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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
--------------------
For the Quarterly Period Ended June 30, 1997 Commission File #0-21942
FIRST PALM BEACH BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0418027
(State of Incorporation) (I.R.S. Employer Identification No.)
450 South Australian Avenue
West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 655-8511
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ----
The number of shares outstanding of the issuer's common stock, par
value $.01 per share, was 5,030,846 at July 31, 1997.
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FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
FORM 10-Q
INDEX
Page
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Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995 for Forward-Looking Information........................ 2
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Financial Condition as of
September 30, 1996 and June 30, 1997 (unaudited) ................ 3
Consolidated Statements of Operations for the Three and
Nine Months ended June 30, 1996 and 1997 (unaudited) ............ 4
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months ended June 30, 1996 and 1997 (unaudited) .... 5-6
Consolidated Statements of Cash Flows for the Nine Months
ended June 30, 1996 and 1997 (unaudited) ........................ 7-8
Notes to Unaudited Consolidated Financial Statements ............ 9-11
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 12-16
PART II. OTHER INFORMATION
Item 1 Legal Proceedings ............................................... 17
Item 2 Changes in Securities ........................................... 17
Item 3 Default upon Senior Securities .................................. 17
Item 4 Submission of Matters to a Vote of Security Holders ............. 17
Item 5 Other Information ............................................... 17
Item 6 Exhibits and Reports on Form 8-K ................................ 17
Signature Page ........................................................... 18
Exhibit Index ............................................................ 19
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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
for Forward-Looking Information
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), First Palm Beach Bancorp,
Inc., (the "Company") is hereby filing cautionary statements identifying
important factors that could cause the Company's actual results to differ
materially from those projected in "forward-looking statements" (as such term is
defined in the Reform Act) of the Company made by or on behalf of the Company
which are made orally, whether in presentations, in response to questions or
otherwise, or in writing in this report or any other future filings by the
Company with the Securities and Exchange Commission, in the Company's press
releases or other public or shareholder communications. Any statements that
express, or involve discussions as to expectations, beliefs, plans, objectives,
assumptions or future events or performance (often, but not always, through the
use of words or phrases such as "will likely result," "are expected to," "will
continue," "is anticipated," "estimated," "projection," or "outlook") are not
historical facts and may be forward-looking and, accordingly, such statements
involve estimates, assumptions, and uncertainties which could cause actual
results to differ materially from those expressed in the forward-looking
statements. Accordingly, any such statements are qualified in their entirety by
reference to, and are accompanied by, the following important factors that could
cause the Company's actual results to differ materially from those contained in
the forward-looking statements of the Company made by or on behalf of the
Company.
The Company cautions that the following important factors could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements of the Company made by or on behalf of the Company.
Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any forward- looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
Some important factors that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements include those
related to the national economic environment, particularly in the region in
which the Company's subsidiary, First Bank of Florida (the "Bank"), operates,
competition, fiscal and monetary policies of the U.S. Government, changes in
governmental legislation and regulations affecting financial institutions,
including regulatory fees and capital requirements, changes in prevailing
interest rates, credit risk management and asset/liability management, the
financial and securities markets, deposit flows, changes in the quality or
composition of the Bank's loan and investment portfolios, and the availability
of and cost associated with sources of liquidity.
All such factors are difficult to predict, contain uncertainties which may
materially affect actual results and are beyond the control of the Company.
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PART I - FINANCIAL INFORMATION
FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1996 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(Unaudited)
(Unaudited)
SEPTEMBER 30, 1996 JUNE 30, 1997
------------------ ------------
ASSETS
Cash and amounts due from depository institutions $ 19,438 $ 20,069
Interest earning deposits 141,975 44,749
----------- -----------
Total cash and cash equivalents 161,413 64,818
Securities available-for-sale 27,551 34,264
Securities held-to-maturity 6,981 14,986
Mortgage-backed and related securities available-for-sale 105,866 148,570
Mortgage-backed and related securities held-to-maturity 126,407 221,153
Loans receivable - net of allowance for loan losses 1,007,881 1,119,559
Real estate owned 1,626 578
Repossessed automobiles 1,602 522
Office properties and equipment, net 23,077 29,823
Federal Home Loan Bank stock 10,053 13,049
Accrued interest receivable 8,147 9,329
Goodwill 2,825 2,679
Other assets 6,591 7,066
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Total assets $ 1,490,020 $ 1,666,396
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposit accounts $ 1,136,722 $ 1,227,277
Advances from Federal Home Loan Bank 201,025 250,950
Securities sold under agreements to repurchase 10,000 10,000
Senior debentures - net of issue costs -- 33,875
Advances from borrowers for taxes and insurance 14,657 12,671
Other liabilities 27,756 27,680
Deferred income taxes (5,565) (5,552)
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Total liabilities $ 1,384,595 $ 1,556,901
Stockholders' equity:
Preferred stock ($.01 par value) authorized 1,000,000 shares; none outstanding -- --
Common stock ($.01 par value) authorized 10,000,000 shares; issued
5,496,375 shares; outstanding 5,093,096 and 5,030,846 (net of treasury
stock) at September 30, 1996 and June 30, 1997, respectively 55 55
Additional paid-in capital 52,891 53,221
Retained earnings, substantially restricted 65,064 69,698
Treasury stock, at cost (403,279 shares at September 30, 1996 and
465,529 shares at June 30, 1997) (8,660) (10,195)
Common stock purchased by:
Employee stock ownership plan (1,769) (1,162)
Recognition and retention plans (161) (147)
Unrealized decrease in fair value on available-for-sale securities
(net of applicable income taxes) (1,995) (1,975)
----------- -----------
Total stockholders' equity 105,425 109,495
----------- -----------
Total liabilities and stockholders' equity $ 1,490,020 $ 1,666,396
=========== ===========
These financial statements should be read in conjunction with the Notes to
Unaudited Consolidated Financial Statements on pages 9, 10 and 11 herein and the
Notes to Consolidated Financial Statements appearing in First Palm Beach
Bancorp, Inc.'s 1996 Annual Report to Stockholders.
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FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- --------------------
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
------- ------- ------- -------
INTEREST INCOME:
Loans $22,181 $22,327 $61,672 $65,006
Securities available-for-sale 951 876 2,529 3,967
Securities held-to-maturity 130 260 764 873
Mortgage-backed and related securities available-for-sale 1,197 3,119 3,817 6,431
Mortgage-backed and related securities held-to-maturity 2,265 3,583 7,197 8,021
Other 208 277 618 639
------- ------- ------- -------
Total interest income 26,932 30,442 76,597 84,937
------- ------- ------- -------
INTEREST EXPENSE:
Deposits 12,547 14,665 35,549 42,506
Advances from Federal Home Loan Bank 2,964 3,752 8,995 8,746
Securities sold under agreements to repurchase 143 294 562 589
------- ------- ------- -------
Total interest expense 15,654 18,711 45,106 51,841
------- ------- ------- -------
Net interest income 11,278 11,731 31,491 33,096
Provision for loan losses 1,429 831 3,013 2,200
------- ------- ------- -------
Net interest income after provision
for loan losses 9,849 10,900 28,478 30,896
------- ------- ------- -------
OTHER INCOME:
Servicing income and other fees 774 1,042 2,329 2,997
Net gain on sale of loans, mortgage servicing
rights and mortgage-backed and related securities 376 207 409 1,134
Net gain on sale of securities available-for-sale -- 179 811 508
Miscellaneous 410 524 1,063 1,354
------- ------- ------- -------
Total other income 1,560 1,952 4,612 5,993
------- ------- ------- -------
OTHER EXPENSES:
Employee compensation and benefits 3,628 4,693 11,333 13,535
Occupancy and equipment 1,284 1,839 3,414 4,796
Federal deposit insurance premium 600 191 1,620 785
Provision for losses and net losses on sale of
real estate owned 37 214 29 266
Advertising and promotion 195 179 436 861
Miscellaneous 1,140 1,781 3,073 5,108
------- ------- ------- -------
Total other expenses 6,884 8,897 19,905 25,351
------- ------- ------- -------
Income before provision for income taxes 4,525 3,955 13,185 11,538
Provision for income taxes 1,835 1,603 5,296 4,637
------- ------- ------- -------
Net income $ 2,690 $ 2,352 $ 7,889 $ 6,901
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Earnings per share:
Primary $ 0.53 $ 0.47 $ 1.55 $ 1.38
Fully Diluted $ 0.53 $ 0.46 $ 1.55 $ 1.36
These financial statements should be read in conjunction with the Notes to
Unaudited Consolidated Financial Statements on pages 9, 10 and 11 herein and the
Notes to Consolidated Financial Statements appearing in First Palm Beach
Bancorp, Inc.'s 1996 Annual Report to Stockholders.
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FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 1996 AND 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
------ ---------- -------- --------
NINE MONTHS ENDED JUNE 30, 1996
Balance at September 30, 1995 $ 55 $ 51,733 $ 66,592 $(7,283)
Net income -- -- 7,889 --
Accretion of unrealized gain on
securities and mortgage-backed and
related securities transferred from
available-for-sale to held-to-maturity,
net of income taxes -- -- -- --
Change in unrealized losses on
securities available-for-sale
and mortgage-backed and related
securities available-for-sale,
net of income taxes -- -- -- --
Amortization of deferred compensation
Employee Stock Ownership Plan and
Recognition and Retention Plans -- 485 -- --
Issue 299,478 shares of Treasury Stock
for purchase of PBS Financial Corp. -- 496 -- 6,130
Purchase of Treasury Stock at cost
(254,353 shares) -- -- -- (5,615)
Exercise of stock options by certain
directors and employees -- (32) -- 62
Declaration of dividends of $0.30
per share -- -- (1,564) --
------- --------- -------- -------
Balance at June 30, 1996 $ 55 $ 52,682 $ 72,917 $(6,706)
======= ========= ======== =======
Unrealized
(Decrease)
Increase
In Fair
Common Common Value on
Stock Stock Available- Total
Purchased Purchased for-Sale Stockholders'
by ESOP By RRP Securities Equity
--------- --------- ---------- -------------
NINE MONTHS ENDED JUNE 30, 1996
Balance at September 30, 1995 $(2,509) $ (621) $(3,356) $ 104,611
Net income -- -- -- 7,889
Accretion of unrealized gain on
securities and mortgage-backed and
related securities transferred from
available-for-sale to held-to-maturity,
net of income taxes -- -- (37) (37)
Change in unrealized losses on
securities available-for-sale
and mortgage-backed and related
securities available-for-sale,
net of income taxes -- -- 351 351
Amortization of deferred compensation
Employee Stock Ownership Plan and
Recognition and Retention Plans 550 280 -- 1,315
Issue 299,478 shares of Treasury Stock
for purchase of PBS Financial Corp. -- -- -- 6,626
Purchase of Treasury Stock at cost
(254,353 shares) -- -- -- (5,615)
Exercise of stock options by certain
directors and employees -- -- -- 30
Declaration of dividends of $0.30
per share -- -- -- (1,564)
------- ------- ------- ---------
Balance at June 30, 1996 $(1,959) $ (341) $(3,042) $ 113,606
======= ======= ======= =========
These financial statements should be read in conjunction with the Notes to
Unaudited Consolidated Financial Statements on pages 9, 10 and 11 herein and the
Notes to Consolidated Financial Statements appearing in First Palm Beach
Bancorp, Inc.'s 1996 Annual Report to Stockholders.
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FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 1996 AND 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
------ ---------- -------- --------
NINE MONTHS ENDED JUNE 30, 1997
Balance at September 30, 1996 $ 55 $ 52,891 $65,064 $(8,660)
Net income -- -- 6,901 --
Accretion of unrealized gain on
securities and mortgage-backed and
related securities transferred from
available-for-sale to held-to-maturity,
net of income taxes -- -- -- --
Change in unrealized losses on
securities available-for-sale
and mortgage-backed and related
securities available-for-sale,
net of income taxes -- -- -- --
Amortization of deferred compensation
Employee Stock Ownership Plan and
Recognition and Retention Plans -- 945 -- --
Purchase of Treasury Stock at cost
(114,000 shares) -- -- -- (2,668)
Exercise of stock options by certain
directors and employees -- (615) -- 1,133
Declaration of dividends of $0.45
per share -- -- (2,267) --
------- --------- ------- --------
Balance at June 30, 1997 $ 55 $ 53,221 $69,698 $(10,195)
======= ========= ======= ========
Unrealized
(Decrease)
Increase
In Fair
Common Common Value on
Stock Stock Available- Total
Purchased Purchased for-Sale Stockholders'
by ESOP By RRP Securities Equity
--------- --------- ---------- -------------
NINE MONTHS ENDED JUNE 30, 1997
Balance at September 30, 1996 $(1,769) $ (161) $(1,995) $ 105,425
Net income -- -- -- 6,901
Accretion of unrealized gain on
securities and mortgage-backed and
related securities transferred from
available-for-sale to held-to-maturity,
net of income taxes -- -- (22) (22)
Change in unrealized losses on
securities available-for-sale
and mortgage-backed and related
securities available-for-sale,
net of income taxes -- -- 42 42
Amortization of deferred compensation
Employee Stock Ownership Plan and
Recognition and Retention Plans 607 14 -- 1,566
Purchase of Treasury Stock at cost
(114,000 shares) -- -- -- (2,668)
Exercise of stock options by certain
directors and employees -- -- -- 518
Declaration of dividends of $0.45
per share -- -- -- (2,267)
------- ------- ------- ---------
Balance at June 30, 1997 $(1,162) $ (147) $(1,975) $ 109,495
======= ======= ======= =========
These financial statements should be read in conjunction with the Notes to
Unaudited Consolidated Financial Statements on pages 9, 10 and 11 herein and the
Notes to Consolidated Financial Statements appearing in First Palm Beach
Bancorp, Inc.'s 1996 Annual Report to Stockholders.
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FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
June 30, June 30,
1996 1997
------------ ------------
Cash flow from (for) operating activities:
Net Income $ 7,889 $ 6,901
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 813 1,413
Employee Stock Ownership Plan and Recognition and Retention Plan
compensation expense 1,315 1,566
Accretion of discounts, amortization of premiums, and other deferred
yield items (534) (799)
Amortization of goodwill 97 146
Provision for loan losses 3,013 2,200
Provision for losses and net losses on sales of real estate owned 29 266
Net (gain) loss on sale of:
Loans 34 (402)
Mortgage-backed and related securities 17 (740)
Other securities (811) (508)
Change in assets and liabilities net of effects from purchase of
PBS Financial Corp.:
Increase in accrued interest receivable (1,440) (1,182)
(Increase) decrease in other assets 1,286 (475)
Decrease in other liabilities net of change in dividends payable (3,084) (322)
------------ ------------
Net cash provided by operating activities 8,624 8,064
------------ ------------
Cash flow from (for) investing activities:
Loan originations and principal payments on loans (227,930) (139,262)
Principal payments received on mortgage-backed and related securities 29,361 43,410
Purchases of:
Loans (3,682) (7,771)
Mortgage-backed and related securities held-to-maturity -- (132,449)
Mortgage-backed and related securities available-for-sale -- (128,815)
Securities held-to-maturity -- (15,413)
Securities available-for-sale (236,988) (151,076)
Office properties and equipment (4,332) (8,159)
Proceeds from sales of:
Loans 20,554 27,747
Mortgage-backed and related securities available-for-sale 8,187 82,070
Securities available-for-sale 138,803 110,424
Repossessed automobiles 10,666 14,321
Real estate acquired in settlement of loans 1,172 2,798
Purchase of Federal Home Loan Bank stock (526) (2,996)
Proceeds from maturities of securities 144,818 41,896
Cash acquired through purchase of PBS Financial Corp., net of cash payments
relating to purchase 9,873 --
Other investing activities (3,365) (9,582)
------------ ------------
Net cash used for investing activities $ (113,389) $ (272,857)
------------ ------------
These financial statements should be read in conjunction with the Notes to
Unaudited Consolidated Financial Statements on pages 9, 10 and 11 herein and the
Notes to Consolidated Financial Statements appearing in First Palm Beach
Bancorp, Inc.'s 1996 Annual Report to Stockholders.
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FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
June 30, June 30,
1996 1997
------------ ------------
Cash flow from (for) financing activities:
Issuance of senior debentures $ -- $ 33,875
Purchase of treasury stock at cost (5,615) (2,668)
Exercise of stock options 30 518
Net increase (decrease) in:
NOW accounts, demand deposits, and savings accounts 42,986 12,655
Certificates of deposit 56,102 77,900
Advances from Federal Home Loan Bank 29,925 49,925
Securities sold under agreement to repurchase (8,427) --
Advances by borrowers for taxes and insurance (3,183) (1,986)
Dividends paid on stock (1,322) (2,021)
------------ ------------
Net cash provided by financing activities 110,496 168,198
------------ ------------
Net increase (decrease) in cash and cash equivalents 5,731 (96,595)
Cash and cash equivalents, beginning of period 25,132 161,413
------------ ------------
Cash and cash equivalents, end of period $ 30,863 $ 64,818
============ ============
Supplemental disclosure of cash flows
Supplemental disclosure of cash flow information:
Cash paid for income taxes $ 5,158 $ 189
============ ============
Cash paid for interest on deposits and other borrowings $ 44,839 $ 52,933
============ ============
Supplemental schedule of noncash investing and financing activities:
Repossessed automobiles acquired in settlement of loans $ 11,895 $ 12,426
============ ============
Real estate acquired in settlement of loans $ 399 $ 1,947
============ ============
Change in unrealized loss (gain) on available-for-sale securities,
net of income taxes $ (314) $ (20)
============ ============
On December 8, 1995 the Company purchased all of the stock of PBS
Financial Corp. ("PBS")
Consideration paid for PBS:
Cash $ 1,107
Capital stock issued 6,626
------------
Total purchase price 7,733
Fair value of net assets acquired (4,763)
------------
Goodwill $ 2,970
============
These financial statements should be read in conjunction with the Notes to
Unaudited Consolidated Financial Statements on pages 9, 10 and 11 herein and the
Notes to Consolidated Financial Statements appearing in First Palm Beach
Bancorp, Inc.'s 1996 Annual Report to Stockholders.
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FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Generally Accepted Accounting Principles
(GAAP) for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X of the Securities and
Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all material adjustments
(consisting of only normal recurring accruals) necessary for a fair
presentation have been included. The results of operations and other
data for the nine months ended June 30, 1997 are not necessarily
indicative of results that may be expected for the entire fiscal year
ending September 30, 1997.
The unaudited consolidated financial statements include the accounts of
First Palm Beach Bancorp, Inc. (the "Company") and its wholly-owned
subsidiary, First Bank of Florida (the "Bank"), and the Bank's
wholly-owned subsidiaries - The Big First, Inc., Retail Investment
Corporation, First Corporate Center, Inc., First Bank of Florida
Mortgage Corporation and PBS Service Corporation. Material intercompany
accounts and transactions have been eliminated in financial statement
consolidation. Certain amounts included in prior periods' consolidated
financial statements have been reclassified to conform to the current
period's presentation.
(2) Conversion to Stock Ownership
The Company was organized in May 1993 as the holding company for the
Bank in connection with the Bank's conversion (the "Conversion") from a
federally chartered mutual savings and loan association to a federally
chartered stock savings and loan association. On September 29, 1993,
the Company completed its initial public offering and sold 5,496,375
shares of common stock at $10.00 per share to depositors, borrowers,
and the employees of the Bank during the subscription offering. The
proceeds from the Conversion after recognizing Conversion expenses and
underwriting costs of $2.5 million were $52.5 million and are recorded
as common stock and additional paid-in capital in the accompanying
consolidated statements of financial condition. The Company utilized
$25.2 million of the net proceeds to purchase all of the capital stock
of the Bank.
In connection with the Conversion, the Bank established for eligible
employees an Employee Stock Ownership Plan ("ESOP"). The ESOP borrowed
$4.2 million from the Company and purchased 423,200 common shares
issued in the Conversion. The Bank is expected to make scheduled
discretionary cash contributions to the ESOP sufficient to service the
amount borrowed. The $4.2 million in stock issued by the Company was
reflected as a charge to unearned compensation and a credit to common
stock and additional paid-in capital. The unamortized balance of
unearned compensation is shown as a deduction from stockholders'
equity. The unpaid balance of the ESOP loan is eliminated in
consolidation. For the quarters ended June 30, 1997 and 1996, ESOP
expenses of $406,000 and $336,000, respectively, were recognized. For
the nine months ended June 30, 1997 and 1996, ESOP expenses of
$1,104,000 and $938,000, respectively, were recognized.
In 1993, the Bank established two Recognition and Retention Plans
("RRPs") which purchased in the aggregate 211,600 shares of common
stock in the Conversion and contributed $2.1 million to fund the
purchase of the RRP shares. Awards which were made at the date of
Conversion vested in three equal annual installments commencing on
September 29, 1994, the first anniversary date of the effective date of
these awards. As of June 30, 1997, all of the awards made under the
RRPs had vested except two awards totaling 10,600 shares made to two
non-employee directors which vest at a rate of 33 1/3% per year
beginning September 17, 1997, one award of 1,000 shares made to an
officer which will vest at the rate of 50% per year beginning June 30,
1998, and one award of 1,000 shares made to an officer which vested
July 15, 1997.
The aggregate purchase price of these shares is amortized as
compensation expense over the vesting period. The unamortized cost of
the RRPs is reflected as a reduction from stockholders' equity. For the
quarter ended June 30, 1997, RRP expense of $30,000 was recognized. For
the quarter ended June 30, 1996, the Bank reversed an over-accrual of
$260,000 resulting in a net reversal in RRP expense of $80,000. For the
nine months ended June 30, 1997, the Bank reversed an over-accrual of
$76,000 resulting in a net RRP expense of $14,000. An expense of
$280,000 was recorded during the nine months ended June 30, 1996.
In 1993, the Company adopted stock option plans for the benefit of
directors, officers, and other key employees of the Bank. The number of
shares of common stock initially reserved for issuance under the stock
option plans was equal to 10% of the total number of common shares
issued pursuant to the Conversion. In January 1997, the stockholders
approved the reservation of an additional 250,000 shares of common
stock for issuance under the 1993 First Palm Beach Bancorp, Inc.
Incentive Stock Option Plan. On March 18, 1997, the Company granted
233,000 non-qualified stock options to certain officers of the Bank at
an exercise price of $29.06, all of which are exercisable as of the
date of grant. On April 28, 1997, the Company granted 10,000
non-qualified stock
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options to an officer of the Bank at an exercise price of $27.38, all
of which are exercisable as of the date of the grant. On June 30, 1997,
the Company granted 8,000 incentive stock options to an officer of the
Bank at an exercise price of $33.19, which options are exercisable at a
rate of 33 1/3% per year beginning June 30, 1998. Under the stock
option plans, the option exercise price cannot be less than the fair
value of the underlying common stock as of the date of the option
grant, and the maximum option term cannot exceed ten years.
Stock options granted to officers and employees are exercisable based
on schedules approved by the Company's Board of Directors. At June 30,
1997, stock options for 361,581 shares were outstanding to officers and
employees, all but 18,200 of which are currently exercisable. At June
30, 1997, there are 968 options available for future grants to officers
and employees.
Stock options awarded to non-employee directors may be exercised at any
time after grant. At June 30, 1997, there were options for 121,726
shares outstanding to non-employee directors and 26,500 options
available for future grants to non-employee directors.
(3) New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 "Reporting
Comprehensive Income," which requires that an enterprise report, by
major components and as a single total, the change in its net assets
during the period from nonowner sources; and No. 131 "Disclosures about
Segments of an Enterprise and Related Information," which establishes
annual and interim reporting standards for an enterprise's operating
segments and related disclosures about its products, services,
geographic areas, and major customers. Adoption of these statements
will not impact the Company's consolidated financial position, results
of operations or cash flows, and any effect will be limited to the form
and content of its disclosures. Both statements are effective for
fiscal years beginning after December 15, 1997, with earlier
application permitted.
(4) Earnings Per Share
Earnings per share of common stock for the quarters ended June 30, 1997
and 1996 were determined by dividing net income for the period by the
weighted average number of shares of common stock and common stock
equivalents outstanding which were 5,011,130 and 5,096,957,
respectively, excluding unallocated shares held by the ESOP. Earnings
per share of common stock for the nine months ended June 30, 1997 and
1996 were determined by dividing net income for the period by the
weighted average number of shares of common stock and common stock
equivalents outstanding which were 5,002,295 and 5,099,101,
respectively, excluding unallocated shares held by the ESOP. Stock
options are regarded as common stock equivalents and, therefore, are
considered in both primary and fully diluted earnings per share
calculations. Common stock equivalents are computed using the treasury
stock method. Including stock options in the calculation of primary
earnings per share reduces earnings by $0.01 per share for the three
month periods ended June 30, 1997 and 1996. Including stock options in
the calculation of primary earnings per share reduces earnings per
share by $0.03 and $0.04 for the nine months ended June 30, 1997 and
1996, respectively.
In February 1997, the FASB issued SFAS #128, "Earnings per Share." The
statement is designed to make the earnings per share computation
comparable to International Accounting Standards and is effective for
financial statements issued for periods ending after December 15, 1997.
For the quarter ended June 30, 1997, if basic earnings per share and
diluted earnings per share were computed under the provisions of SFAS
#128 the results would be $0.48 and $0.47, respectively.
(5) Commitments and Contingencies
Commitments to originate loans of $34.9 million at June 30, 1997
represent the total principal amounts which the Bank plans to fund
within the normal commitment period of 60 to 90 days. As of June 30,
1997, the Bank had no commitments to purchase securities.
As of June 30, 1997, the Bank had $3.5 million in commitments to
purchase loans.
(6) Accounting for Impairment of Loans
In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." The Statement generally requires all creditors
to account for impaired loans, except those loans that are accounted
for at fair value or at the lower of cost or fair value, at the present
value of the expected future cash flows discounted at the loan's
effective interest rate. In October 1994, the FASB issued SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures." This Statement amends SFAS No. 114 to allow a
creditor to use existing methods for recognizing interest income on an
impaired loan. SFAS No. 118 does not change the provisions in SFAS No.
114 that require a creditor to measure impairment based on the present
value of expected future cash flows discounted at the loan's effective
interest rate, or at the market price of the loan or the fair value of
the collateral if the loan is collateral dependent. The Bank adopted
the provisions of SFAS No. 114 as amended by SFAS No.
118 effective October 1, 1995.
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An analysis of the changes in the allowance for loan losses for the
nine months ended June 30, 1997 and fiscal year ended September 30,
1996, is as follows:
Fiscal Nine
Year Months
Ended Ended
Sept. 30, June 30,
1996 1997
------------ ------------
(In thousands)
Balance at beginning of period $ 2,157 $ 11,855
Increase in allowance due to acquisition of PBS Financial Corp. 2,253 --
Current provision 15,704 2,200
Charge-offs - net (8,259) (7,300)
------------ ------------
Ending balance $ 11,855 $ 6,755
============ ============
At June 30, 1997, the Bank's impaired loans consisted of the following:
JUNE 30, 1997
---------------------------------
Loan Related
Balances Allowance
------------ ------------
(In thousands)
Impaired loan balances and related allowance for loan losses $ 4,184 $ 541
In January 1997, a home builder in Palm Beach County, who was the
contractor of record on 23 loans to individual borrowers, declared
bankruptcy. The Bank has negotiated with substantially all of the
individual borrowers concerning construction shortfalls to complete the
homes and has settled with such borrowers without material loss to the
Bank. Contractor liens filed against properties are being reviewed by
the Bank's management to assess the extent of their impact on the Bank.
Such impact cannot be determined at this time. The impaired loan
balances above include an unsecured line of credit for $349,000 to the
home builder, which is fully reserved. The reserve amount is included
in the related allowance.
11
13
FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED HEREIN AND WITH MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
APPEARING IN FIRST PALM BEACH BANCORP, INC.'S 1996 ANNUAL REPORT TO
STOCKHOLDERS.
General
First Palm Beach Bancorp, Inc., (the "Company") was formed as the holding
company for First Bank of Florida (the "Bank") in connection with the Bank's
conversion (the "Conversion") from a federally chartered mutual savings and loan
association to a federally chartered stock savings and loan association on
September 29, 1993. On that date, the Company issued and sold 5,284,775 shares
of common stock, par value $0.01 per share, at $10.00 per share to complete the
Conversion. An additional 211,600 shares were purchased by the Bank's
Recognition and Retention Plans ("RRPs") at $10.00 per share. Net proceeds to
the Company after $2.5 million in expenses and underwriting costs were $52.5
million. The Company used $25.2 million of the net proceeds to purchase all the
capital stock of the Bank, and lent $4.2 million to the Bank's Employee Stock
Ownership Plan ("ESOP"). The remaining proceeds of $23.0 million were advanced
to the Bank under a note agreement carrying an interest rate tied to the one
month short-term credit advance of the Federal Home Loan Bank ("FHLB") of
Atlanta. The rate on the note was 5.69% during the quarter ended June 30, 1997,
and the balance on the note at June 30, 1997 was $5.9 million.
On December 8, 1995 (the "Effective Date"), the Company completed the
acquisition of PBS Financial Corp. ("PBS") by means of the merger (the "Merger")
of PBS with and into the Company, pursuant to an Agreement and Plan of Merger
between the Company and PBS dated as of May 31, 1995 (the "Agreement").
Concurrently with the Merger, Palm Beach Savings and Loan, F.S.A. ("Palm Beach
Savings"), the savings and loan subsidiary of PBS, merged with and into the Bank
in accordance with a Plan of Merger and Combination dated as of May 31, 1995
between Palm Beach Savings and the Bank. In conjunction with and as a part of
the Merger, each of the 283,700 shares of PBS Class A common stock issued and
outstanding and 419,300 shares of PBS Class B common stock issued and
outstanding at the Effective Date was converted into (i) .426 of a share of the
Company's Common Stock and (ii) a cash payment of $0.75 per share of PBS common
stock. Based on an aggregate of 703,000 shares of PBS Class A and Class B common
stock issued and outstanding, the Company issued in the aggregate 299,478 shares
of the Company's Common Stock and made $527,250 in cash payments. Also in
conjunction with the Merger, the Company paid $88,544 in exchange for all
outstanding PBS Options, and $459,536 in exchange for all outstanding PBS
Warrants.
On June 30, 1997, the Company issued $35 million of 10.35% Senior Debentures due
2002. The net proceeds of the debenture issuance will be used for general
corporate purposes, including contributing $25 million of the net proceeds to
the Bank. The Indenture entered into by the Company in connection with the
10.35% Senior Debentures includes certain covenants which, among other things,
(i) limit the Company's disposition of the voting stock of the Bank, other than
dispositions which (a) are for fair market value and, after giving effect to
such dispositions and to any potential dilution, the Company will own not less
than 80% of the shares of voting stock of the Bank free and clear of any
security interest; (b) are made in compliance with an order of a court or
regulatory authority of competent jurisdiction, a condition imposed by any such
court or authority permitting the acquisition by the Company, directly or
indirectly, of any other bank or entity the activities of which are legally
permissible for a bank holding company or a subsidiary thereof to engage in, or
an undertaking made to such authority in connection with such an acquisition;
(c) are made where the Bank, having obtained any necessary regulatory approvals,
unconditionally guarantees payment when due of the principal of and interest on
the Senior Debentures; or (d) are made to the Company or any wholly-owned
subsidiary if such wholly-owned subsidiary agrees to be bound by the covenant as
if it were the Company and the Company agrees to maintain such wholly-owned
subsidiary as a wholly-owned subsidiary (notwithstanding the foregoing, the Bank
may be merged into or consolidated with another banking institution if, after
giving effect to such merger or consolidation, the Company or any wholly-owned
subsidiary owns at least 80% of the voting stock of such other banking
institution then issued and outstanding free and clear of any security interest
and if, immediately after giving effect thereto and treating any such resulting
banking institution thereafter as the Bank and a subsidiary, for purposes of the
Indenture, no Event of Default (as such term is defined in the Indenture), and
no event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing); (ii) limit, to a percentage of
net worth, the Company's and the Bank's ability to become liable on certain
forms of indebtedness generally outside the normal course of the Company's and
the Bank's business; (iii) provide that the Company will not permit its
Consolidated Net Worth minus Goodwill to be less than $90 million; (iv) provide
that the Company shall not allow the Bank to be classified as other than
"well-capitalized"; and (v) restrict dividend or other distributions of the
Company and the Bank and stock repurchases by the Company in such a way that any
such dividends or stock repurchases after March 31, 1997 may not exceed in the
aggregate, the sum of (a) $10,000,000 plus (b) 75% (or 100% in the case of
deficit) of consolidated net income for the period beginning March 31, 1997 and
ending and including the date such dividend, distribution or stock repurchase
(each a Restricted Payment) is declared or made (plus 100% of the proceeds of
issuances of equity securities after March 31, 1997), and a Restricted Payment
may not be made if at the time of and immediately before the Restricted Payment
is declared, and after giving effect to the Restricted Payment a Default (as
such term is defined in the Indenture) or Event of Default is existing or shall
have occurred within 365 days of the declaration of the Restricted Payment.
12
14
The Company's consolidated results of operation are primarily those of the Bank.
The Bank's principal business has been, and continues to be, attracting retail
deposits from the general public and investing those deposits, together with
funds generated from operations and borrowings, primarily in one-to-four family,
owner-occupied, residential mortgage loans, consumer loans, and, to a lesser
extent, construction loans, commercial real estate loans, and multi-family
residential mortgage loans. In addition, the Bank invests in mortgage-backed
securities, securities issued by the U.S. Government and government agencies,
and other investments permitted by federal laws and regulations. The Bank is a
member of the FHLB system and its deposits are insured to the applicable limits
by the Federal Deposit Insurance Corporation (the "FDIC"). The Bank is subject
to regulation by the Office of Thrift Supervision (the "OTS") as its chartering
agency and the FDIC as its deposit insurer.
At June 30, 1997, the Bank had 44 full-service branches in Palm Beach, Martin,
Broward, Dade and Lee Counties, Florida. Three loan production offices are
located in Palm Beach County and one is in Broward County. As of June 30, 1997,
the Bank operated four of its full-service branches inside Winn-Dixie
supermarkets and fourteen inside Albertson's supermarkets. The Bank intends to
open additional supermarket branches at Albertson's in the future. During the
quarter ended June 30, 1997, the Bank opened four full-service supermarket
branches.
The Bank has five wholly-owned subsidiaries, only one of which, First Bank of
Florida Mortgage Corporation, which provides mortgage brokerage services to the
Bank, is currently active.
The Bank's results of operations depend primarily on net interest income, which
is the difference between the interest income earned on its loans and investment
portfolio, and its cost of funds, consisting of the interest paid on deposits
and borrowings. Net interest income is impacted by the provision for loan
losses. The Bank's operating results are also affected, to a lesser extent, by
fee income and by gains or losses on the sale of loans, securities and
mortgage-backed securities available-for-sale, and real estate owned. The Bank's
operating expenses consist primarily of employee compensation, occupancy
expenses, FDIC insurance premiums and other general and administrative expenses.
The Bank's results of operations are also significantly affected by general
economic and competitive conditions, particularly changes in market interest
rates and U.S. Treasury yield curves, government policies and actions of
regulatory authorities.
Liquidity and Capital Resources
The Bank's most liquid assets are cash, amounts due from depository institutions
and interest-bearing deposits. The levels of these assets depend on the Bank's
lending, investing, operating and deposit activities during any given period. At
June 30, 1997, cash, amounts due from depository institutions and
interest-earning deposits totaled $64.8 million.
The Bank's primary sources of funds are deposits, proceeds from principal and
interest payments on loans, proceeds from the amortization of, the maturing of
and sales of securities, advances from the FHLB and securities sold under
agreements to repurchase ("reverse repurchase agreements"). While maturity and
scheduled amortization of loans and securities are predictable sources of funds,
deposit inflows and mortgage prepayments are greatly influenced by local market
conditions, general interest rates and regulatory changes.
Under OTS regulations, the Bank is required to maintain liquid assets of at
least 5% of the average daily balance of the sum of its net withdrawable deposit
accounts plus short-term borrowings during the preceding calendar month. For
purposes of these regulations, liquid assets consist of cash, amounts due from
depository institutions, interest-bearing deposits and short and intermediate
term U.S. Government and government agency securities. The Bank historically has
maintained a level of liquid assets in excess of this regulatory requirement.
The Bank's liquidity ratio was 7.2% and 16.3% at June 30, 1997 and September 30,
1996, respectively. Liquidity management for the Bank is a daily and long-term
function of the Bank's management strategy. If the Bank requires liquid funds
beyond its ability to generate them internally, additional sources of funds are
available through the use of FHLB advances and reverse repurchase agreements.
The primary investment activity of the Bank is the origination of mortgage and
consumer loans. During the nine months ended June 30, 1997, the Bank originated
mortgage and consumer loans in the aggregate amount of $303.4 million as
compared to $399.3 million for the nine months ended June 30, 1996. This
decrease resulted from the Bank's decision to discontinue originations of
indirect consumer loans. A primary component of the Bank's current strategic
plan is to increase its originations of mortgage and consumer loans, excluding
indirect automobile loans. At September 30, 1996, the Bank discontinued its
indirect automobile lending program, which produced higher delinquency rates and
a level of repossessed assets which management deemed unacceptable and which
resulted in higher loan loss provisions. Repossessed automobiles decreased from
$1.6 million at September 30, 1996 to $522,000 at June 30, 1997. The Bank also
invests in U.S. Treasury and agency securities, collateralized mortgage
obligations, municipal bonds and FHLB overnight funds. During periods when the
Bank's loan demand is lower, the Bank may purchase short-term investment
securities to obtain a higher yield than otherwise would be available.
At June 30, 1997, the Bank had outstanding commitments to originate $34.9
million of loans and had no commitments to purchase securities. At June 30,
1997, the Bank had $3.5 million in commitments to purchase loans. Management is
of the opinion that the Bank will have sufficient funds available to meet all of
these commitments. At June 30, 1997, certificates of deposits scheduled to
mature in one year or less
13
15
after June 30, 1997 totaled $694.4 million. Based on the Bank's past experience
and current market conditions, management is of the opinion that a significant
portion of these funds will remain with the Bank.
At June 30, 1997, the Bank exceeded each of the three OTS capital requirements.
The Bank's ratios were: 7.47% tangible capital ratio; 7.47% core capital ratio;
and 14.77% risk-based capital ratio. The OTS minimum regulatory capital ratio
requirements at June 30, 1997 were 1.5%, 3.0%, and 8.0% respectively.
Changes in Financial Condition
Total assets increased $176.0 million to $1.666 billion at June 30, 1997 from
$1.490 billion at September 30, 1996. Cash and cash equivalents, securities
held-to-maturity, securities available-for-sale, mortgage-backed and related
securities held-to-maturity and mortgage-backed and related securities
available-for-sale increased $55.6 million to $483.8 million at June 30, 1997
from $428.2 million at September 30, 1996. Office properties and equipment
increased by $6.7 million to $29.8 million at June 30, 1997 from $23.1 million
at September 30, 1996 due to the addition of eleven new branch locations and
capitalized improvements related to the relocation of the Bank's corporate
offices. Loans receivable increased by $112.0 million to $1.120 billion at June
30, 1997 from $1.008 billion at September 30, 1996. Loans originated amounted to
$303.4 million (which included $254.3 million of mortgage loans and $49.1
million of consumer loans) during the nine months ended June 30, 1997 compared
to $399.3 million (which included $250.9 million of mortgage loans and $148.4
million of consumer loans) during the nine months ended June 30, 1996. Indirect
automobile loan balances decreased to $101.7 million at June 30, 1997 from
$148.2 million at September 30, 1996.
Deposit accounts increased $90.0 million to $1.227 billion at June 30, 1997 from
$1.137 billion at September 30, 1996. This increase was attributable to new
office openings and aggressive pricing on certificates. The average interest
rate paid on deposits increased to 4.95% as of June 30, 1997 from 4.87% as of
September 30, 1996.
Advances from the FHLB and other borrowed funds increased $50.0 million to
$261.0 million from $211.0 million at September 30, 1996. As previously
discussed, the Company issued $35 million of 10.35% Senior Debentures due 2002
on June 30, 1997. Stockholders' equity was $109.5 million at June 30, 1997 and
$105.4 million at September 30, 1996. For the nine months ended June 30, 1997,
the major changes affecting stockholders' equity resulted from net income of
$6.9 million offset by treasury stock purchases of $2.7 million. During the nine
months ended June 30, 1997, the Company purchased 114,000 shares of its stock to
be held as treasury stock at an average cost of $23.40, resulting in increases
in treasury stock to $10.2 million at June 30, 1997 from $8.7 million at
September 30, 1996.
Interest Rate Sensitivity
The matching of assets and liabilities may be analyzed by examining the extent
to which assets and liabilities are "interest rate sensitive" and by monitoring
an institution's interest rate sensitivity "gap." An asset or liability is
"interest rate sensitive" within a specific time period if it will mature or
reprice within that time period. The interest rate sensitivity gap is defined as
the difference between the aggregate amount of interest-earning assets maturing
or anticipated to reprice, based upon certain assumptions, within a specified
time period and the aggregate amount of interest-bearing liabilities maturing or
anticipated to reprice, based upon certain assumptions, within that time period.
A gap is considered negative when the amount of interest rate sensitive
liabilities maturing or repricing within a specified time frame exceeds the
amount of interest rate sensitive assets maturing or repricing within that same
time frame.
The Bank's policy is to manage its exposure to interest rate risk by attempting
to match the maturities of its interest rate sensitive assets and liabilities,
in part, by emphasizing, when market conditions permit, the origination of
adjustable rate mortgages ("ARM") and short term residential construction loans.
As of June 30, 1997, these loans made up approximately 51% of outstanding
mortgage loans. Approximately 9% of outstanding mortgage loans are loans with
seven year and ten year fixed rates which become one year adjustable loans
thereafter. These are classified as ARM loans. The Bank also manages its
exposure by purchasing short term securities and short average life and
adjustable-rate collateralized mortgage obligations. The Bank's one year
interest rate sensitivity gap as a percentage of total assets was a negative
23.8% at June 30, 1997 as compared to a negative 4.5% at September 30, 1996.
During the nine months ending June 30, 1997, the Bank purchased approximately
$100 million of mortgage-backed and related securities with annual repricing
periods. As of June 30, 1997, these securities had initial repricing periods
greater than one year that, in July 1997, moved to repricing periods of one year
or less. During a period of rising interest rates, a negative gap would tend to
result in a decrease in net interest income while a positive gap would tend to
increase net interest income.
Asset Quality
The Company and the Bank regularly review interest earning assets to determine
proper valuation of those assets. Management monitors the asset portfolio by
reviewing historical loss experience, known and inherent risks in the portfolio,
the value of any underlying collateral, prospective economic conditions and the
regulatory environment. During the nine months ended June 30, 1997,
non-performing assets decreased $4.0 million to $12.1 million from $16.1 million
at September 30, 1996 due to decreases in non-performing loans, real estate
owned, and repossessed assets during the period. Real estate owned decreased
$1.0 million to $578,000 at June 30, 1997 from $1.6 million at
14
16
September 30, 1996. Repossessed assets decreased $1.1 million to $522,000 at
June 30, 1997 from $1.6 million at September 30, 1996. As previously discussed,
the Bank discontinued its indirect automobile lending program as of September
30, 1996.
The following table sets forth information regarding the Bank's non-performing
loans, repossessed assets and real estate owned at the dates indicated. The Bank
generally discontinues accruing interest on loans that are 90 days or more past
due, at which time the accrued but uncollected interest is excluded from
interest income.
ASSET QUALITY
(Dollars in thousands)
Sept. 30, June 30,
1996 1997
------------ ------------
Non-performing mortgage loans delinquent more than 90 days $ 11,279 $ 9,501
Non-performing other loans delinquent more than 90 days 1,552 1,516
Total non-performing loans 12,831 11,017
Real estate owned, net of related allowance 1,626 578
Repossessed assets, net of related allowance 1,602 522
Total non-performing assets $ 16,059 $ 12,117
Non-performing loans to total loans 1.20% 0.94%
Non-performing assets to total assets 1.08% 0.73%
Allowance for loan losses to non-performing loans 92.40% 61.31%
15
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RESULTS OF OPERATIONS
Comparison of results in this section are for the three month periods ended June
30, 1997 and June 30, 1996 and the nine month periods then ended.
General
Net income for the quarter ended June 30, 1997 was $2.4 million as compared to
$2.7 million for the quarter ended June 30, 1996, a decrease of $300,000. Net
income for the nine months ended June 30, 1997 was $6.9 million as compared to
$7.9 million for the nine months ended June 30, 1996, a decrease of $1.0
million. Declines in net income for both the quarter and nine months ended June
30, 1997 resulted primarily from increases in other expenses which offset the
increases in net interest income and other income.
Net Interest Income
Net interest income before provision for loan losses was $11.7 million for the
quarter ended June 30, 1997 as compared to $11.3 million for the quarter ended
June 30, 1996. For the nine months ended June 30, 1997, net interest income
before provision for loan losses was $33.1 million as compared to $31.5 million
for the nine months ended June 30, 1996. The increase in net interest income for
the nine months ended June 30, 1997 was due to an increase of approximately
$222.0 million in earning assets to $1.596 billion at June 30, 1997 from $1.374
billion at June 30, 1996 which was partially offset by a decline in the net
interest margin to 3.03% for the nine months ended June 30, 1997 from 3.22% for
the nine months ended June 30, 1996. The decline in net interest margin was
primarily caused by an increase in the average interest rate paid on deposits to
4.95% at June 30, 1997 from 4.87% at September 30, 1996. The reduction in the
outstanding balance of indirect automobile loans has also contributed to the
decline.
Provision for Loan Losses
During the three months ended June 30, 1997, the provision for loan losses
decreased to $831,000 from $1.4 million for the comparable period ended June 30,
1996. For the nine months ended June 30, 1997, the provision for loan losses was
$2.2 million as compared to $3.0 million for the same period ended June 30,
1996.
Other Income
Other income increased to $2.0 million for the quarter ended June 30, 1997 from
$1.6 million for the quarter ended June 30, 1996. For the nine months ended June
30, 1997, other income increased to $6.0 million from $4.6 million for the nine
months ended June 30, 1996. The increases in other income are primarily the
result of increased servicing income, other fees and miscellaneous income. Net
gains on sales of securities, loans and related mortgage servicing rights were
$1.6 million for the nine months ended June 30, 1997 as compared to $1.2 million
for the same period in the prior year. In November 1995, the FASB issued "A
Guide to Implementation of SFAS No. 115 on Accounting for Certain Investments in
Debt and Equity Securities - Questions and Answers" ("SFAS 115 Q&A Guide"). SFAS
115 Q&A Guide included a one-time opportunity for entities which had previously
adopted the provisions of SFAS 115 to reconsider their ability and intent to
hold securities to maturity and to allow such entities to transfer securities
from the held-to-maturity category to available-for-sale without calling into
question the intent to hold securities to maturity. SFAS 115 Q&A Guide required
that any one-time reclassification occur between November 15, 1995 and December
31, 1995. In November 1995, the Bank reclassified $10.5 million of municipal
securities and $20.0 million of U.S. Treasury notes from held-to-maturity to
available-for-sale. Subsequently, the Bank sold $10.4 million of municipal
securities and recognized a gain of approximately $844,000 on the sale during
the nine months ended June 30, 1996.
Other Expenses
Other expenses increased by $2.0 million to $8.9 million for the quarter ended
June 30, 1997 as compared to $6.9 million for the quarter ended June 30, 1996.
For the nine months ended June 30, 1997, other expenses increased by $5.5
million to $25.4 million as compared to $19.9 million for the nine months ended
June 30, 1996. Employee compensation and benefits increased by $1.1 million to
$4.7 million for the quarter ended June 30, 1997, from $3.6 million for the
quarter ended June 30, 1996. For the nine months ended June 30, 1997, employee
compensation and benefits was $13.5 million, as compared to $11.3 million for
the nine months ended June 30, 1996, an increase of $2.2 million. These
increases were primarily caused by personnel costs related to staff increases in
conjunction with the opening of twelve new branches since June 30, 1996, as well
as staff additions in various servicing and support functions. Additional
increases to other expenses resulted from occupancy and equipment which
increased to $1.8 million for the quarter ended June 30, 1997 as compared to
$1.3 million for the same period in the prior year. For the nine months ended
June 30, 1997, occupancy and equipment expenses increased by $1.4 million to
$4.8 million from $3.4 million at June 30, 1996. Miscellaneous expenses
increased $2.0 million to $5.1 million for the nine months ended June 30, 1997
as compared to $3.1 million for the nine months ended June 30, 1996. Of this
increase, approximately $960,000 related to increases in lending related
expenses for mortgage and consumer loans. The remaining increases in
miscellaneous expenses for the nine months ended June 30, 1997 from the
comparable period in the prior year related to a variety of increases in
operating costs which management considered normal for the increase in
operations during the period.
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PART II - OTHER INFORMATION
FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
Item 1 Legal Proceedings
Neither the Company nor its subsidiaries are involved in any pending
legal proceedings, other than routine legal matters occurring in the
ordinary course of business which in the aggregate involve amounts
which in management's opinion are not material to the consolidated
financial condition or results of operations of the Company.
Item 2 Changes in Securities
Not applicable.
Item 3 Default upon Senior Securities
Not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5 Other Information
Not applicable.
Item 6 Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report:
10.1 Employment Agreement between First Palm Beach Bancorp, Inc. and Louis O. Davis, Jr.
10.2 Employment Agreement between First Bank of Florida and Louis O. Davis, Jr.
10.3 Employment Agreement between First Palm Beach Bancorp, Inc. and R. Randy Guemple
10.4 Employment Agreement between First Bank of Florida and R. Randy Guemple
10.5 Change of Control Agreement between First Palm Beach Bancorp, Inc. and John Trammel
10.6 Change of Control Agreement between First Bank of Florida and John Trammel
10.7 Change of Control Agreement between First Palm Beach Bancorp, Inc. and Rita Groton
10.8 Change of Control Agreement between First Bank of Florida and Rita Groton
10.9 Change of Control Agreement between First Palm Beach Bancorp, Inc. and John Rudy
10.10 Change of Control Agreement between First Bank of Florida and John Rudy
10.11 Change of Control Agreement between First Palm Beach Bancorp, Inc. and Linda Terrell
10.12 Change of Control Agreement between First Bank of Florida and Linda Terrell
10.13 Change of Control Agreement between First Palm Beach Bancorp, Inc. and Calvin L. Cearley
10.14 Change of Control Agreement between First Bank of Florida and Calvin L. Cearley
10.15 Change of Control Agreement between First Palm Beach Bancorp, Inc. and Alissa Ballot
10.16 Change of Control Agreement between First Bank of Florida and Alissa Ballot
11 Statement Re: Computation of Per Share Earnings.
27 Financial Data Schedule (for SEC use only).
(b) There were no reports filed on Form 8-K during the quarter ended
June 30, 1997.
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FIRST PALM BEACH BANCORP, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Palm Beach Bancorp, Inc.
(Registrant)
Date:
August 13, 1997 /s/ Louis O. Davis, Jr.
-----------------------
Louis O. Davis, Jr.
President and Chief Executive Officer
(Duly Authorized Officer)
Date:
August 13, 1997 /s/ R. Randy Guemple
--------------------
R. Randy Guemple
Treasurer and Chief Financial Officer
(Principal Financial Officer)
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EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
10.1 Employment Agreement between First Palm Beach Bancorp, Inc. and Louis O. Davis, Jr............20
10.2 Employment Agreement between First Bank of Florida and Louis O. Davis, Jr.....................32
10.3 Employment Agreement between First Palm Beach Bancorp, Inc. and R. Randy Guemple..............44
10.4 Employment Agreement between First Bank of Florida and R. Randy Guemple.......................56
10.5 Change of Control Agreement between First Palm Beach Bancorp, Inc. and John Trammel...........68
10.6 Change of Control Agreement between First Bank of Florida and John Trammel....................75
10.7 Change of Control Agreement between First Palm Beach Bancorp, Inc. and Rita Groton............83
10.8 Change of Control Agreement between First Bank of Florida and Rita Groton.....................90
10.9 Change of Control Agreement between First Palm Beach Bancorp, Inc. and John Rudy..............98
10.10 Change of Control Agreement between First Bank of Florida and John Rudy......................105
10.11 Change of Control Agreement between First Palm Beach Bancorp, Inc. and Linda Terrell.........113
10.12 Change of Control Agreement between First Bank of Florida and Linda Terrell..................120
10.13 Change of Control Agreement between First Palm Beach Bancorp, Inc. and Calvin L. Cearley.....128
10.14 Change of Control Agreement between First Bank of Florida and Calvin L. Cearley..............136
10.15 Change of Control Agreement between First Palm Beach Bancorp, Inc. and Alissa Ballot.........144
10.16 Change of Control Agreement between First Bank of Florida and Alissa Ballot..................152
11 Statement Re: Computation of Per Share Earnings..............................................160
27 Financial Data Schedule (for SEC use only)...................................................161
19