, 2001.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The only class of voting securities of the Company is its Common Stock, 304,728 shares of which were outstanding as of December 31, 2001. To the best knowledge of the Company, other than Messrs. Carlton, Holmberg and Amerson (whose shareholdings are listed in "Security Ownership of Management" below), there are no other persons who own beneficially more than five percent (5%) of the Company's Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The information set forth below as to the beneficial ownership of shares of Common Stock of the Company by each director of the Company, and by all directors and principal officers of the Company as a group, as of December 31, 2000 has been furnished by the respective persons.
1. All of these shares are owned as joint tenant with this individual's spouse. Includes 4703 shares subject to options which are presently exercisable.
2. Includes 26,025 shares which Mr. Carlton owns individually and 50 shares each owned in trust for Mr. Carlton's three children ( a total of 150 shares) of which Mr. Carlton is sole trustee. Includes 4703 shares subject to options which are presently exercisable.
3. Includes 10,000 shares which Dr. Henderson owns as joint tenant with Kathy Henderson, his wife, and 125 shares each owned by a trust set up for Dr. Henderson's four (4) children (a total of 500 shares) of which Kathy Henderson is sole trustee and as to which Dr. Henderson disclaims beneficial ownership. Includes 4703 shares subject to options which are presently exercisable.
4. Includes 29,207 shares which Mr. Holmberg owns individually. Also includes 100 shares which are owned by Mr. Holmberg's wife, as to which shares Mr. Holmberg disclaims beneficial ownership. Includes 4703 shares subject to options which are presently exercisable.
5. Includes 5,000 shares held in a Valrico State Bank Self-Directed Ira for the sole benefit of Mr. Jennings; 2,466 shares of which Mr. Jennings owns individually and 200 shares which Mr. Jennings owns as joint tenant with his wife. Also, includes 100 shares which Mr. Jennings' wife owns as to which shares Mr. Jennings disclaims beneficial ownership. Includes 4703 shares subject to options which are presently exercisable.
6. Includes 4,200 shares Mr. McLean owns as joint tenant with his wife and daughter and 1,170 shares owned by Mr. McLean in trust for his grandchildren for which Mr. McLean is sole trustee. Also includes 1,100 shares owned by Mr. McLean's daughter, son-in-law, and wife as to which shares Mr. McLean disclaims beneficial ownership. Includes 7,489 shares subject to options which are presently exercisable.
7. Includes 7,226 shares which Mr. Noriega owns individually and 100 shares each owned joint with three of Mr. Noriega's children (a total of 300 shares). Includes 4703 shares subject to options which are presently exercisable.
8. Includes 450 shares which Mr. Ball owns jointly with his spouse. Includes 7500 shares subject to options which are presently exercisable.
9. Includes 100 shares which Mr. Weaver owns individually and 200 shares owned in joint with Mr. Weavers spouse. Includes 6000 shares subject to options which are presently exercisable.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain officers, directors, security holders with more than five percent ownership, and corporations and individuals related to such persons have indebtedness in the form of loans. These loans to such persons are made in the ordinary course of business. The loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and do not involve more than the normal risk of collectibility, nor do they present other unfavorable features.
SCHEDULE II LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS Year ended December 31, 2001
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NOTES
SCHEDULE II LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
SCHEDULE II LOANS TO OFFICERS, DIRECTORS, PRINCIPAL SECURITY HOLDERS, AND ANY ASSOCIATES OF THE FOREGOING PERSONS
SCHEDULE III LOANS AND LEASE FINANCING RECEIVABLES (Dollars in Thousands)
SCHEDULE IV BANK PREMISES AND EQUIPMENT
PLEASE REFERENCE NOTES TO FINANCIAL STATEMENTS: NOTE D - FACILITIES
SCHEDULE V INVESTMENT IN, INCOME FROM DIVIDENDS, AND EQUITY IN EARNINGS OR LOSSES, OF SUBSIDIARIES AND ASSOCIATED COMPANIES
NOT APPLICABLE
SCHEDULE VI ALLOWANCE FOR POSSIBLE LOAN LOSSES
PLEASE REFERENCE NOTES TO FINANCIAL STATEMENTS: NOTE C - LOANS
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 2001.
(a) Incorporated by reference to the Company's Registration Statement #33-90524 on Form S-4 for the registrant.
(b) Incorporated by reference to the Company's December 31, 1995 Form 10-K.
(c) Incorporated by reference to the Company's December 31, 1997 Form 10-K
(d) Incorporated by reference to the Company's December 31, 1998 Form 10-K
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 28, 2001.
By: /s/ Bob McLean By: /s/ Jerry L. Ball ---------------------------- ------------------------------------ Bob McLean, President & CEO Jerry L. Ball, Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant on March 28, 2001.
Signatures Titles
/s/ J. E. "Bob" McLean, III President and Chief Executive Officer - ------------------------------- J. E. "Bob" McLean, III
/s/ Jerry L. Ball Executive Vice President and Director - ------------------------------- Jerry L. Ball
/s/ C. Dennis Carlton Director - ------------------------------- C. Dennis Carlton
/s/ H. Leroy English Director - ------------------------------- H. Leroy English
/s/ Gregory L. Henderson Director - ------------------------------- Gregory L. Henderson
/s/ Douglas A. Holmberg Director - ------------------------------- Douglas A. Holmberg
/s/ Charles E. Jennings, Jr. Director - ------------------------------- Charles E. Jennings, Jr.
/s/ J. "Bill" Noriega, Jr. Director - ------------------------------- J. "Bill" Noriega, Jr.
/s/LeVaughn Amerson Director - ------------------------------- LeVaughn Amerson