- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: Commission File Number
June 30, 1996 33-81818
FIRST FAMILY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Florida 3277352
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2801 South Bay Street
Eustis, Florida 32726-6503
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(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (904)352-4171
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Common Stock, $.01 par value
Number of shares of Common Stock outstanding as of June 30, 1996: 545,000
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The aggregate market value of the voting stock held by nonaffiliates of
registrant based upon the average bid and ask prices on June 30, 1996, was
$9,391,389.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO ___.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Stockholders for the year ended June 30, 1996 (only
portions of which are incorporated by reference). Part II, Items 5, 6, 7
and 8 and Part IV.
(2) Proxy Statement, filed with the Securities and Exchange Commission (only
portions of which are incorporated by reference). Part III, Items 10, 11,
12 and 13.
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PART I
ITEM 1. BUSINESS
General
First Family Financial Corporation ("First Family" or "Holding Company")
became the Holding Company for First Family Bank, fsb ("Bank") (collectively,
the "Company") on November 8, 1994. First Family operates as a unitary savings
and loan holding company. The Holding Company's only activity is the operations
of the Bank. On November 8, 1994, the Bank's stockholders approved an Agreement
and Plan of Reorganization under which the Bank became a wholly owned subsidiary
of the Holding Company. On November 8, 1994 the Bank's stockholders exchanged
their common shares for shares of the Holding Company. As a result, all of the
previously issued 540,000 shares of $1.00 par value common stock of the Bank
were exchanged for 540,000 shares of the $.01 par value common shares of the
Holding Company.
The Bank, was chartered and initially commenced operations in 1935 as a
federal mutual savings and loan association under the name First Federal Savings
and Loan Association of Eustis. On October 22, 1992, the Bank converted to a
capital stock savings bank and changed its name to First Family Bank, fsb. The
Bank's deposits are federally insured and the Bank is a member of the Federal
Home Loan Bank ("FHLB") System.
The Company's corporate office is located in Eustis, Florida, which is
located 35 miles Northwest of Orlando, Florida, and its telephone number is
(904) 352-4171. The Company operates five full-service branches one each in
Eustis, Leesburg, Tavares, Mount Dora and Umatilla. The Company considers its
primarily market area for lending and savings activities to be Lake County. To a
lesser extent, the Company also serves the rest of the central Florida area,
including Orange, Seminole, Polk, Volusia, Marion, Sumter, and Osceola Counties.
At June 30, 1996, the Company had total consolidated assets of $155.9 million,
deposits accounts of $143.3 million and stockholders' equity of $9.2 million.
The following table sets forth, for the indicated periods, certain ratios
reflecting the profitability of the Company.
Year Ended June 30,
-------------------
1996 1995 1994
---- ---- ----
Return on average assets (net earnings divided
by average total assets) .91% .63% .63%
Return on average equity (net earnings divided
by average equity) 16.98% 12.81% 13.46%
Average equity-to-average assets ratio (average equity
divided by average total assets) 5.36% 4.87% 4.71%
The Company is primarily engaged in soliciting deposits from the general
public and investing such deposits, together with other sources of funds, in
loans secured primarily by residential real estate. To a lesser extent, the
Company invests its funds in commercial loans, primarily loans that are
government guaranteed by the Small Business Administration ("SBA"), Rural
Development Program Loans guaranteed by the U.S. Department of Agriculture and
consumer loans. The Company also invests funds in securities.
Commercial and consumer loans usually earn a higher rate of interest than
the first mortgage home loans, and management believes this type of lending will
improve its interest margin without material increases in risk. These types of
loan originations will also help the Company attract additional checking and
other low cost deposit accounts which management believes are a key element in
building customer banking relationships.
The principal sources of funds for the Company's lending activities
traditionally have been deposits, sales and repayments of loans and earnings
from operations. In addition, the Company has also utilized advances from the
FHLB of Atlanta as a secondary source of funds. Principal sources of income are
interest and fees on loans, fees on transaction accounts and other activities,
and interest and dividends on securities. The Company's principal costs are
interest paid on deposits and operating expenses.
1
The Company experiences substantial competition in attracting and retaining
deposits and in making mortgage and other loans. The primary factors associated
with competing for savings deposits are interest rates, the range of financial
services offered, convenience of office locations, and flexible office hours.
Direct competition for savings deposits comes from commercial banks, savings
institutions, and credit unions as well as other businesses such as securities
brokerage firms and mutual funds, many of which are larger and have
substantially greater resources than the Company. Most of the Company's
competition is concentrated in Lake County, where the Company competes directly
with several branch offices of large regional commercial banking concerns,
including Sun Bank, Barnett Bank, SouthTrust, First Union and NationsBank. The
primary factors in competing for loans are interest rates, loan origination
fees, and the range of lending services offered. Direct competition for
origination of first mortgage loans normally comes from mortgage brokers,
mortgage lenders, commercial banks, savings institutions, insurance companies,
and other lending institutions located both within and outside the Company's
market area.
The competitive environment created by federal legislation and deregulation
since the 1980's gives savings institutions that comply with their regulatory
capital requirements the opportunity to compete in many areas previously
reserved for other types of financial institutions, mainly commercial banks.
Broader powers have increased the cost and risk of doing business for all
depository institutions in the Company's market area. The competition among
savings institutions, commercial banks and other financial institutions has
increased significantly and will continue to do so. Competition may also
increase as a result of the continuing reduction in the effective restrictions
on the interstate operations of financial institutions and by the enactment of
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") and the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), which allow bank holding companies to acquire savings institutions.
Pending Merger
On July 19, 1996, the Board of Directors of First Family entered into an
Agreement and Plan of Merger ("Merger Agreement") whereby First Family will be
acquired by Colonial BancGroup, Inc. ("Colonial") Montgomery, Alabama, a bank
holding company with assets of $4.5 billion and 127 full service offices
throughout Alabama, Florida, Georgia and Tennessee. Under the terms of the
Merger Agreement, Colonial is proposing to acquire all of the outstanding
capital stock of First Family. Shareholders of First Family will receive total
consideration of $23.50 for each share of the Company's common stock in a 50%
cash and 50% stock transaction, resulting in each shareholder receiving $11.75
in cash and Colonial common stock with a value of $11.75. The number of shares
of Colonial common stock into which each outstanding share of First Family
common stock will be converted will be equal to $11.75 divided by the market
value of Colonial's common stock on the effective date of the merger as
determined by the closing prices reported by the New York Stock Exchange on each
of the 10 trading days, ending on the trading day immediately prior to the
effective date. Colonial will also assume all of First Family stock options
outstanding at the time of closing and each option will represent the right to
obtain Colonial common stock. Cash will be paid in lieu of any factional shares.
The transaction will be accounted for as a "purchase" and is subject to the
approval of First Family's shareholders and regulatory approvals from the Board
of Governors of the Federal Reserve Bank ("FRB") and the Office of Thrift
Supervision ("OTS").
Lending Activities
General. At June 30, 1996, the Company's net loan portfolio totaled $114.2
million or 73.3% of the Company's total assets. The Company concentrates
its loan origination activities on conventional loans secured by first
mortgages on residences for between one and four families ("single-family
residences"). To a lesser extent, The Company also makes loans secured by
second mortgages on single-family residences. The Company makes commercial,
commercial SBA and consumer loans to the extent there is a demand in the
market area which is serves. The Company also makes 30-year and 15-year
adjustable and fixed-rate mortgage loans. It has been management's
experience that the Company's interest rate risk on 15-year loans is
mitigated by prepayments, which reduce the expected term of such loans. An
additional advantage of the 15-year loans is the limited credit risk, since
the loans allow borrowers to build equity in their homes quickly. The
Company expects to continue concentrating its loan origination activities
on residential and consumer loans secured by single-family residences in
the Company's market area for the foreseeable future. It is the Company's
current policy not to consider loans in excess of $250,000 unless
management and the Executive Committee seeks and receives Board approval.
2
The following table sets forth the composition of the Company's loan
portfolio by type of loan and type of security at the dates indicated.
At June 30,
---------------------------------------------------------------------------------
1996 1995 1994
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Amount % Amount % Amount %
------ --------- ------ --------- ------ -----
($ In thousands)
Type of Loan:
Conventional real estate loans:
Residential construction
loans $ 8,195 6.87% $ 7,953 6.76% $ 9,073 8.42%
Loans on existing property 102,337 85.75% 98,752 83.94% 88,291 81.96%
Consumer 8,688 7.27% 10,712 9.10% 10,132 9.41%
Commercial, other than
mortgage 130 .11% 231 .20% 221 .21%
------- ------ -------- ------ -------- -------
Total 119,350 100.00% 117,648 100.00% 107,717 100.00%
====== ====== ======
Less:
Loans in process (4,545) (2,939) (4,952)
Discounts and other 85 129 (79)
Loan loss allowance (723) (783) (523)
------- ------- --------
Total, net $ 114,167 $ 114,055 $ 102,163
======= ======= =======
Type of Security:
Residential real estate:
Single-family 94,825 79.45% 92,730 78.82% 82,835 76.90%
Multi-family 2,541 2.13% 2,965 2.52% 5,892 5.47%
Commercial real estate 13,166 11.03% 11,010 9.38% 8,637 8.02%
Consumer and other loans:
Manufactured housing loans 3,145 2.63% 3,868 3.28% 5,020 4.66%
Home equity and second
mortgage loans 4,528 3.79% 5,346 4.53% 4,019 3.73%
Deposit account loans 401 .35% 322 .27% 331 .31%
Automobile 290 .24% 358 .30% 365 .34%
Other consumer 324 .27% 818 .70% 397 .36%
Commercial, other than
mortgage 130 .11% 231 .20% 221 .21%
------- ------ ------- ------ -------- -------
Total 119,350 100.00% 117,648 100.00% 107,717 100.00%
====== ====== ======
Less:
Loans in process (4,545) (2,939) (4,952)
Discounts and other 85 129 (79)
Loan loss reserve (723) (783) (523)
------- ------- --------
Total, net $ 114,167 $ 114,055 $ 102,163
======= ======= =======
3
Loan Origination. The Company's primary lending activity consists of the
origination or purchase of single-family residential loans secured by
property throughout the state of Florida. At June 30, 1996, the Company had
$94.8 million of single-family residential loans, which constituted 97.4%
of its residential real estate loans and 79.5% of its gross loans. The
Company makes single-family residential loans with either fixed or
adjustable interest rates. At June 30, 1996, $35.1 million or 37.0% of the
Company's single-family residential loans had fixed rates, and $59.7
million or 63.0%, had adjustable rates. The Company also makes
single-family residential construction loans. At June 30, 1996, the Company
had $8.2 million of such loans which are included in the total of
single-family residential loans.
Generally, long-term fixed-rate loans originated by First Family are
originated with documentation and in accordance with other agency
guidelines so that they are saleable in the secondary loan market. Such
loans are originated with terms not exceeding 30 years and are amortized on
a monthly basis with payments of principal and interest due each month.
The Company also offers adjustable rate mortgages ("ARM") loans secured by
single-family residences with terms of up to 30 years. These types of loans
have one or three year adjustment periods and are generally adjusted based
on the one or three-year United States Treasury constant maturity
securities index. The Company's typical ARM loan is priced at 287.5 basis
points over the one-year Treasury Bill rate, with an annual interest rate
change cap of 200 basis points and a lifetime interest rate cap of 600
basis points over the initial loan interest rate.
ARM loans assist the Company in its asset/liability management by reducing
its exposure to increases in interest rates more than if it held only
fixed-rate residential loans. However, there are certain credit risks to
the Company resulting from making loans at rates below the fully indexed
rate and from the potential increased cost to the borrower as a result of
the repricing of the loans. It is possible that during periods of rising
interest rates, the risk of default on ARM loans may increase because of
the increased cost to the borrower. In order to reduce this risk, the
Company underwrites the loans at the fully indexed rate. Moreover, the
inclusion of annual and lifetime caps on ARM loans reduces the extent to
which ARM loans can help to protect the Company against interest rate risk.
The maximum loan-to-value ratio on the Company's owner-occupied
single-family residential loans is 95% of the market value of the
residences and 75% if the loan is to refinance an existing loan on an
existing owner-occupied residence. In either case, the loan amount over 80%
is generally covered by private mortgage insurance. For loans secured by
nonowner-occupied residences, the maximum loan-to-value ratio is 80%. All
residential loans have due-on-sale clauses, which provide that the loan
must be repaid upon the sale or transfer of the security property, unless
the purchaser of the property meets the Company's credit criteria for such
loans.
Prior to FDICIA, federal regulations permitted federally chartered savings
institutions to make secured and unsecured consumer loans up to 30% of an
institution's assets. In addition, a federal savings institution has
separate lending authority, apart from the 30% category for certain types
of consumer loans, such as manufactured housing loans, home equity loans,
home improvement loans, and loans secured by deposit accounts. FDICIA
increased authorized consumer loans from 30% to 35% of an institution's
assets. Management considers consumer lending to be an important component
of its future strategic plan. The Company originates consumer loans in
order to provide a wide range of financial services to its customers and
thereby create stronger ties to its customers and because the shorter-term
and normally higher interest rates on such loans help the Company increase
the sensitivity of its interest-earning assets to changes in interest rates
and maintain a profitable spread between its average loan yield and its
costs of funds. The terms of the consumer loans generally range from one to
ten years. The Company's underwriting standards for consumer loans include
an assessment of the applicant's payment history on other debts and ability
to meet existing obligations and payments on the proposed loans. Although
the applicant's creditworthiness is a primary consideration, the
underwriting process also includes a comparison of the value of the
security, if any, to the proposed loan amount. The Company underwrites and
originates the majority of its consumer loans internally, which management
believes limits exposure to credit risks relating to loans underwritten or
purchased from brokers or other outside sources.
4
Consumer loans may entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured
by assets that depreciate rapidly, such as automobiles. In addition,
consumer loan collections are dependent on the borrower's continuing
financial stability, and thus are more likely to be adversely affected by
job loss, divorce, illness or personal bankruptcy. Furthermore, the
application of various federal and state laws, including federal and state
bankruptcy and insolvency laws, may limit the amount which can be recovered
on such loans. Such loans may also give rise to claims and defenses by the
borrower against the Company as the holder of the loan, and a borrower may
be able to assert claims and defenses which it has against the seller of
the underlying collateral.
Commercial loans may be significantly impacted by the local economic
environment and may be subject to a greater extent to adverse conditions in
the economy generally. To minimize the Company's risk, the Company ensures
that these loans have adequate collateral, positive cash flow to cover
operating expenses and debt service payments, and that the borrowers have
substantial experience. In underwriting these loans, consideration is given
to the borrower's operating history, future operating projections, and
reputation in the local and regional markets, as well as, the location and
physical condition of the collateral. Underwriting analysis also includes
credit checks and a complete review of the financial condition of the
borrowers. When real estate is involved, a narrative appraisal report is
required to substantiate property values for all real estate securing the
loan. These appraisals are reviewed by the Company's lending personnel
prior to the closing of the loans.
At June 30, 1996, the Company's consumer loans totaled $8.7 million, or
7.3% of the Company's gross loans. The Company's consumer loans include
manufactured housing loans, home equity and second mortgages, loans secured
by deposit accounts, automobile loans, and other consumer loans. The
largest category of consumer loans at June 30, 1996 was home equity and
second mortgage loans which totaled $4.5 million and constituted 52.1% of
the Company's consumer and other loan portfolio. The home equity loans are
secured by single-family residences and are limited to a maximum of 100% of
appraised value, less any current liens. The Company's commercial, other
than mortgage, loans totaled $130,000, or .1% of the Company's gross loans
and consist primarily of secured and unsecured loans to local businesses.
At June 30, 1996, the Company held $2.5 million, or 2.1% of its gross
loans, in multi-family real estate loans and $13.1 million, or 11.0% of its
gross loans, in commercial real estate loans. Multi-family real estate
loans are collateralized primarily by garden-style apartments located in
Florida. Commercial real estate loans are secured by office and retail
business properties, apartment complexes, and similiar facilities
throughout the state of Florida.
The Company's multi-family and commercial real estate loans were originated
with loan-to-value ratios not exceeding 80% of the appraised value of the
properties; provided, however, that multi-family loans could exceed 80% of
the appraised value of the properties if the excesses were fully secured by
deposits at the Company. The maximum amortization term was 30 years, but at
June 30, 1996 the average remaining term of the Company's multi-family and
commercial real estate loan portfolio was approximately 14 years.
Loans secured by multi-family and commercial real estate are generally
larger and involve a greater degree of risk than residential mortgage
loans. Because payments on loans secured by multi-family and commercial
property depend to a large degree on results of operations and management
of the properties, repayment of such loans may be subject to a greater
extent to adverse conditions in the real estate market or the economy. See
"Mortgage Banking Activities, Loan Purchases, and Sales," below.
Mortgage Banking Activities, Loan Purchases, and Sales. Most of the loans
in the Company's portfolio have been originated by the Company. Since 1985,
it has been the Company's policy to underwrite most residential mortgage
loans in accordance with Federal Home Loan Mortgage Corporation ("FHLMC")
and Federal National Mortgage Association ("FNMA") standards so that they
are eligible for sale in the secondary market. There have been specific
circumstances when the Company has elected to sell loans from its
portfolio.
5
In addition to originating home loans for its own portfolio, the Company
has originated home loans for correspondents and has sold loans to
government entities. Loan sales usually generate fee income and loan
servicing income for the Company. At the present time most loans not
retained in portfolio are sold, servicing-released, to other private
investors. The Company plans to sell more loans more loans to the FHLMC and
FNMA, while retaining servicing rights on the loans. The Company purchases
loans that meet its underwriting guidelines to supplement its own
originations.
Loan Commitments. In making home mortgage loans, the Company does not normally
charge a commitment fee. As part of the loan application, the borrower pays
the Company for its out-of-pocket costs in processing the application, such
as the cost of appraisal, whether or not the borrower closes the loan. The
interest rate charged is normally the prevailing rate at the time the loan
application is approved.
See Note 8 to Consolidated Financial Statements for information as to total
loan commitments outstanding at June 30, 1996.
Income from Loan Activities. Interest rates charged by the Company on mortgage
loans are primarily determined by competitive loan rates offered in its
market area. Mortgage-loan interest rates reflect factors such as general
interest rate levels, the supply of money available to the Company and the
demand for such loans. These factors are, in turn, affected by general
economic conditions, the monetary policies of the federal government,
including the Federal Reserve Board, the general supply of money in the
economy, tax policies and governmental budget matters.
The Company receives fees for servicing loans sold to others. These fees
generally are a percentage of the balance of the loans being serviced. At
June 30, 1996 the Company was servicing $14.7 million of loans for others.
The Company recognized $120,000, $74,000 and $47,000 of income from
servicing loans in the years ended June 30, 1996, 1995 and 1994,
respectively. See Note 5 of the Notes to Consolidated Financial Statements.
The Company also receives fees in connection with loan commitments and
originations, loan modifications, late payments, changes of property
ownership and for miscellaneous services related to its loans. Income from
these activities varies from period to period with the volume and type of
loans originated, sold and purchased, which in turn are dependent on
prevailing mortgage interest rates and their effect on the demand for loans
in the markets served by the Company. The Company usually sets its loan
interest rates and fees whereby approximately 3/4% to 1-1/2% of the
principal amount is earned in fees when home loan originations are sold to
other investors.
6
The following table sets forth certain information at June 30, 1996
regarding loans in the Company's portfolio based upon their contractual
terms to maturity. Demand loans, loans having no schedule of repayments
and no stated maturity, and overdrafts are reported as due in one year
or less.
Due After Due After Due After Due After Due After
Due During 1 through 2 through 3 through 5 through 10 through Due After
the Year 2 Years 3 Years 5 Years 10 Years 15 Years 15 Years
Ending After After After After After After
June 30, June 30, June 30, June 30, June 30, June 30, June 30,
1997 1996 1996 1996 1996 1996 1996 Total
---- ---- ---- ---- ---- ---- ---- -----
(In thousands)
Real estate
mortgage
loans $ 2,340 $2,033 $2,372 $5,415 $15,071 $22,444 $52,662 $102,337
Real estate
construction 8,119 76 - - - - - 8,195
Consumer loans 775 132 263 230 1,150 3,449 2,689 8,688
Commercial, other
than mortgage 25 - - - 105 - - 130
------ ------ ------ ------ ------- ------- ------- -------
Total $ 11,259 $2,241 $2,635 $5,645 $16,326 $25,893 $55,351 $119,350
====== ===== ===== ===== ====== ====== ====== =======
Of the $108.1 million in loans due after 1997, 39% of such loans have
fixed interest rates and 61% have adjustable interest rates.
Nonperforming Loans, Restructured Loans, and Foreclosed Property. The following
table sets forth information with respect to the Company's nonperforming
assets as of the dated indicated.
At June 30,
-----------
1996 1995 1994
---- ---- ----
(In thousands)
Loans accounted for on a nonaccrual basis:
Real estate mortgage:
Single-family residential $ 272 $212 $276
Multi-family and commercial 403 - -
Consumer and other loans 10 - -
---- ---- ----
Total 685 212 276
---- ---- ----
Accruing loans which are contractually
past due 90 days or more:
Single-family residential - - -
---- ---- ----
Total - - -
---- ---- ----
Total of nonaccrual and 90 days past due loans $685 $212 $276
=== === ===
Percentage of total loans .57% .18% .26%
=== === ===
Other nonperforming assets (1) $108 $768 $917
=== === ===
Total nonperforming assets $793 $980 $1,193
=== === =====
Percentage of total assets .51% .62% .84%
=== === ===
(1) Other nonperforming assets represent property acquired by the Company
through foreclosure or repossession.
7
Interest on the nonaccruing loans that would have been reported as income
for the years ended June 30, 1996, 1995 and 1994 had the loans been fully
accruing, totaled approximately $32,000, $16,000, and $22,000,
respectively, of which approximately $8,000, $6,000 and $12,000, were
received during the years ended June 30, 1996, 1995 and 1994, respectively.
Loan Impairment and Losses. On July 1, 1995, the Company adopted Statements of
Financial Accounting Standards No. 114 and 118 ("SFAS 114 and 118"). These
Statements address the accounting by creditors for impairment of certain
loans. The Statements generally require the Company to identify loans for
which the Company probably will not receive full repayment of principal and
interest, as impaired loans. The Statements require that impaired loans be
valued at the present value of expected future cash flows, discounted at
the loan's effective interest rate, or at the observable market price of
the loan, or the fair value of the underlying collateral if the loan is
collateral dependent. The Company has implemented the Statements by
modifying its review of the adequacy of the allowance for loan losses to
also identify and value impaired loans in accordance with guidance in the
Statements.
Management considers a variety of factors in determining whether a loan is
impaired, including (i) any notice from the borrower that the borrower will
be unable to repay all principal and interest amounts contractually due
under the loan agreement, (ii) any delinquency in the principal and
interest payments (other than minimum delays or shortfalls in payments),
and (iii) other information known by management which would indicate that
full repayment of the principal and interest is not probable. In evaluating
loans for impairment, management generally considers delinquencies of 90
days or less to be minimum delays, and accordingly does not consider such
delinquent loans to be impaired in the absence of other indications of
impairment.
Management evaluates smaller balance, homogenous loans for impairment and
adequacy of allowance for loan losses collectively, and evaluates other
loans for impairment individually, on a loan-by-loan basis. For this
purpose, the Company considers its portfolio of first mortgage,
single-family residential loans with outstanding balances less than
$250,000 and its consumer loan portfolio to be smaller balance, homogenous
loans. The Company evaluates each of these loan portfolios for impairment
on an aggregate basis, and utilizes its own historical charge-off
experience, as well as the charge-off experience of its peer group and
industry statistics to evaluate the adequacy of the allowance for loan
losses. For all other loans, the Company evaluates loans for impairment on
a loan by loan basis.
The Company evaluates all nonaccrual loans as well as any accruing loans
exhibiting collateral or other credit deficiencies for impairment. With
respect to impaired, collateral-dependant loans, any portion of the
recorded investment in the loan that exceed the fair value of the
collateral is charged-off. During the years ended June 30, 1996, 1995 and
1994, no loans were identified as impaired under the provisions of SFAS 114
and 118.
8
Asset Classification. Federal regulations require each savings institution to
classify its assets on a regular basis. In addition, in connection with
examinations of such savings institutions, federal examiners have authority
to identify problem assets and, if appropriate, classify them. There are
three classifications for problem assets: substandard, doubtful and loss.
An asset is classified "substandard" if it is determined to be inadequately
protected by the current net worth and paying capacity of the obligor or of
the collateral pledged, if any. An asset is classified as "doubtful" if
full collection is highly questionable or improbable. An asset is
classified as "loss" if it is considered uncollectible, even if a partial
recovery could be expected in the future. Assets classified as substandard
or doubtful require the savings institution to establish general allowances
for loan losses. If an asset or portion thereof is classified loss, the
savings institution must either establish specific allowances for loan
losses in the amount of the portion of the asset classified as loss, or
charge off such amount. Federal examiners may disagree with the savings
institution's classifications and amounts reserved. If an institution does
not agree with an examiner's classification of an asset, it may appeal this
determination to the OTS District Director. Classified assets totaled
$947,000 at June 30, 1996 of which $943,000 were substandard assets and
$4,000 were classified doubtful. Non-performing assets discussed in the
table above are included in classified assets. Of the total classified
assets, approximately $64,000 is real estate owned, $44,000 is other
repossessed assets and $839,000 are earning assets with recognized credit
weakness related to borrowers or weaknesses in the underlying collateral
causing classification.
Investment Activities
The Company is required under federal regulations to maintain a minimum
amount of its portfolio in liquid assets, which typically are marketable
short-term investments. Actual liquidity levels may be increased above
these minimums, depending upon the yields on investment alternatives,
management's judgment as to the attractiveness of the yields then available
in relation to other opportunities, its expectations of the level of yield
that will be available in the future, and management's projections as to
the short-term demand for funds to be used in the Company's loan
origination and other activities. At June 30, 1996, the Company's liquidity
ratio was 7.4%.
Sources of Funds
General. Deposits are the primary source of the Company's funds for lending and
other investment activities. In addition to deposits, the Company also
derives funds from loan and securities principal repayments, loan sales,
and interest payments. Loan repayments and interest payments are a
relatively stable source of funds, while deposit inflows and outflows are
significantly influenced by general interest rates and money market
conditions. From time to time, the Company emphasizes longer-term deposits
as compared to shorter-term deposits in order to lengthen the average term
on its interest-bearing liabilities. At June 30, 1996, the percentage of
the Company's deposits with terms shorter than or equal to one year
represent 72.3% of total deposits. FHLB loans may be used on a short-term
basis to compensate for reductions in the availability of funds from other
sources. The Company also may borrow on a longer-term basis for general
business purposes. At June 30, 1996, the Company did not have any borrowed
funds outstanding. See Note 7 of the Notes to Consolidated Financial
Statements for additional information concerning the Company's deposits.
Deposits. Consumer and commercial deposit accounts are attracted principally
from within the Company's market area through the offering of a variety of
deposit instruments, including passbook and statement accounts and
certificates of deposit ranging in terms up to five years. Deposit account
terms vary, with the principal differences being the minimum balance
required, the time periods the funds must remain on deposit, and the
interest rate. The Company also offers individual retirement accounts
("IRAs").
The Company's activities are designed primarily to attract deposits from
local residents rather than to obtain deposits from areas outside its
primary market. Deposits are acquired through marketing and advertising
strategies including branch reader boards, direct mail, print advertising
and cross selling. The Company does not accept, and never has accepted,
deposits from brokers.
The deregulation of various federal controls on insured deposits has
allowed the Company to be more competitive in obtaining funds and has given
it more flexibility to meet the threat of deposit outflows. While the
deregulation of rates payable on deposits has allowed the Company to be
more competitive in the acquisition and retention of funds, it has also
resulted in a more volatile cost of funds.
9
Interest rates paid, maturity terms, service fees and withdrawal penalties
are established by the Company on a periodic basis. Determination of rates
and terms are predicated upon funds acquisition and liquidity requirements,
earnings spread, rates paid by competitors, growth goals, and federal
regulations.
Reserve Requirements. Reserve requirements are established by law for
transaction accounts and non- personal time deposits of all depository
institutions. NOW accounts, money market accounts and Super NOW accounts,
for example, are subject to reserve requirements. See "Regulation - Federal
Reserve System".
Employees
At June 30, 1996, the Company had 51 full-time employees and 11 part-time
employees. No employees were represented by a collective bargaining
agreement. The Company believes that it enjoys good relations with its
personnel.
The Company currently maintains a comprehensive employee benefit program
providing, among other benefits, hospitalization and major medical
insurance, long term disability insurance, life insurance, and education
assistance. Such employee benefits are considered by management to be
generally competitive with employee benefits provided by other major
employers in the Company's market areas.
Taxation
General. The following discussion summarizes certain federal income tax
provisions applicable to the Company as a thrift institution. This summary
is based on the Internal Revenue Code of 1986, as amended ("Code"),
regulations, rulings and decisions currently in effect, all of which are
subject to change.
The Holding Company and its subsidiaries currently file a consolidated
federal income tax return on a June 30, fiscal year basis.
Federal Income Taxation. First Family is subject to the provisions of the Code
in the same general manner as other corporations. However, certain
subsidiaries of First Family such as the Bank, which meet certain
definitional tests and other conditions prescribed by the Code may benefit
from favorable provisions regarding their deductions from taxable income
for annual additions to their bad debt reserve. For purposes of the bad
debt reserve deductions, loans are separated into "qualifying real property
loans," which generally are loans secured by interests in certain real
property, and nonqualifying loans, which are all other loans. The bad debt
reserve deduction with respect to nonqualifying loans is based generally on
actual loss experience over a period of years ("experience method"). The
amount of the bad debt reserve deduction with respect to qualifying real
property loans may be based upon the experience method or a percentage of
taxable income determined without regard to such deduction ("percentage of
taxable income method"). These deductions may have the effect of lowering
slightly the tax rates applicable to the Company.
Generally, the Company elects to use the bad debt reserve deduction which
results in the most favorable tax treatment. Historically, the Company has
elected to use the percentage of taxable income method. Under the
percentage of taxable income method, the bad debt reserve deduction for
qualifying real property loans is computed as a percentage, of "specially
computed" taxable income. The allowable deduction under the percentage of
taxable income method ("percentage bad debt deduction") is 8% if certain
assets ("qualifying assets") of an institution amount to at least 60% of
its total assets. There is no bad debt reserve deduction in the event that
less than 60% of the total dollar amount of the assets of an institution
are qualifying assets. Moreover, in such case, an institution could be
required to recapture, generally over a period of up to four years, its
existing bad debt reserve. As of June 30, 1996, more than the required
amount of the Company's total assets were qualifying assets.
10
The bad debt reserve deduction under the percentage of taxable income
method is subject to certain limitations. First, the amount of the
deduction accumulated in reserves for losses on qualifying real property
loans may not exceed 6% of such loans outstanding at the end of the taxable
year. Further, the amount of the deduction for losses on qualifying real
property loans cannot exceed the amount which, when added to that year's
bad debt reserve for losses on nonqualifying loans, equals the amount by
which 12% of total deposits or withdrawable accounts of depositors at
year-end exceeds the sum of surplus, undivided profits and reserves at the
beginning of the year. Finally, the percentage bad debt deduction under the
percentage of taxable income method is reduced by the deduction for losses
on nonqualifying loans. It is not expected that the limitations will
restrict the Company from making the maximum addition to its bad debt
reserve.
Under the Code, an alternative minimum income tax ("AMT") is imposed to the
extent a corporation's AMT exceeds the corporation's regular income tax for
the year. The AMT is imposed at the rate of 20% of a specially computed tax
base known as "alternative minimum taxable income." A corporation's
alternative minimum taxable income for any taxable year is the
corporation's taxable income determined with regard to certain adjustments
prescribed by the Code, and increased by a number of preference items,
including (i) the amount by which the deduction allowable for the taxable
year under the percentage of taxable income method exceeds the amount that
would have been allowable using the experience method and (ii) the interest
earned on certain tax-exempt private activity bonds issued on or after
August 8, 1986. One adjustment to AMT is based on an amount equal to 75% of
the amount by which a corporation's adjusted current earnings (as defined
in the Code) exceeds its AMT (determined without regard to this preference
and prior to reduction for net operating losses).
Earnings appropriated to the Bank's bad debt reserve and claimed as a tax
deduction are not available for the payment of cash dividends or for
distribution to the Holding Company (including distributions made on
dissolution or liquidation), unless the Bank includes the amount in taxable
income, along with the amount deemed necessary to pay the resulting federal
income tax. At June 30, 1996, the Bank had approximately $2,889,000 in tax
earnings and profits available for dividend distribution to the Holding
Company without the imposition of any tax to the Bank.
Changes in tax laws in recent years have eliminated or reduced tax benefits
from payments of interest, from investments in real estate, and from IRA
contributions. These and other tax law changes could have an indirect
adverse effect on the business of savings institutions, including the Bank.
The Company's federal income tax returns have not been audited in the last
four years.
For further information regarding federal income taxes, see Note 10 of the
Notes to Consolidated Financial Statements.
State Income Taxation. The State of Florida has a corporate franchise tax which
subjects the Company's taxable income in Florida to a 5.5% tax. Florida
taxable income is substantially similar to federal taxable income, except
that it includes interest income on obligations of any state or political
subdivision thereof which is not otherwise exempt under Florida laws and
that net operating losses cannot be carried back to prior taxable years.
The Florida franchise tax may be reduced by a credit for intangible taxes
paid, but such credit cannot exceed 65% of the franchise tax due for the
year. This tax is deductible in determining federal taxable income.
Income Tax Accounting Standard. In February 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 109
("SFAS 109") relating to the method of accounting for income taxes. SFAS
109 requires companies to take into account changes in tax rates when
valuing the deferred income tax amounts they carry on their balance sheets
(the "Liability Method"). SFAS 109 also requires that deferred taxes be
provided for all temporary differences between financial statement income
and taxable income. The Company adopted SFAS 109 in fiscal 1992 and
retroactively applied it to the fiscal year beginning July 1, 1989.
11
Regulation and Supervision
General. The following is a brief summary of the regulatory environment in which
the Company operates and is not designed to be a complete discussion of all
statutes and regulations affecting such operations, including those
statutes and regulations specifically mentioned herein.
First Family is a unitary savings and loan holding company and is
registered as such with the OTS and is subject to regulation and
supervision by the OTS. The Company is required to file with the FRB and
the OTS annual reports and such other information as they may require. The
FRB and OTS may also conduct examinations of the Company.
First Family is a legal entity which is separate and distinct from its
subsidiaries. There are various legal limitations on the extent to which
the Bank may extend credit, pay dividends or otherwise supply funds to
First Family or its affiliates. In particular, the Bank is subject to
certain restrictions imposed by federal law on any extensions of credit to
First Family or, with certain exceptions, other affiliates.
Regulation of the Company
General. The Company is a nondiversified unitary savings and loan holding
company within the meaning of the Home Owners Loan Act of 1933, as amended
("HOLA"). As a unitary savings and loan holding company, the Company
generally will not be restricted under existing laws as to the types of
business activities in which it may engage, provided that the Bank
continues to be a qualified thrift lender ("QTL"). Upon any non-supervisory
acquisition by the Company of another savings institution, the Company
would become a multiple savings and loan holding company (if the acquired
institution were held as a separate subsidiary). The HOLA limits the
activities of a multiple savings and loan holding company and its
non-insured institution subsidiaries primarily to activities permissible
for bank holding companies under Section 4(c)(8) of the Bank Holding
Company Act ("BHC Act"), subject to the prior approval of the OTS, and
activities authorized by OTS regulation. Recently proposed legislation
could restrict the activities of unitary savings and loan holding companies
to those permissible for multiple savings and loan holding companies.
The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring more than
5% of the voting stock of another savings institution or holding company
thereof, without prior written approval of the OTS; acquiring or retaining,
with certain exceptions, more than 5% of a nonsubsidiary company engaged in
activities other than those permitted by the HOLA; or acquiring or
retaining control of a depository institution that is not insured by the
FDIC. In evaluating applications by holding companies to acquire savings
institutions, the OTS must consider the financial and managerial resources
and future prospects of the company and institution involved, the effect of
the acquisition on the risk to the insurance fund, the convenience and
needs of the community and competitive factors.
The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings institutions
in more than one state, subject to two exceptions: (i) the approval of
interstate supervisory acquisitions by savings and loan holding companies
and (ii) the acquisition of a savings institution in another state if the
laws of the state of the target savings institution specifically permit
such acquisitions. The laws of the states vary in the extent to which they
permit interstate savings and loan holding company acquisitions.
Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends
or other capital distributions, HOLA does impose such restrictions on
subsidiary savings institutions, as described below. Thus, the Bank must
notify the OTS 30 days before declaring any dividend to the Company. In
addition, the financial impact of a holding company on its subsidiary
institution is a matter that is evaluated by the OTS and the agency has
authority to order cessation of activities or divestiture of subsidiaries
deemed to pose a threat to the safety and soundness of the institution.
12
Transactions with Related Parties and Affiliates. The Banks authority to engage
in transactions with related parties or "affiliates" (i.e., any company
that controls or is under common control with a savings institution, or to
make loans to certain insiders, is limited by Sections 23A and 23B of the
Federal Reserve Act ("FRA"). Section 23A limits the aggregate amount of
transactions with any individual affiliate to 10% of the capital and
surplus of the savings institution and also limits the aggregate amount of
transactions with all affiliates to 20% of the savings institution's
capital and surplus. Certain transactions with affiliates are required to
be secured by collateral in an amount and of a type described in the FRA
and the purchase of low quality assets from affiliates is generally
prohibited. Section 23B provides that certain transactions with affiliates,
including loans and asset purchases, must be on terms and under
circumstances, including credit standards, that are substantially the same
or at least as favorable to the savings institution as those prevailing at
the time for comparable transactions with a nonrelated party or
nonaffiliated company. In the absence of comparable transactions, such
transactions may only occur under terms and circumstances, including credit
standards, that in good faith would be offered to or would apply to
nonrelated parties or nonaffiliated companies. Notwithstanding Sections 23A
and 23B, savings institutions are prohibited from lending to any affiliate
that is engaged in activities that are not permissible for bank holding
companies under Section 4(c) of the Bank Holding Company Act.
Section 22(g) and 22(h) of the Federal Reserve Act ("FRA") and Regulation O
set limits on loans and extensions of credit to executive officers,
directors and 10% shareholders, as well as companies which such persons
control, applies to savings institutions. Among other things, such loans
must be made on terms, including interest rates, substantially the same as
loans to unaffiliated individuals which involve no more than the normal
risk of collectibility and place limits on the amount of loans the Bank may
make to such persons. These restrictions apply in addition to certain
restrictions on transactions with affiliated persons contained in the OTS
regulations.
Regulation of the Bank
General. The activities of savings institutions are governed by the HOLA and by
OTS regulations adopted thereunder. The Bank is a federally-chartered
institution and its deposit accounts are insured up to a maximum of
$100,000 per each insured depositor under SAIF which is administered by the
FDIC. As such, the Bank is subject to examination and regulation by the OTS
and the FDIC.
Insurance of Deposit Accounts. FDICIA required the FDIC to establish, beginning
January 1, 1994, a risk-based assessment system for insured depository
institutions that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. For the
semi-annual assessment period beginning January 1, 1993, a transitional
risk-based insurance system was implemented by regulation by the FDIC
pursuant to FDICIA and the average assessment rate paid by SAIF and BIF
insured institutions was increased. Under the rule implementing the
transitional system, the FDIC assigned an institution to one of three
capital categories based on the institution's financial information, as of
the reporting period ending seven months before the assessment period.
These categories consist of well capitalized, adequately capitalized or
undercapitalized, and one of three supervisory subcategories within each
capital group. The supervisory subgroup to which an institution is assigned
is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information which the FDIC
determines to be relevant to the institution's primary federal regulator
and information which the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit
insurance funds. A savings institution's assessment rate depends on the
capital category and supervisory category to which it is assigned. Under
the transitional system there are nine assessment risk classifications
(i.e., combinations of capital groups and supervisory subgroups) to which
different assessment rates are applied. Assessment rates range from 23
basis points of deposits for an institution in the highest category (i.e.,
well-capitalized and financially sound with only a few minor weaknesses) to
31 basis points of deposits for an institution in the lowest category
(i.e., undercapitalized and posing a substantial probability of loss to the
SAIF unless effective corrective action is taken). The Bank's assessment
rate for the first six months of the fiscal year 1997 will be $.23 per $100
of deposits which based upon deposits as of June 30, 1996, would be
approximately $330,000 in fiscal 1997. The Bank paid $416,000 in FDIC
premiums during the year ended June 30, 1996.
13
Federal legislation has been proposed which would merge the BIF and SAIF
funds. If this occurs, it is expected that the premiums paid by the Bank
would decrease substantially after an initial one-time assessment. The
Company cannot predict if or when such legislation may be enacted.
A final rule establishing a new risk-based system was adopted by the FDIC
in June 1993. Semi-annual assessment under the final rule went into effect
on January 1, 1994. Except for limited changes, the structure of the new
risk-based system is substantially the same as the structure of the
transitional system. The FDIC is authorized to raise the assessment rates
in certain circumstances. If the FDIC determined to increase the assessment
rates for all depository institutions, institutions in all risk categories
could be affected. The FDIC has exercised this authority several times in
the past and may raise SAIF insurance premiums again in the future to fund
the SAIF. If such action is taken by the FDIC, it could have an adverse
effect on the earnings of the Bank.
Under the FDI Act, insurance of deposits may be terminated by the FDIC upon
a finding that the savings institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or
has violated any applicable law, regulation, rule, order or condition
imposed by the FDIC or the OTS. Management of First Family does not know of
any practice, condition or violation that might lead to termination of
deposit insurance. At June 30, 1996, the Bank's regulatory capital exceeded
all of the fully phased-in capital requirements.
To reduce the risk of loss to SAIF, the OTS is required to promulgate
regulations regarding institutional capital and permissible business
activities. The OTS is required to issue regulations that specify certain
mandatory and discretionary supervisory actions to be taken when
FDIC-insured savings institutions fall within one of the following five
specific categories which are indexed to the capital level of the
institution:
"Well capitalized" - an institution that significantly exceeds the required
minimum level for each relevant capital measure.
"Adequately capitalized" - an institution that meets the required minimum
level for each relevant capital measure.
"Undercapitalized" - an institution that fails to meet the required minimum
level for any relevant capital measure.
"Significantly undercapitalized" - an institution that is significantly
below the required minimum level for any relevant capital measure.
"Critically undercapitalized" - an institution that has a ratio of tangible
equity to total assets of 2% or less, or otherwise fails to meet the
critical capital level established under Section 38(c)(3)(A) of the Federal
Deposit Insurance Act.
Subject to limited exceptions, insured institutions in any of the
undercapitalized categories are prohibited from declaring dividends, making
any other capital distribution or paying a management fee to a controlling
person. These undercapitalized institutions are subject to certain
mandatory supervisory actions, including increased monitoring, required
capital restoration planning, and growth and acquisition restrictions.
Significantly undercapitalized institutions face even more severe
restrictions such as requiring the institution to raise additional capital;
restricting transactions between the institution and its affiliates;
restricting interest rates paid on deposits; requiring the institution to
accept an offer to be acquired by another institution or company; and
requiring the institution to terminate, reduce or alter any activity posing
excessive risk to the institution. The OTS may require a significantly
undercapitalized institution or an undercapitalized institution that has
failed to submit or implement an acceptable capital restoration plan to
comply with restrictions on activities imposed on critically
undercapitalized institutions (a term defined to include institutions which
still have a positive net worth). These institutions may not enter into any
material transaction such as investment, expansion, sale of assets
requiring notice to the OTS; extend credit for any highly leveraged
transaction; amend their charter or bylaws; make any material change in
their accounting methods; or pay excessive compensation or bonuses.
14
On September 16, 1992, the OTS adopted final regulations to implement the
prompt corrective action provisions of FDICIA. These regulations became
effective December 19, 1992. Among other things, the regulations define the
relevant capital measures for the five capital categories. For example, a
savings institution is deemed to be "well capitalized" if it has a total
risk-based capital ratio (total capital to risk-weighted assets) of 10% or
greater, a Tier 1 risk-based capital ratio (Tier 1 capital to risk-weighted
assets) of 6% or greater, and a Tier 1 leverage capital ratio (Tier 1
capital to adjusted total assets) of 5% or greater, and is not subject to a
regulatory order, agreement or directive to meet and maintain a specific
capital level for any capital measure. A savings institution is deemed to
be "adequately capitalized" if it has a total risk-based capital ratio of
8% or greater, and (generally) a Tier 1 leverage capital ratio of 4% or
greater, and the institution does not meet the definition of a "well
capitalized" institution. A savings institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%. In addition,
the OTS is authorized effectively to downgrade an institution to a lower
capital category than the institution's capital ratios would otherwise
indicate, based upon safety and soundness considerations (such as when the
institution has received a less than satisfactory examination rating for
any of the equivalent MACRO rating categories on asset quality, management,
earnings or liquidity). Based upon current capital and most recent
examinations, management of First Family does not believe that the Bank
will be materially affected by the new regulation. At June 30, 1996, the
Bank was considered "well capitalized".
In accordance with FDICIA, the FDIC has implemented restrictions on the
acceptance of brokered deposits. In general, an "undercapitalized"
institution may not accept, renew or roll over any brokered deposits.
"Adequately capitalized" institutions may request a waiver from the FDIC to
do so while "well capitalized" institutions may accept, renew or roll over
such deposits without restriction. The rule requires registration of
deposit brokers and imposes certain recordkeeping requirements.
Institutions that are not "well capitalized" (even if meeting minimum
capital requirements) are subject to limits on rates of interest they may
pay on brokered and other deposits. At June 30, 1996, the Bank had no
brokered deposits.
FIRREA. The FIRREA, which was enacted on August 9, 1989, abolished the Federal
Home Loan Bank Board ("FHLBB") and the Federal Savings and Loan Insurance
Corporation ("FSLIC") and significantly changed the federal regulatory
framework for savings institutions and their holding companies. The FHLBB's
regulatory responsibilities for savings institutions and their holding
companies were transferred to the Director of the OTS, and a new insurance
fund was established to insure the deposit accounts of savings
institutions. All savings institutions that were insured by the FSLIC
immediately prior to the enactment of FIRREA automatically became members
of the SAIF upon enactment of FIRREA. The SAIF is administered by the FDIC,
which also administers the Bank Insurance Fund, the insurance fund for
commercial banks and in some instances savings banks. The FDIC, in its
capacity as administrator of the SAIF, has the authority generally to
regulate savings institutions to the extent necessary to ensure the safety
and soundness of the SAIF. The Director of the OTS serves as a member of
the FDIC's Board of Directors.
Qualified Thrift Lender Test ("QTL"). The QTL test as originally imposed by the
Competitive Equality Banking Act of 1987 and the underlying FHLBB
regulations, required that a savings institution maintain at least 60% of
its total tangible assets in "qualified thrift investments" on an average
basis in three out of every four quarters and two out of every three years.
The FIRREA amended the QTL test by requiring that a savings institution's
qualified thrift investment equal or exceed 70% of the savings
institution's portfolio assets for the two-year period beginning July 1,
1991. The QTL test has since been liberalized with the enactment of the
FDICIA, reducing the test from 70% to 65% and providing that the test be
measured on a monthly average basis in 9 out of every 12 months.
For purpose of the test, portfolio assets are defined as: the total assets
of the savings institution minus goodwill and other intangible assets; the
value of property used by the institution to conduct its business; and
liquid assets not to exceed a certain percentage (20% under FDICIA) of the
savings institution's total assets.
15
Under the QTL statutory and regulatory provisions, "qualified thrift
investments" include home mortgages, home improvement loans, home equity
loans, manufactured housing loans, securities backed by or representing an
interest in mortgages on residential or manufactured housing, and shares of
stock issued by a Federal Home Loan Bank, as well as a designated
percentage of consumer loans and, subject to certain limits, shares of
stock issued by the FNMA or FHLMC, and 50% of residential mortgage loans
originated and sold within 90 days. Investments in non-subsidiary
corporations or partnerships whose activities include servicing mortgages
or real estate development are also considered qualified thrift investments
in proportion to the amount of primary revenue such entities derive from
housing-related activities. Also included in qualified thrift investments
are mortgage servicing rights, whether such rights are purchased by the
insured institution or created when the institution sells loans and retain
the right to service such loans.
A savings institution that fails to become or remain a qualified thrift
lender shall either become a national bank or be subject to restriction
specified in FIRREA. A savings institution that converts to a bank must pay
the applicable exit and entrance fees involved in converting from one
insurance fund to another. A savings institution that fails to meet the QTL
test and does not convert to a national bank will be: (i) prohibited from
making any new investment or engaging in activities that would not be
permissible for national banks; (ii) prohibited from establishing any new
branch offices where a national bank located in the savings institution's
home state would not be able to establish a branch office; (iii) ineligible
to obtain new advances from any FHLB; and (iv) subject to limitations on
the payment of dividends comparable to the statutory and regulatory
dividend restrictions applicable to national banks. Also, beginning three
years after the date on which the savings institution ceases to be a
qualified thrift lender, the savings institution would be prohibited from
retaining any investment or engaging in any activity not permissible for a
national bank and would be required to repay any outstanding advances to
any FHLB. A savings institution may requalify as a qualified thrift lender
if it, thereafter, complies with the QTL test.
As of June 30, 1996, the Bank was in compliance with the current QTL
requirement.
Branching. In order to obtain supervisory clearance for branching, a savings
institution's regulatory capital must meet or exceed the minimum
requirements established by law and by the OTS regulations. Section
38(e)(4) of the FDI Act prohibits any "undercapitalized" savings
institution from acquiring or establishing additional branches, unless: (i)
the OTS has accepted the savings institution's capital restoration plan
required by the law; (ii) the institution is implementing the plan; and
(iii) the OTS determines that the proposed action is consistent with such
plan, or the FDIC Board of Directors determines that the proposed action
will further the purposes of the law. In addition, the savings institution
must have a satisfactory record under the Community Reinvestment Act. At
June 30, 1996 First Family operates five (5) full service branches.
Subsidiary Activities. The FIRREA substantially revised the minimum regulatory
capital requirements and tangible capital requirements of savings
institutions. Under FIRREA, investments in and loans to subsidiaries
engaged in activities not permitted to national banks must be deducted from
capital in determining whether an institution meets its regulatory and
tangible capital requirements. At June 30, 1996, First Family had one
active wholly-owned subsidiary, First of Eustis, Inc. which was
incorporated in September, 1981 and two inactive subsidiaries, First Family
Real Estate & Investments, Inc. and First Family Ventures, Inc., both of
which were incorporated on March 31, 1982.
The procedures for establishing or acquiring an operating subsidiary differ
depending on whether the parent savings institution is eligible for
"expedited treatment". A savings institution that is eligible for expedited
treatment may submit a notice to the OTS and FDIC, rather than an
application, stating that it intends to establish or acquire an operating
subsidiary or engage in new activities through an existing operating
subsidiary. If an application is required, formal approval from the OTS
must be obtained by the parent savings institution before it can establish
or acquire an operating subsidiary or engage in new activities through the
existing operating subsidiary. At June 30, 1996, First Family had one
operating subsidiary, First of Eustis, Inc. First Family, through First of
Eustis, Inc., a wholly-owned subsidiary entered into a securities product
and insurance product agreement in January, 1990 with Liberty Financial,
whereby Liberty Financial, leased office space in First Family's branch
offices, paid fees in connection with its sale of securities to First
Family customers, and utilized certain marketing services provided by First
Family. This brokerage activity was preapproved by OTS for First of Eustis,
Inc.
16
OTS Assessments. Savings institutions are required by OTS regulation to pay
assessments to the OTS to fund the operation of the OTS. The general
assessment, to be paid on a semiannual basis, is computed upon the savings
institution's total assets, including consolidated subsidiaries, as
reported in the institution's latest quarterly thrift financial report. The
Bank's paid $47,000 in OTS assessments for the fiscal year ended June 30,
1996.
Capital Requirements. The OTS capital regulations require savings institutions
to meet three capital standards: a 1.5% tangible capital standard; a 3%
leverage (core capital) ratio; and an 8% risk-based capital standard. Core
capital is defined as common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related surplus,
minority interests in the equity accounts of consolidated subsidiaries,
less intangibles other than certain qualifying goodwill and certain
purchased mortgage servicing rights. The Bank has no supervisory goodwill.
In determining compliance with these capital standards, investments in and
extension of credit to any subsidiary engaged in activities not permissible
for a national bank shall be deducted from capital. Such deductions were
being phased in gradually until June 30, 1994. At June 30, 1996, the Bank
had only a minor amount of investments or extensions of credit which were
required to be deducted from capital.
On August 23, 1993, the OTS adopted a final regulation amending its
regulatory capital rules to incorporate an "interest rate risk component."
Savings associations would be required to comply with the provisions of the
new rule beginning on July 1, 1994, and calculations of an association's
sensitivity to interest rate risk would be determined by using the
association's financial data from the preceding two calendar quarters.
Generally speaking, the rule would measure an association's interest rate
risk by determining the changes to an association's "net portfolio value"
in response to a hypothetical 200 basis point increase or decrease in
market interest rates. Under the rule, a decline in net portfolio value of
up to 2% of an association's assets will be considered a "normal level" of
interest rate risk. It is only when a decline in net portfolio value would
exceed that 2% threshold that an association would be required to hold
capital against the interest rate risk. In that case, an institution would
be required to hold capital in an amount equal to one-half of the
difference between the measured risk and the 2% threshold. The rule also
includes an exemption for savings association with less than $300 million
in assets that have a risk-based capital ratio of 12 percent or more.
Institutions qualifying for the exemption may opt to file a "short form" of
financial information with OTS and would not be subject to the interest
rate risk component of the capital regulation.
As of June 30, 1996, the risk-based capital standard for savings
institutions is 8.0% of total capital (which is defined as core and
supplementary capital) to risk-weighted assets. The components of core
capital are equivalent to those discussed earlier under the 3% leverage
standard. The components of supplementary capital include cumulative
perpetual preferred stock, long-term perpetual preferred stock, mandatory
convertible securities, subordinated debt and intermediate preferred stock
and allowance for loan losses. Allowance for loan losses includable in
supplementary capital is limited to a maximum of 1.25% of risk-adjusted
assets. Overall, the amount of supplementary capital counted toward total
capital cannot exceed 100% of core capital. In determining the amount of
risk-weighted assets, all assets, including certain off balance sheet
assets, are multiplied by a risk weight of 0% to 100%, as assigned by the
OTS capital regulation based on the risks OTS believes are inherent in the
type of asset.
The following table summarizes the current capital requirements at June 30,
1996 for the Bank (See Also Note 16 to the Notes to Consolidated Financial
Statements in the 1996 Annual Report to Shareholders):
At June 30, 1996
----------------
Core Tangible Risk-Based
---- -------- ----------
($ in thousands)
% of % of % of
Quali- Quali- Risk-
fying fying Weighted
Amount Assets Amount Assets Amount Assets
------ ------ ------ ------ ------ ------
Regulatory capital $ 9,061 5.8% $ 9,061 5.8% $ 9,784 12.2%
Requirement 4,668 3.0 2,334 1.5 6,436 8.0
----- --- ----- --- ----- ----
Excess $ 4,393 2.8% $ 6,727 4.3% $ 3,348 4.2%
======= === ======= === ======= ===
At June 30, 1996, the Bank exceeded all of its capital requirements.
17
Capital Distributions. Federal regulations impose certain limitations on the
payment of all capital distributions by the Bank such as cash dividends and
other distributions charged against capital. Under the regulations, a
savings association that, immediately prior to, and on a pro forma basis
after giving effect to, a proposed capital distribution, has total capital
(as defined by OTS regulation) that is equal to or greater than the amount
of its fully phased-in capital requirements, is generally permitted without
OTS approval to make capital distributions during a calendar year in the
amount of (i) up to 100% of its net income to date during the calendar
year, plus (ii) an amount that would reduce by one-half its surplus capital
ratio at the beginning of the calendar year. Any distribution in excess of
that amount requires prior OTS approval. A savings association with total
capital in excess of the fully phased-in capital requirement that has been
notified by OTS that it is in need of more than normal supervision also
will be subject to restrictions on its ability to pay dividends. A savings
association with total capital in excess of current minimum capital
requirements but not in excess of fully phased-in requirements is permitted
by the new regulations to make capital distributions, without OTS approval,
of between 25% and 75% of its net income for the previous four quarters,
less dividends already paid for such period, depending on the extent of its
capital. A savings association that fails to meet current minimum capital
requirements is prohibited from making any capital distributions without
the prior approval of OTS. The Bank meets its fully phased-in capital
requirements and, unless OTS determines that the Bank is an institution
requiring more than normal supervision, the Bank is authorized to pay
dividends in accordance with the provisions of OTS regulations discussed
above. Provisions of FDICIA also would bar any insured depository
institution from making any capital distribution if, after making the
distribution, the institution would be "undercapitalized,"with certain
narrow exceptions.
Liquidity. The Bank is required to maintain an average daily balance of liquid
assets (cash, certain time deposits, bankers' acceptances, specified United
States Government, state or federal agency obligations, shares of certain
mutual funds and certain corporate debt securities and commercial paper
equal to a monthly average of not less than a specified percentage of its
net withdrawable deposit accounts plus short-term borrowings. This
liquidity requirement may be changed from time to time by the OTS to any
amount within the range of 4% to 10% depending upon economic conditions and
the savings flow of member institutions, and is currently 5%. OTS
regulations also require each member savings institution to maintain an
average daily balance of short-term liquid assets at a specified percentage
(currently 1%) of the total of its net withdrawable deposit accounts and
borrowings payable in one year or less. Monetary penalties may be imposed
for failure to meet these liquidity requirements. The Bank's average daily
liquidity ratio at June 30, 1996 was 7.4% and the short-term liquidity
ratio at June 30, 1996 was approximately 5.3%.
Enforcement. Under the HOLA, the OTS has primary enforcement responsibility over
savings institutions and has the authority to bring enforcement actions
against all "institution-related parties," including stockholders,
attorneys, appraiser and accountants who knowingly or recklessly
participate in wrongful actions likely to have an adverse effect on an
insured institution. Civil penalties are broadened to cover a wider range
of violations and actions and range up to $25,000 per day unless a finding
of reckless disregard is made, in which case penalties may be as high as $1
million per day. Criminal penalties for most financial institution crimes
are increased to 15 years. In addition, regulators are provided with far
greater flexibility to impose enforcement action on an institution that
fails to comply with its regulatory requirements, particularly with respect
to the capital requirements. Possible enforcement action ranges from the
imposition of a capital plan and capital directive to receivership,
conservatorship or the termination of deposit insurance. The FDI Act
empowers the FDIC to recommend to the Director of OTS enforcement action be
taken with respect to a particular savings institution. If action is not
taken by the Director, the FDIC has authority to take such action under
certain circumstances.
18
Loans to One Borrower. Under the HOLA, savings institutions are subject to the
national bank limits on loans to one borrower. Generally, savings
institutions now may lend to a single or related group of borrowers on an
unsecured basis an amount equal to 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired
capital and surplus, if such loan is secured by readily-marketable
collateral, which is defined to include certain securities and bullion, but
generally does not include real estate. At June 30, 1996, the Bank was in
compliance with the loans to one borrower limit.
On February 15, 1995, the Office of the Comptroller of the Currency
announced its revised rules governing national bank lending limits which
were effective on March 17, 1995. The revisions automatically apply to
savings institutions regulated by the OTS. Under the revision, the
calculation of capital has been changed to the bank's total Tier 1 and Tier
2 capital, plus the balance of the bank's allowance for loan and lease
losses not included in the total Tier 1 and Tier 2 capital. The revised
rule simplifies the calculation of loan limits by permitting the Bank to
rely mainly on information from quarterly reports of condition of income or
call reports, instead of requiring calculation of the lending limits on a
daily basis.
Community Reinvestment. Under the Community Reinvestment Act ("CRA"), as
implemented by OTS regulations, a savings institution has a continuing and
affirmative obligation consistent with its safe and sound operation to help
meet the credit needs of its entire community, including low and moderate
income neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that
it believes are best suited to its particular community, consistent with
the CRA. The CRA requires the OTS, in connection with its examination of a
savings institution, to assess the institution's record of meeting the
credit applications by such institution. The FIRREA amended the CRA to
require, effective July 1, 1990, public disclosure of an institution's CRA
rating to require that the OTS provide a written evaluation of an
institution's CRA performance utilizing a four-tiered descriptive rating
system in lieu of the previously existing five-tiered numerical rating
system. The Bank is committed to meeting the needs of the communities it
serves.
New CRA regulations which were enacted in late 1995 take effect starting in
1996. Under the new regulations, institutions will be evaluated based on:
(i) performance in lending in their assessment areas; (ii) the provision of
deposit and other community services in their assessment areas; and (iii)
the investment in housing-related and other qualified community
investments. Under the new regulations, an institution which is found to be
deficient in its performance in meeting its community's credit needs may be
subject to enforcement actions, including cease and desist orders and civil
money penalties.
The Bank received an "outstanding" CRA Rating in its last CRA Examination.
Management believes the Bank meets its obligations under the CRA and
intends to continue to make a difference in the local communities it serves
by investing in those communities in order to provide more opportunities
for the citizens therein.
Federal Home Loan Bank System. The FHLB System consists of 12 regional FHL
Banks. The FHLB provides a central credit facility primarily for member
savings institutions. The Bank as a member of the FHLB-Atlanta, is required
to acquire and hold shares of capital stock in that FHLB in an amount at
least equal to 1% of the aggregate principal amount of its unpaid
residential mortgage loans and similar obligations at the beginning of each
year, or 5% of its advances (borrowings) from the FHLB-Atlanta, whichever
is greater. First Family is in compliance with this requirement. The FHLB
advances must be secured by specified types of collateral and may be
obtained only for the purpose of providing funds for residential housing
finance.
19
The FHLBs are required to provide funds for the resolution of insolvent
savings institutions and to contribute funds for affordable housing
programs. These requirements could reduce the amount of dividends that the
FHLBs pay to their members and could also result in the FHLBs imposing a
higher rate of interest on advances to members. For the year ended June 30,
1996, dividends from the FHLB-Atlanta amounted to $82,000 or 3.8% of the
Bank's pre-tax income. Should dividends be reduced, or interest on FHLB
advances increased, the Bank's net interest income might also be reduced.
Furthermore, there can be no assurance that the impact of the FIRREA on the
FHLB's will not also cause a decrease in the value of the FHLB-Atlanta
stock held by the Bank.
Federal Reserve System. The Federal Reserve Board regulations require savings
institutions to maintain noninterest-earning reserves against their
transaction accounts (primarily NOW and regular checking accounts). The
Federal Reserve Board regulations generally require that reserves of 3%
must be maintained against aggregate transaction accounts of $51.9 million
or less (subject to adjustment by the Federal Reserve Board) and an initial
reserve of $1.56 million plus 10% (subject to adjustment by the Federal
Reserve Board between 8% and 14%) against that portion of total transaction
accounts in excess of $51.9 million. The first $4.0 million of otherwise
reservable balances (subject to adjustments by the Federal Reserve Board)
are exempted from the reserve requirements. First Family is in compliance
with the foregoing requirements. The balances maintained to meet the
reserve requirements imposed by the Federal Reserve Board may be used to
satisfy liquidity requirements imposed by the OTS. Because required
reserves must be maintained in the form of either vault cash, a
noninterest-bearing account at a Federal Reserve Bank or a pass-through
account as defined by the Federal Reserve Board, the effect of this reserve
requirement is to reduce the Bank's interest-earning assets. FHLB System
members are also authorized to borrow from the Federal Reserve's "discount
window," but Federal Reserve Board regulations require institutions to
exhaust all FHLB sources before borrowing from a Federal Reserve Bank.
20
ITEM 2. PROPERTIES
The following table sets forth the location of the Company's offices, all of
which it owns, at June 30, 1996 and certain other information relating to these
properties at that date:
Net Book Value of
-----------------
Furniture
Date Building Fixtures and
Location Opened and Land Equipment
-------- ------ -------- ---------
(In thousands)
2801 South Bay Street * 1973 $ 1,338 $190
Eustis, Florida
2803 South Bay Street 1987 553 10
Eustis, Florida
1330 Citizens Boulevard
Leesburg, Florida 1974 194 13
909 North Donnelly Street
Mount Dora, Florida 1962 45 7
224 North Sinclair Avenue
Tavares, Florida 1972 119 26
356 North Central Avenue
Umatilla, Florida 1975 64 16
- - --------------------
* This is the corporate headquarters.
The Company uses on-line processing terminals. Branch offices communicate
through the main office with the Company's outside provider of data processing
services. At June 30, 1996, the net book value of the Company's premises and
equipment was $2,575,000. See Note 4 of the Notes to the consolidated Financial
Statements for additional information concerning the Company's premises and
equipment.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any pending legal proceedings other than
nonmaterial legal proceedings undertaken in the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended June 30, 1996, no matters
were submitted to a vote of the security holders through a solicitation or
otherwise.
21
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Registrant hereby incorporates by reference the section entitled "Financial
Highlights" in its Annual Report to Stockholders for the year ended June 30,
1996. The Company had only one class of stock outstanding and had 403
shareholders at that date. For restrictions on payment of dividends, see Note 15
to the consolidated financial statements included in the registrant's annual
report which is also hereby incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
Registrant hereby incorporates by reference the section entitled "Selected
Financial Data" in its Annual Report to Stockholders for the year ended June 30,
1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS
Registrant hereby incorporates by reference the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in its
Annual Report to Stockholders for the year ended June 30, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates by reference the Report of Independent Auditors
and Consolidated Financial Statements and related notes in its Annual Report to
Stockholders for the year ended June 30, 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with the Company's accountants on any matter of
accounting principles or practices or financial statement disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Registrant hereby incorporates by reference the sections entitled "Management -
Directors of the Company" and "Management - Remuneration of Directors and
Officers" contained in its 1996 Annual Meeting Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
Registrant hereby incorporates by reference the section entitled "Management -
Remuneration of Directors and Officer" contained in its 1996 Annual Meeting
Proxy Statement.
22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Registrant hereby incorporates by reference the section entitled "Principal
Holders of Voting Securities" contained in its 1996 Annual Meeting Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans made to directors and executive officers and employees of the Company are
made on substantially the same terms, including interest rates and collateral,
as are made to other customers of the Company. Such loans do not involve more
than the normal risk of collectibility or other unfavorable features.
Savings institutions and banks are governed by the provisions of Section 22(g)
and 22(h) of the FRA with regard to the extension of credit to affiliates,
directors, executive officers and principal shareholders. Loans made to
executive officers, directors, and holders of 10% or more of the shares of any
class of the Company Common Stock ("Principal Shareholder") and affiliates
thereof must contain terms no less favorable to the Company than could have been
obtained in arm's-length negotiations with unaffiliated persons, and such
transactions must be approved in advance by a majority of disinterested
directors. All of the Company's loans to its directors and officers are current
in their contractual payments of both principal and interest. The Company has no
loans outstanding to any Principal Shareholder.
Set forth below is certain information, as of June 30, 1996, as to loans made by
the Company to each of its directors and executive officers whose aggregate
indebtedness to the Company exceeded $60,000 at any time during the 1996 fiscal
year (in thousands).
Highest Balance
During Year Balance as
Name and Position Date of Ended June 30, of June 30, Interest
with First Family Loan 1996 1996 Rate Type(1)
- - ----------------- ---- ---- ---- ---- -------
Thomas A. Windram, 4/29/87 $ 95 $ - - % FM
Director 11/6/90 22 - - % SM
2/12/96 119 - (2) 7.6% FM
William M. Furnas,
Director 4/16/87 97 95 7.6% FM
William Wintersdorf, 10/27/86 86 84 8.2% FM
Director 11/12/95 93 93 6.4% FM
Braxton W. Price,
Director 2/13/95 146 144 7.5% FM
John B. Kirkpatrick, Jr.
Director 3/29/93 92 - - % FM
I. D. Red Voldness
Director 11/16/95 200 200 6.9% FM
(1) "FM" (First Mortgage Loan); "SM" (Second Mortgage Loan);
(2) This loan has been sold.
23
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) List of Documents filed by Registrant as part of this report:
Page Number
Annual Form
Report 10-K
------ ----
Financial Statements, Financial statements
of Registrant are incorporated herein by
reference to Registrant's Annual Report to
Stockholders for the year ended June 30, 1996 17 - 38 -
Independent Auditors' Report 39 -
Consolidated Balance Sheets at June 30, 1996 and 1995 17 -
Consolidated Statements of Earnings for the
years ended June 30, 1996, 1995 and 1994 18 -
Consolidated Statements of Stockholders' Equity
for the years ended June 30, 1996, 1995 and 1994 19 -
Consolidated Statements of Cash Flows for the
years ended June 30, 1996, 1995 and 1994 20 - 21 -
Notes to Consolidated Financial Statements 22 - 38 -
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the
year ended June 30, 1996.
(c) There are no exhibits filed as part of this report
(d) Financial Statement Schedules.
All supplemental schedules are omitted as inapplicable or because the
required information is included in the financial statements or notes
thereto.
24
SIGNATURES
Pursuant to the requirement of Section 13 of 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
FIRST FAMILY FINANCIAL CORPORATION
By: /s/ David M. Shepherd
---------------------
President, Chief Executive Officer
and Chairman of the Board
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 and in the capacities and on the dates indicated.
/s/ David M. Shepherd President, Chief Executive
- - --------------------- Officer, Chairman of the Board
David M. Shepherd and Director
Principal Executive Officer
/s/ Bradley R. Meredith Treasurer, Chief Financial Officer,
- - ----------------------- Secretary and Director
Bradley R. Meredith Principal Financial Officer
Principal Accounting Officer
/s/ William Wintersdorf Director
- - -----------------------
William Wintersdorf
/s/ John B. Kirkpatrick, Jr.Director
- - ---------------------------
John B. Kirkpatrick, Jr.
/s/ Thomas J. Windram Director
- - ---------------------
Thomas J. Windram
/s/ William M. Furnas Director
- - ---------------------
William M. Furnas
/s/ Catherine C. Hanson Director
- - -----------------------
Catherine C. Hanson
/s/ George A. Bavelis Director
- - ---------------------
George A. Bavelis
/s/ Braxton W. Price, M.D. Director
- - --------------------------
Braxton W. Price, M.D.
/s/ I.D. Red Voldness Director
- - ---------------------
I.D. Red Voldness
25
SIGNATURES
Pursuant to the requirement of Section 13 of 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
FIRST FAMILY FINANCIAL CORPORATION
By:
David M. Shepherd, President, Chief Executive Officer
and Chairman of the Board
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 and in the capacities and on the dates indicated.
- - ------------------------ President, Chief Executive
David M. Shepherd Officer, Chairman of the Board
and Director
Principal Executive Officer
- - ------------------------ Treasurer, Chief Financial Officer,
Bradley R. Meredith Secretary and Director of the Board
Principal Financial Officer
Principal Accounting Officer
- - ------------------------ Director
William Wintersdorf
- - ------------------------ Director
John B. Kirkpatrick, Jr.
- - ------------------------ Director
Thomas J. Windram
- - ------------------------ Director
William M. Furnas
- - ------------------------ Director
Catherine C. Hanson
- - ------------------------ Director
George A. Bavelis
- - ------------------------ Director
Braxton W. Price, M.D.
- - ------------------------ Director
I.D. Red Voldness
25