1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended Commission File Number
JUNE 30, 2000 0-29132
TIB FINANCIAL CORP.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0655973
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
99451 OVERSEAS HIGHWAY, KEY LARGO, FLORIDA 33037-7808
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 305-451-4660
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
--------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $0.10 Par Value 3,880,947
- ----------------------------- --------------------------------
Class Outstanding as of August 1, 2000
===============================================================================
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(UNAUDITED)
ASSETS
Cash and due from banks $ 13,519,862 $ 19,506,372
Federal funds sold 9,249,000 2,658,000
Investment securities held to maturity
(market value of $38,395,884 and
$42,292,323, respectively) 40,448,110 44,440,836
Investment securities available for sale 14,880,365 15,921,641
Investment in ERAS Joint Venture 993,830 968,760
Loans, net of deferred loan fees 307,493,415 289,880,721
Less: Allowance for loan losses 3,257,740 2,996,532
------------- -------------
Loans, net 304,235,675 286,884,189
Premises and equipment, net 14,173,790 14,318,646
Intangible assets 1,445,789 1,534,509
Other assets 7,428,966 5,896,378
------------- -------------
TOTAL ASSETS $ 406,375,387 $ 392,129,331
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand $ 83,089,224 $ 72,300,414
Interest-bearing demand and money market 147,593,831 144,183,661
Savings 22,590,495 24,582,207
Time deposits of $100,000 or more 44,330,449 45,974,452
Other time deposits 64,972,605 59,862,786
------------- -------------
Total Deposits 362,576,604 346,903,520
Short-term borrowings 9,252,605 11,712,056
Other borrowings -- 659,625
Other liabilities 4,869,489 4,551,972
------------- -------------
TOTAL LIABILITIES 376,698,698 363,827,173
------------- -------------
STOCKHOLDERS' EQUITY
Common stock - $.10 par value:
7,500,000 shares authorized,
4,405,947 and 4,490,137 shares issued 440,595 449,014
Surplus 7,668,193 7,554,967
Retained earnings 21,841,901 21,634,649
Accumulated other comprehensive income (loss) -
market valuation reserve on investment
securities available for sale (274,000) (285,000)
Treasury stock, 0 and 95,000 shares at cost -- (1,051,472)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 29,676,689 28,302,158
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 406,375,387 $ 392,129,331
============= =============
(See notes to consolidated financial statements)
1
3
TIB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- ------------
INTEREST INCOME
Loans, including fees $ 6,913,232 $ 5,652,647 $13,417,335 $ 11,068,276
Investment securities:
U.S. Treasury securities 236,428 395,955 496,252 740,493
U.S. Government agencies and corporations 531,077 559,217 1,064,405 1,126,267
States and political subdivisions 83,010 90,303 173,830 189,776
Other investments 20,437 27,486 40,986 54,303
Interest bearing deposits in other bank 2,100 152,768 2,470 236,494
Federal funds sold 116,622 145,012 208,529 361,925
----------- ----------- ----------- ------------
TOTAL INTEREST INCOME 7,902,906 7,023,388 15,403,807 13,777,534
----------- ----------- ----------- ------------
INTEREST EXPENSE
Interest-bearing demand and money market 1,601,244 1,384,135 3,017,495 2,815,172
Savings 134,333 159,146 272,414 309,087
Time deposits of $100,000 or more 631,731 430,143 1,280,853 820,391
Other time deposits 905,077 791,949 1,739,741 1,495,362
Short-term borrowings 79,592 20,568 149,647 32,450
----------- ----------- ----------- ------------
TOTAL INTEREST EXPENSE 3,351,977 2,785,941 6,460,150 5,472,462
----------- ----------- ----------- ------------
NET INTEREST INCOME 4,550,929 4,237,447 8,943,657 8,305,072
----------- ----------- ----------- ------------
PROVISION FOR LOAN LOSSES 135,000 120,000 270,000 300,000
----------- ----------- ----------- ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES
4,415,929 4,117,447 8,673,657 8,005,072
OTHER INCOME
Service charges on deposit accounts 484,462 473,647 981,862 955,354
Merchant bankcard processing income 980,337 744,573 2,074,620 1,574,414
Gain on sale of government guaranteed loans 186,573 280,621 192,209 390,151
Fees on mortgage loans sold at origination 98,987 103,522 160,813 215,582
Retail investment services 78,143 69,633 146,662 130,545
Equity in income (loss), net of goodwill
amortization, from investment in
ERAS Joint Venture (7,463) (34,008) 25,070 (36,405)
Other income 203,250 175,069 374,554 325,895
----------- ----------- ----------- ------------
TOTAL OTHER INCOME 2,024,289 1,813,057 3,955,790 3,555,536
----------- ----------- ----------- ------------
OTHER EXPENSE
Salaries and employee benefits 1,911,511 1,956,146 3,823,427 3,801,396
Net occupancy expense 701,105 666,876 1,356,854 1,281,080
Other expense 1,975,590 1,802,157 3,922,843 3,437,621
----------- ----------- ----------- ------------
TOTAL OTHER EXPENSE 4,588,206 4,425,179 9,103,124 8,520,097
----------- ----------- ----------- ------------
INCOME BEFORE INCOME TAX EXPENSE 1,852,012 1,505,325 3,526,323 3,040,511
INCOME TAX EXPENSE 677,600 544,700 1,302,000 1,101,000
----------- ----------- ----------- ------------
NET INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 1,174,412 960,625 2,224,323 1,939,511
2
4
(Continued)
TIB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- ------------
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE FOR DEFERRED
ORGANIZATION COSTS, NET OF TAX BENEFIT
OF $28,300 -- -- -- 47,047
----------- ----------- ----------- ------------
NET INCOME $ 1,174,412 $ 960,625 $ 2,224,323 $ 1,892,464
=========== =========== =========== ============
BASIC EARNINGS PER SHARE:
Income before cumulative effect of change
in accounting principle $ 0.27 $ 0.22 $ 0.51 $ 0.44
Cumulative effect of change in accounting
principle for deferred organization costs,
net of tax -- -- -- (0.01)
----------- ----------- ----------- ------------
BASIC EARNINGS PER SHARE $ 0.27 $ 0.22 $ 0.51 $ 0.43
=========== =========== =========== ============
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of change
in accounting principle $ 0.26 $ 0.21 $ 0.49 $ 0.43
Cumulative effect of change in accounting
principle for deferred organization costs,
net of tax -- -- -- (0.01)
----------- ----------- ----------- ------------
DILUTED EARNINGS PER SHARE $ 0.26 $ 0.21 $ 0.49 $ 0.42
=========== =========== =========== ============
(See notes to consolidated financial statements)
3
5
TIB FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
Accumulated
Other
Comprehensive
Income -
Market
Comprehensive Retained Treasury Valuation Common
Total Income Earnings Stock Reserve Stock Surplus
----------- ---------- ----------- ----------- --------- -------- ----------
Balance at December 31, 1999 $28,302,158 $21,634,649 $(1,051,472) $(285,000) $449,014 $7,554,967
Comprehensive Income
Net Income 2,224,323 $2,224,323 2,224,323
Other comprehensive income,
net of tax expense of $7,000:
Net market valuation adjustment
on securities available for sale 11,000 11,000 11,000
----------
Comprehensive income $2,235,323
==========
Exercise of stock options 93,138 1,581 91,557
Income tax benefit from stock options
exercised 21,669 21,669
Purchase of treasury stock (51,590) (51,590)
Retirement of treasury stock -- (1,093,062) 1,103,062 (10,000)
Cash dividends declared, $.21 per share (924,009) (924,009)
----------- ----------- ----------- --------- -------- ----------
Balance at June 30, 2000 $29,676,689 $21,841,901 $ -- $(274,000) $440,595 $7,668,193
=========== =========== =========== ========= ======== ==========
Accumulated
Other
Comprehensive
Income -
Market
Comprehensive Retained Treasury Valuation Common
Total Income Earnings Stock Reserve Stock Surplus
----------- ---------- ----------- ----------- --------- -------- ----------
Balance at December 31, 1998 $26,567,534 $19,328,022 $ (557,788) $ 150,000 $444,979 $7,202,321
Comprehensive Income
Net Income 1,892,464 $1,892,464 1,892,464
Other comprehensive income, net
of tax benefit of $196,800:
Net market valuation adjustment
on securities available for sale (327,200) (327,200) (327,200)
===========
Comprehensive income $1,565,264
===========
Exercise of stock options 88,469 1,370 87,099
Income tax benefit from stock options
exercised 13,961 13,961
Compensation paid thru issuance of
common stock 183,337 1,667 181,670
Purchase of treasury stock (387,593) (387,593)
Cash dividends declared, $.205 per
share (899,115) (899,115)
----------- ----------- ---------- --------- -------- ----------
Balance at June 30, 1999 $27,131,857 $20,321,371 $ (945,381) $(177,200) $448,016 $7,485,051
=========== =========== ========== ========= ======== ==========
4
6
TIB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
FOR THE SIX MONTH PERIOD ENDED JUNE 30,
2000 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 2,224,323 $ 1,892,464
Adjustments to reconcile net income to net cash provided by operating
activities:
Net amortization of investments 98,048 96,094
Amortization of intangible assets 88,720 89,481
Depreciation of premises and equipment 611,487 592,789
Write-off of unamortized leasehold improvements on
abandoned property -- 133,546
Compensation paid thru issuance of common stock -- 183,337
Provision for loan losses 270,000 300,000
Cumulative effect of change in accounting principle for
organization costs -- 75,347
Deferred income tax provision (benefit) (6,138) (105,346)
Deferred net loan fees (115,048) 3,382
Gain (loss) on sale/disposal of premises and equipment 16,850 (3,342)
Gain on sales of government guaranteed loans, net (192,209) (390,151)
Increase in intangible assets -- (6,498)
Increase in other assets (1,533,450) (99,123)
Increase in other liabilities 338,051 1,083,701
Equity in (income) loss, net of goodwill amortization,
from investment in ERAS JV (25,070) 36,405
Other -- 21,863
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,775,564 3,903,949
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities held to maturity -- (230,400)
Purchases of investment securities available for sale -- (11,092,104)
Repayments of principal and maturities of investment securities
available for sale 953,954 2,612,029
Maturities of investment securities held to maturity 4,000,000 2,000,000
Proceeds from sales of government guaranteed loans 9,631,596 6,945,350
Loans originated or acquired, net of principal repayments (26,945,825) (22,200,767)
Purchases of premises and equipment (506,151) (1,910,578)
Sales of premises and equipment 22,670 8,285
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (12,843,756) (23,868,185)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in federal funds purchased and securities sold under
agreements to repurchase 540,549 1,635,088
Net increase in demand, money market and savings accounts 12,207,268 14,868,850
Time deposits accepted, net of repayments 3,465,816 18,118,526
Repayment of short term borrowings (18,659,625) --
Advances on short term borrowings 15,000,000 399,625
Proceeds from exercise of stock options 93,138 88,469
Treasury stock repurchased (51,590) (387,593)
Cash dividends paid (922,874) (899,590)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,672,682 33,823,375
------------ ------------
5
7
(Continued)
TIB FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
FOR THE SIX MONTH PERIOD ENDED JUNE 30,
2000 1999
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 604,490 13,859,139
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 22,164,372 24,701,735
------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 22,768,862 $ 38,560,874
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid for:
Interest $ 6,391,658 $ 5,265,774
Income taxes 1,215,000 1,395,927
(See notes to consolidated financial statements)
6
8
TIB FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements for TIB Financial
Corporation (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statement presentation. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
June 30, 2000 are not necessarily indicative of trends or results to be
expected for the year ended December 31, 2000. For further information, refer
to the Company's consolidated financial statements and footnotes thereto for
the year ended December 31, 1999.
The consolidated statements include the accounts of TIB Financial Corporation
and its wholly-owned subsidiaries, TIB Bank of the Keys and TIB Software and
Services, Inc., and the Bank's two subsidiaries, TIB Government Loan
Specialists, Inc. and TIB Investment & Insurance Center Inc., collectively
known as the Company. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Certain amounts previously reported on have been reclassified to conform with
current period presentation.
NOTE 2 - LOANS
Loans are reported at the gross amount outstanding, reduced by net deferred
loan fees and a valuation allowance for loan losses. Interest income on loans
is recognized over the terms of the loans based on the unpaid daily principal
amount outstanding. If the collectibility of interest appears doubtful, the
accrual thereof is discontinued. Loan origination fees, net of direct loan
origination costs, are deferred and recognized as income over the life of the
related loan on a level-yield basis. Gains on sales of government guaranteed
loans are recognized as income when the sale occurs.
Major classifications of loans are as follows:
June 30, 2000 December 31, 1999
------------- -----------------
Commercial, financial and agricultural $188,116,387 $182,581,460
Real estate - construction 9,775,962 9,182,378
Real estate - individual 91,613,839 82,421,833
Installment and simple interest individual 18,440,238 16,248,303
Other 165,118 179,924
------------ ------------
Total loans 308,111,544 290,613,898
Net deferred loan fees 618,129 733,177
------------ ------------
Loans, net of deferred loan fees $307,493,415 $289,880,721
============ ============
NOTE 3 - ALLOWANCE FOR LOAN LOSSES
The financial statements include an allowance for estimated losses on loans
based upon management's evaluation of specific loans and inherent losses in the
loan portfolio. The allowance for loan losses is established through a
provision for loan losses charged to expense. Management's judgment in
determining the adequacy of the allowance is based on evaluations of the
collectibility of loans and takes into consideration such factors as changes in
the nature and volume of the loan portfolio, current economic conditions that
may affect the borrower's ability to pay, overall portfolio quality and review
of specific problem loans. Periodic revisions are made to the allowance when
circumstances which necessitate such revisions become known. Recognized losses
are charged to the allowance for loan losses, while subsequent recoveries are
added to the allowance.
7
9
Activity in the allowance for loan losses for the six months ended June 30,
2000 and June 30, 1999 follows:
2000 1999
----------- -----------
Balance, January 1 $ 2,996,532 $ 2,517,234
Provision charged to expense 270,000 300,000
Loans charged off (8,792) (78,675)
Recoveries of loans previously charged off -- 42,407
----------- -----------
Balance, June 30 $ 3,257,740 $ 2,780,966
=========== ===========
NOTE 4 - INVESTMENT SECURITIES
Securities available-for-sale are securities which management believes may be
sold prior to maturity for liquidity or other reasons and are reported at fair
value, with unrealized gains and losses, net of related income taxes, reported
as a separate component of stockholders' equity. Securities held-to-maturity
are those securities for which management has both the ability and intent to
hold to maturity and are carried at amortized cost.
The amortized cost and estimated market value of investment securities
held-to-maturity at June 30, 2000 and December 31, 1999 are presented below:
June 30, 2000
-------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ----------- -----------
U.S. Treasury securities $ 6,095,291 $ 1,744 $ 3,266 $ 6,093,769
U.S. Government agencies and corporations 33,163,559 -- 2,050,704 31,112,855
Other investments 1,189,260 -- -- 1,189,260
----------- ---------- ----------- -----------
$40,448,110 $ 1,744 $ 2,053,970 $38,395,884
=========== ========== =========== ===========
December 31, 1999
--------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ----------- -----------
U.S. Treasury securities $10,088,880 $ 17,913 $ 2,508 $10,104,285
U.S. Government agencies and corporations 33,162,696 -- 2,163,918 30,998,778
Other investments 1,189,260 -- -- 1,189,260
----------- ---------- ----------- -----------
$44,440,836 $ 17,913 $ 2,166,426 $42,292,323
=========== ========== =========== ===========
The amortized cost and estimated market value of investment securities
available for sale at June 30, 2000 and December 31, 1999 are presented below:
June 30, 2000
--------------------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ----------- -----------
U.S. Treasury securities $ 7,701,433 $ -- $ 226,255 $ 7,475,178
States and political subdivisions 6,230,933 23,909 171,059 6,083,783
Mortgage-backed securities 1,386,998 101 65,695 1,321,404
----------- ---------- ----------- -----------
$15,319,364 $ 24,010 $ 463,009 $14,880,365
=========== ========== =========== ===========
8
10
[CAPTION]
December 31, 1999
--------------------------------------------------------
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- -------- ----------- -----------
U.S. Treasury securities $ 7,806,262 $ -- $ 248,432 $ 7,557,830
States and political subdivisions 6,929,169 39,690 226,861 6,741,998
Mortgage-backed securities 1,643,210 1,135 22,532 1,621,813
----------- -------- ----------- -----------
$16,378,641 $ 40,825 $ 497,825 $15,921,641
=========== ======== =========== ===========
Other investments consist of stock in the Independent Bankers Bank of Florida
and the Federal Home Loan Bank of Atlanta.
NOTE 5 - EARNINGS PER SHARE AND COMMON STOCK
Basic earnings per share have been computed based on the weighted average number
of common equivalent shares outstanding during the period. Stock options are
considered to be common stock equivalents for purposes of calculating diluted
earnings per share.
The reconciliation of basic earnings per share to diluted earnings per share is
as follows:
Per Share
Net Earnings Common Shares Amount
------------ ------------- ---------
For the six months ended June 30, 2000:
Basic earnings per common share $2,224,323 4,395,058 $ .51
Effect of dilutive stock options -- 128,772 (.02)
---------- --------- ---------
Diluted earnings per common share $2,224,323 4,523,830 $ .49
========== ========= =========
For the six months ended June 30, 1999:
Basic earnings per common share $1,892,464 4,377,492 $ .43
Effect of dilutive stock options -- 164,548 (.01)
---------- --------- ---------
Diluted earnings per common share $1,892,464 4,542,040 $ .42
========== ========= =========
Per Share
Net Earnings Common Shares Amount
------------ ------------- ---------
For the three months ended June 30, 2000:
Basic earnings per common share $1,174,412 4,398,030 $ .27
Effect of dilutive stock options -- 124,091 (.01)
---------- --------- ---------
Diluted earnings per common share $1,174,412 4,522,121 $ .26
========== ========= =========
For the three months ended June 30, 1999:
Basic earnings per common share $ 960,625 4,380,885 $ .22
Effect of dilutive stock options -- 159,031 (.01)
---------- --------- ---------
Diluted earnings per common share $ 960,625 4,539,916 $ .21
========== ========= =========
NOTE 6 - STOCK BASED COMPENSATION
Under the Bank's 1994 Incentive Stock Option and Nonstatutory Stock Option Plan
("the Plan"), the Company may grant stock options to persons who are now or who
during the term of the Plan become directors, officers, or key executives as
defined by the Plan. Stock options granted under the Plan may either be
incentive stock options or nonqualified stock options for federal income tax
purposes. The Company's Board of Directors may grant nonqualified stock options
to any director, and incentive stock options or nonqualified stock options to
any officer, key executive, administrative, or other employee including an
employee who is a director of the Company. Subject to the provisions of the
Plan, the maximum number of shares of Company common stock that may be optioned
or sold is 978,000 shares. Such shares may be treasury, or authorized but
unissued, shares of common stock of the Company. In no event shall the number of
options outstanding at any time exceed twenty percent of the Company's currently
outstanding common stock.
Total options granted, exercised, and expired during the six months ended June
30, 2000 were 0, 15,810 and 14,200, respectively. As of June 30, 2000, 562,400
options for shares were outstanding.
9
11
NOTE 7 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
requires companies to recognize all derivatives contracts as either assets or
liabilities in the balance sheet and to measure them at fair value.
Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. The Company adopted the new
standard as of July 1, 1998. The effect on the financial statements at July 1,
1998 which resulted from the transfer of certain investment securities, with an
amortized cost of $11,898,815, from the held to maturity category to the
available for sale category was an increase in other comprehensive income market
valuation reserve of approximately $176,000.
Effective January 1, 1999, the Company adopted American Institute of Certified
Public Accountants Statement of Position 98-5 (SOP 98-5), "Reporting the Costs
of Start-Up Activities." SOP 98-5 applies to all nongovernmental entities and
requires that costs of start-up activities and organization costs be expensed as
incurred. Prior to 1999, the Company capitalized organization costs and
amortized them to expense over a five-year period. The Company recorded a charge
net of tax of $47,047 in 1999 as the cumulative effect of this accounting
change.
NOTE 8 - SUBSEQUENT EVENT
The Company entered into an agreement with the Company's largest shareholder
effective July 1, 2000, to purchase 525,000 shares of the Company's common stock
in exchange for four subordinated debt instruments of the Company totaling
$5,250,000. The interest rate on the notes is 13%, with interest payments
required quarterly. The principal balance is payable in full on October 1, 2010,
the maturity date of the notes. The notes can be prepaid by the Company at par
any time after July 1, 2003.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion addresses the factors that have affected the financial
condition and results of operations of TIB Financial Corporation (the "Company")
as reflected in the unaudited consolidated statement of condition as of June 30,
2000, and statement of income for the three and six months ended June 30, 2000.
The Company's net income of $1,174,412 for the second quarter of 2000 was a
22.3% increase compared to $960,625 for the same period last year. The increase
in net income is attributed to an increase of $313,482, or 7.4%, in net interest
income; an increase of $211,232, or 11.7%, in other income; offset by an
increase in other expense of $163,027, or 3.7%; an increase of $15,000 in the
provision for loan losses; and an increase in income tax expense of $132,900 or
24.4%.
Net income for the six months ended June 30, 2000 was $2,224,323 up 17.5% from
$1,892,464 for the comparable period in 1999.
Basic and diluted earnings per share for the second quarter of 2000 were $0.27
and $0.26 respectively as compared to $0.22 and $0.21 per share in the previous
year's quarter. Basic and diluted earnings per share for the six months ended
June 30, 2000 were $0.51 and $0.49 respectively, compared to $0.43 and $0.42 for
the corresponding period ended June 30, 1999. Book value per share increased to
$6.74 at June 30, 2000 from $6.44 at December 31, 1999. The Company paid a
quarterly dividend of $0.105 per share in both the first quarter and second
quarter of 2000 as compared to $0.1025 in both the first and second quarter of
1999.
Performance of banks is often measured by various ratio analyses. Two widely
recognized indicators are return on average equity and return on average assets.
Annualized return on average equity for the six months ended June 30, 2000 was
15.3% on average equity of $29,027,000, compared to 14.1% on average equity of
$26,906,000 for the same period in 1999. Annualized return on average assets of
$396,392,000 for the six months ended June 30, 2000 was 1.12%, compared to 0.98%
on average assets of $386,233,000 for the same period in 1999.
10
12
Net interest income is one measurement of how management has balanced the
Company's interest rate sensitive assets and liabilities. The Company's net
interest income is its principal source of income. Interest earning assets for
the Company include loans, federal funds sold, and investment securities. The
Company's interest-bearing liabilities include its deposits, federal funds
purchased, and other short-term borrowings. Net interest income increased 7.7%
to $8.9 million, in the six months ended June 30, 2000 as compared to the same
period last year primarily as a result of a higher level of earning assets.
Interest from loans increased to $13.4 million for the first six months of 2000
compared to $11.1 million for the comparable period last year. The Company's net
interest margin increased to 4.99% in the first six months of 2000 compared to
4.73% in the first six months of 1999. Despite margins being under pressure on
both the asset yield and deposit cost sides, this increase in margins results
from the increase in loan outstandings relative to other lower yielding assets.
Provision for loan losses decreased to $270,000 from $300,000 for the first six
months of 2000 compared to the first six months of 1999. Gross charged off loans
for the first six months were $8,792 with recoveries of $0, resulting in an
annualized net charge-off rate of 0.01% of total loans. This compares to net
charge offs during the same period last year of $36,268. At June 30, 2000, the
Company had aggregate non-accrual loans of $5,800 compared to $69,701 at
December 31, 1999. Loans past due 90 days or more and still accruing totaled
$2,003,795 and $1,993,343 at June 30, 2000 and December 31, 1999, respectively.
These amounts are entirely attributable to the non-guaranteed portion of one
individual loan to construct a lumber mill near Pensacola, Florida. The loan was
partially guaranteed as to principal and interest by the U.S. Department of
Agriculture (USDA). In addition to business real estate and equipment, the loan
is collateralized by the business owner's interest in a trust. Under provisions
of the trust agreement, beneficiaries cannot receive trust assets until November
2010. Management believes the value of all assets pledged as collateral for this
loan substantially exceeds the unpaid amount. The loan is in the process of
foreclosure, and no loss is anticipated. The ratio of non-performing loans
(including loans 90 days or more past due and still accruing) to total
outstanding loans was 0.65% at June 30, 2000 compared to 0.71% at December 31,
1999.
Other income increased $400,254 to $3,955,790 for the six month period ended
June 30, 2000 from $3,555,536 in the comparable period last year. The increase
in non interest income is attributable to an increase of $500,206 in merchant
bankcard processing income; a $26,508 increase in service charges on deposit
accounts; a $16,117 increase in retail investment services; a $61,475 increase
in equity in income (loss), net of goodwill amortization, from the investment in
ERAS JV; a $48,659 increase in other income; offset by a decrease of $197,942 in
gains on sale of government guaranteed loans; and a $54,769 decrease in fees on
mortgage loans sold at origination. Government loan fees result from a
relatively small number of significant transactions. The timing of the closing
of these transactions will not generally be evenly distributed during the year
and, therefore, the revenue recognition from these transactions can vary
considerably from period to period.
Other expense increased $583,027 or 6.8% to $9,103,124, in the first six months
of 2000 as compared to the prior year period. The major areas of increased
expenses relate to interchange fees for processing merchant bankcard
transactions and computer services. Bankcard costs are volume driven and are
more than offset by higher revenues reported in Other Income. Specifically, fees
for processing these types of transactions increased to $1,539,554 for the six
months of 2000 from $1,153,531 during the comparable period of 1999 for an
increase of $386,023. The increase of $42,400 in computer services reflects the
costs associated with the larger number and activity in account relationships,
and the Company's internet banking product which was introduced in the first
quarter of 2000.
Effective January 1, 1999, the Company changed its method of accounting for
organization costs in order to expense these costs in the period incurred. Prior
to 1999, the Company capitalized organization costs and amortized them to
expense over a five-year period. This change in accounting method was made in
order for the Company to be in compliance with AICPA Statement of Position 98-5
(SOP 98-5), which requires that the costs of start-up activities, including
organization costs, be expensed as incurred. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998. The Company recorded a charge net of
tax of $47,047, or $0.01 per share, in the first quarter of 1999 as the
cumulative effect of this accounting change.
Total assets at June 30, 2000 were $406,375,387, up from total assets of
$392,129,331 at December 31, 1999. Loans net of deferred loan fees increased
$17,612,694 for the first six months of 2000 from year end 1999. Also, in the
same period, federal funds sold increased $6,591,000, and investment securities
decreased $5,034,002.
At June 30, 2000, the Company had $9,252,605 in short-term borrowings compared
to $11,712,056 at December 31, 1999. Short-term borrowings at June 30, 2000
include $477,709 in securities sold under agreements to repurchase, a $7 million
advance from the Federal Home Loan Bank, and $1,774,896 in Treasury tax
deposits.
11
13
The Company entered into an agreement with the Company's largest shareholder
effective July 1, 2000, to purchase 525,000 shares of the Company's common stock
in exchange for four subordinated debt instruments of the Company totaling
$5,250,000. The interest rate on the notes is 13%, with interest payments
required quarterly. The principal balance is payable in full on October 1, 2010,
the maturity date of the notes. The notes can be prepaid by the Company at par
any time after July 1, 2003.
CAPITAL ADEQUACY
Federal banking regulators have established certain capital adequacy standards
required to be maintained by banks and bank holding companies. The minimum
requirements established in the regulations are set forth in the table below,
along with the actual ratios at June 30, 2000 and December 31, 1999:
Well Adequately
Capitalized Capitalized June 30, 2000 December 31, 1999
Requirement Requirement Actual Actual
- --------------------------------------------------------------------------------------------------------------------------------
Tier 1 Capital (to Average Assets)
Consolidated =>5% 3% 7.2% 7.3%
Bank =>5% 3% 6.8% 7.1%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated =>6% 4% 9.7% 9.4%
Bank =>6% 4% 9.2% 9.2%
Total Capital (to Risk Weighted Assets)
Consolidated =>10% 8% 10.8% 10.4%
Bank =>10% 8% 10.3% 10.2%
Management believes, as of June 30, 2000, that the Company and the Bank met all
capital requirements to which they are subject.
The pro forma effect as of June 30, 2000, on the foregoing Consolidated capital
ratios of the 525,000 share repurchase effective July 1, 2000, previously
discussed in the Subsequent Event note above is as follows: Tier 1 Capital to
Average Assets: 5.8%; Tier 1 Capital to Risk Weighted Assets: 7.9%; Total
Capital to Risk Weighted Assets: 10.8%.
The Company has entered into a letter of intent with First Tennessee Capital
Markets for the possible participation by the Company in an underwriting of
trust preferred stock in the amount of $8 million. This transaction, which is
subject to a number of conditions, contemplates a closing in September 2000.
There is no assurance that the Company will close such a transaction or, if
consummated, the offering amount and terms.
LIQUIDITY
The goal of liquidity management is to ensure the availability of an adequate
level of funds to meet the loan demand and deposit withdrawal needs of the
Company's customers. The Company actively manages the levels, types and
maturities of earning assets in relation to the sources available to fund
current and future needs to ensure that adequate funding will be available at
all times.
The Bank has invested in Federal Home Loan Bank stock for the purpose of
establishing credit lines with the Federal Home Loan Bank. The credit
availability to the Bank is equal to 14 percent of the Bank's total assets as
reported on the most recent quarterly financial information submitted to the
regulators. The credit availability approximated $56.7 million at June 30, 2000.
Any advances are secured by the Bank's one-to-four family residential mortgage
loans. In 1999, a $10 million advance was made, which matured on January 24,
2000. A $7 million advance is outstanding at June 30, 2000 which matures on July
27, 2000.
12
14
The Bank has an unsecured line of credit for federal funds purchased from its
principal correspondent bank totaling $7,500,000. Securities sold under
agreements to repurchase (wholesale) represent a wholesale agreement with a
correspondent bank which is collateralized by a U.S. Treasury note. The Bank
also has several securities sold under repurchase agreements (retail) with
commercial account holders whereby the Bank sweeps the customer's accounts on a
daily basis and pays interest on these amounts. These agreements are
collateralized by investment securities chosen by the Bank.
SEGMENT REPORTING
TIB Financial Corp. has three reportable segments: community banking, merchant
bankcard processing, and government guaranteed loan sales and servicing. The
community banking segment's business is to attract deposits from the public and
to use such deposits to make real estate, business and consumer loans in its
primary service area. The merchant bankcard processing segment processes credit
card transactions for local merchants. The government guaranteed loan segment
originates and sells the government guaranteed portion of loans that qualify for
government guaranteed loan programs, such as those offered by the Small Business
Administration and the U.S. Department of Agricultural Rural Development
Business and Industry Program. The results of the Company's segments are as
follows:
Government
Merchant Guaranteed
Community Bankcard Loans Sales and All
Six months ended June 30, 2000 Banking Processing Servicing Other Totals
- --------------------------------------------------------------------------------------------------------------------------------
Interest income $ 15,403,807 $ -- $ -- $ -- $ 15,403,807
Interest expense 6,460,150 -- -- -- 6,460,150
------------ ---------- -------- ---------- ------------
Net interest income 8,943,657 -- -- -- 8,943,657
Other income 1,462,529 2,074,620 246,909 146,662 3,930,720
Equity in income, net of goodwill
amortization, from investment in
ERAS JV -- -- -- 25,070 25,070
Depreciation and amortization 574,765 26,970 7,828 1,925 611,488
Other expense 6,767,718 1,696,985 135,983 160,950 8,761,636
------------ ---------- -------- ---------- ------------
Pretax segment profit $ 3,063,703 $ 350,665 $103,098 $ 8,857 $ 3,526,323
============ ========== ======== ========== ============
Segment assets $405,039,443 $ 121,965 $208,252 $1,005,727 $406,375,387
============ ========== ======== ========== ============
13
15
Government
Merchant Guaranteed
Community Bankcard Loans Sales and All
Six months ended June 30, 1999 Banking Processing Servicing Other Totals
- -----------------------------------------------------------------------------------------------------------------------------
Interest income $ 13,777,534 $ -- $ -- $ -- $ 13,777,534
Interest expense 5,472,462 -- -- -- 5,472,462
------------ ---------- -------- --------- -------------
Net interest income 8,305,072 -- -- -- 8,305,072
Other income 1,439,940 1,574,414 447,042 130,545 3,591,941
Equity in income (loss), net of goodwill
amortization, from investment in
ERAS JV -- -- -- (36,405) (36,405)
Depreciation and amortization 557,633 26,712 7,318 1,126 592,789
Other expense 6,625,640 1,263,730 221,927 116,011 8,227,308
------------ ---------- -------- --------- -------------
Pretax segment profit (excluding effect of
change in accounting principle) $ 2,561,739 $ 283,972 $217,797 $ (22,997) $ 3,040,511
============ ========== ======== ========= =============
Segment assets $390,990,753 $ 141,360 $238,602 $ 760,812 $ 392,131,527
============ ========== ======== ========= =============
Government
Merchant Guaranteed
Community Bankcard Loans Sales and All
Three months ended June 30, 2000 Banking Processing Servicing Other Totals
- -------------------------------------------------------------------------------------------------------------------------------
Interest income $7,902,906 $ -- $ -- $ -- $ 7,902,906
Interest expense 3,351,977 -- -- -- 3,351,977
---------- -------- -------- -------- -----------
Net interest income 4,550,929 -- -- -- 4,550,929
Other income 757,604 980,337 215,668 78,143 2,031,752
Equity in income (loss), net of goodwill
amortization, from investment in
ERAS JV -- -- -- (7,463) (7,463)
Depreciation and amortization 286,667 13,485 3,914 1,013 305,079
Other expense 3,435,801 818,740 81,699 81,887 4,418,127
---------- -------- -------- -------- -----------
Pretax segment profit $1,586,065 $148,112 $130,055 $(12,220) $ 1,852,012
========== ======== ======== ======== ===========
14
16
Government
Merchant Guaranteed
Community Bankcard Loans Sales and All
Three months ended June 30, 1999 Banking Processing Servicing Other Totals
- ---------------------------------------------------------------------------------------------------------------------------
Interest income $7,023,388 $ -- $ -- $ -- $ 7,023,388
Interest expense 2,785,941 -- -- -- 2,785,941
---------- -------- -------- -------- -----------
Net interest income 4,237,447 -- -- -- 4,237,447
Other income 722,158 744,573 310,701 69,633 1,847,065
Equity in income (loss), net of goodwill
amortization, from investment in
ERAS JV -- -- -- (34,008) (34,008)
Depreciation and amortization 291,236 13,356 3,764 563 308,919
Other expense 3,465,103 590,238 126,640 54,279 4,236,260
---------- -------- -------- -------- -----------
Pretax segment profit (excluding effect of
change in accounting principle) $1,203,266 $140,979 $180,297 $(19,217) $ 1,505,325
========== ======== ======== ======== ===========
15
17
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 23, 2000, at the annual meeting of Company shareholders, the
shareholders reelected the following directors: Gretchen K. Holland,
Marvin F. Schindler, Millard J. Younkers, Jr. and also approved the
engagement of BDO Seidman, LLP as independent certified public
accountants for the Company. The directors continuing in office
following the meeting were: Gretchen K. Holland, Marvin F. Schindler,
Millard J. Younkers, Jr., BG Carter, Armando J. Henriquez, James R.
Lawson, III, Edward V. Lett, Scott A. Marr, Derek D. Martin-Vegue, and
Joseph H. Roth, Jr. Effective May 23, 2000, Richard J. Williams retired
from the Board of Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule (SEC use only)
(b) Exhibit 99 - Report of Independent Certified Public Accountants
(c) No reports on Form 8-K were filed during the quarter ended
June 30, 2000.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TIB FINANCIAL CORP.
/s/ Edward V. Lett
-------------------------------------
Date: August 10, 2000 Edward V. Lett
--------------- President and Chief Executive Officer
/s/ David P. Johnson
-------------------------------------
David P. Johnson
Senior Vice President and Chief
Financial Officer
16
18
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule (SEC use only)
99 Report of Independent Certified Public Accountants