UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-8515
BANCFLORIDA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 59-2265850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5801 Pelican Bay Boulevard
Naples, Florida 33963
(Address of principal executive offices)
(Zip Code)
(813) 597-1611
(Registrant's telephone number, including area code)
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
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date, May 4, 1994.
$.01 par value of common stock 3,721,012 shares
(class) (outstanding)
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED MARCH 31, 1994
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS: PAGE NUMBERS
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 8
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 20
ITEM 5. Other Information 20
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
PART I-FINANCIAL INFORMATION
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
Assets March 31, September 30,
1994 1993
Cash (including interest bearing deposits of $15,965 and $8,007). $ 61,920 $ 47,056
Trading securities - FNMA mortgage-backed securities............. 7,522 17,297
Assets available for sale:
Securities..................................................... 211,388 296,589
Loans (aggregate fair values of $28,144 and $108,519).......... 27,866 106,412
Securities held to maturity (aggregate fair values of $299,486
and $220,312).................................................. 312,310 220,846
Loans receivable (net of allowance for loan losses of $22,235
and $26,701)................................................... 775,245 718,313
Investments in real estate....................................... 63,121 58,952
Office properties and equipment.................................. 38,621 37,173
Accrued interest receivable, net................................. 8,158 8,728
Federal Home Loan Bank stock..................................... 11,126 15,250
Other assets (including costs in excess of fair value of net
assets acquired of $2,411 and $2,713).......................... 25,677 24,017
$ 1,542,954 $ 1,550,633
Liabilities and Stockholders' Equity
Deposit accounts (including non-interest bearing deposits of
$101,254 and $83,096).......................................... $ 1,220,711 $ 1,142,197
Due to banks..................................................... - 3,894
Advances from Federal Home Loan Bank............................. 200,000 273,000
Other borrowings................................................. 23,120 23,334
Current income taxes payable..................................... 563 1,562
Deferred income.................................................. 749 893
Advance payments by borrowers for taxes and insurance............ 8,318 14,483
Other liabilities................................................ 13,804 14,940
Total liabilities.............................................. 1,467,265 1,474,303
Stockholders' equity:
Preferred stock $.01 par value; 2,000,000 authorized
shares; 1,138,000 shares issued and outstanding.............. 11 11
Common stock $.01 par value; 16,000,000 authorized shares;
shares issued and outstanding: 3,707,611 in 1994;
3,549,870 in 1993............................................ 37 35
Additional paid-in capital..................................... 71,200 69,929
Retained earnings.............................................. 9,635 7,795
Unrealized loss on securities available for sale, net.......... (4,278) (431)
Employee stock ownership plan obligation....................... (916) (1,009)
Total stockholders' equity................................... 75,689 76,330
$ 1,542,954 $ 1,550,633
See accompanying notes to condensed consolidated financial statements.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
Interest income: 1994 1993 1994 1993
Mortgage loans.................................... $ 13,421 $ 14,950 $ 26,881 $ 29,123
Other loans....................................... 2,871 3,234 5,914 6,681
Mortgage-backed and related securities............ 7,322 7,579 13,991 14,851
Investments and deposits.......................... 300 356 583 903
Total interest income........................... 23,914 26,119 47,369 51,558
Interest expense:
Deposit accounts, net............................. 11,688 13,038 23,531 26,690
Short-term borrowings............................. 1,696 755 3,138 1,395
Long-term borrowings.............................. 1,355 2,688 3,457 5,575
Total interest expense.......................... 14,739 16,481 30,126 33,660
Net interest income............................. 9,175 9,638 17,243 17,898
Provision for loan losses......................... - 1,572 275 4,244
Net interest income after provision for loan
losses........................................ 9,175 8,066 16,968 13,654
Other income:
Unrealized loss on trading securities............. (420) - (187) -
Gain (loss) on sale of mortgage-backed securities. (586) 1,865 11 1,698
Gain on sale of loans............................. 104 - 104 105
Service charges on deposit accounts............... 1,437 1,351 3,050 2,779
Loan servicing fees............................... 281 620 245 759
Other............................................. 634 570 1,103 1,051
Total other income.............................. 1,450 4,406 4,326 6,392
Other expenses:
Compensation and benefits......................... 4,384 4,507 8,680 8,815
Real estate operations, net....................... (1,427) (2,146) (2,823) (5,435)
Occupancy......................................... 1,872 2,203 3,617 4,735
Advertising and promotion......................... 295 261 661 482
Federal insurance premium......................... 946 970 1,924 1,736
Data processing................................... 486 425 912 847
Other............................................. 2,460 1,942 4,361 4,117
Total other expenses............................ 9,016 8,162 17,332 15,297
Income before income tax expense and cumulative
effect of accounting change................... 1,609 4,310 3,962 4,749
Income tax expense................................ 680 1,569 1,522 1,750
Income before cumulative effect of accounting
change........................................ 929 2,741 2,440 2,999
Cumulative effect of accounting change............ - - - 7,327
Net income...................................... $ 929 $ 2,741 $ 2,440 $ 10,326
Primary earnings per share:
Income before cumulative effect of accounting
change.......................................... $ 0.16 $ 0.66 $ 0.48 $ 0.68
Cumulative effect of accounting change............ - - - 1.98
Net income...................................... $ 0.16 $ 0.66 $ 0.48 $ 2.66
Average common and common equivalent shares
outstanding..................................... 3,885,907 3,675,332 3,847,514 3,650,632
Fully diluted earnings per share:
Income before cumulative effect of accounting
change.......................................... $ 0.16 $ 0.51 $ 0.48 $ 0.58
Cumulative effect of accounting change............ - - - 1.23
Net income...................................... $ 0.16 $ 0.51 $ 0.48 $ 1.81
Average shares outstanding........................ 3,885,907 5,841,253 3,847,514 5,936,686
See accompanying notes to condensed consolidated financial statements.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
March 31,
1994 1993
Cash flows from operating activities:
Net income......................................... $ 2,440 $ 10,326
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting change........... - (7,327)
Provision for losses on loans and investments
in real estate................................. 445 6,906
Gain on sale of mortgage-backed securities....... (11) (1,698)
Gain on sale of loans............................ (104) (105)
Unrealized loss on trading securities............ 187 -
Net gain on sale of real estate, property and
equipment...................................... (1,377) (4,589)
Depreciation expense............................. 1,341 1,662
Amortization and accretion....................... 1,826 1,108
Decrease in accrued interest receivable............ 570 108
(Increase) decrease in other assets................ (629) 696
Decrease in current income taxes payable........... (999) (1,312)
Decrease in deferred income........................ (111) (239)
Decrease in advance payments by borrowers for
taxes and insurance.............................. (6,165) (2,464)
Increase (decrease) in other liabilities........... (1,418) 3,235
Net cash provided (used) by operating
activities................................... (4,005) 6,307
Cash flows from investing activities:
Proceeds from sales of loans and mortgage-backed
securities available for sale.................... 170,490 387,618
Decrease in loans available for sale............... 3,584 3,608
Net increase in loans receivable................... (67,125) (75,815)
Purchase of mortgage-backed and related securities. (161,886) (360,818)
Repayments of mortgage-backed and related
securities....................................... 67,504 48,849
Proceeds from maturity of other securities......... 34 28
Purchase of other securities....................... (44) (1,010)
Purchase of FHLB stock............................. (376) (1,022)
Proceeds from the sale of FHLB stock............... 4,500 -
Decrease in real estate............................ 2,717 5,401
Increase in property and equipment................. (2,680) (1,536)
Net cash provided by investing activities....... 16,718 5,303
Cash flows from financing activities:
Net increase in transaction deposit accounts....... 67,014 53,672
Net increase (decrease) in certificates of deposit. 11,500 (17,304)
Repayments of Federal Home Loan Bank advances...... (333,000) (177,000)
Borrowings of Federal Home Loan Bank advances...... 260,000 150,000
Repayment of other borrowings...................... (49) (120)
Increase in short-term borrowings.................. - 12,352
Decrease in due to banks........................... (3,894) -
Proceeds from stock options exercised.............. 1,094 27
Cash dividends paid on cumulative convertible
preferred stock.................................. (607) -
(Increase) decrease in employee stock ownership
plan obligation.................................. 93 (66)
Net cash provided by financing activities...... 2,151 21,561
Net increase in cash and cash equivalents.... 14,864 33,171
Cash and cash equivalents at beginning
of period.................................. 47,056 25,812
Cash and cash equivalents at end of period... $ 61,920 $ 58,983
See accompanying notes to condensed consolidated financial statements.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with instructions on Form 10-Q and, therefore, do not
necessarily include information or footnotes necessary for a fair presentation
of financial position, results of operations and statement of cash flows in
conformity with generally accepted accounting principles. However, in the
opinion of management of BancFlorida Financial Corporation (the "Company" or
"BFL"), all adjustments which are necessary for a fair presentation have been
included and are of a normal, recurring nature. The results of operations for
the three and six months ended March 31, 1994 are not necessarily indicative
of the results which may be expected for the entire fiscal year. The
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and the notes thereto included
in the Company's Annual Report to Shareholders for the year ended September 30,
1993.
Note B - Reclassification
Certain amounts in the March 31, 1993 condensed consolidated statement of
income have been reclassified to conform to the March 31, 1994 presentation.
Note C - Assets Available for Sale
Due to the implementation of Statement of Financial Accounting Standard ("FAS")
115 "Accounting for Certain Investments in Debt and Equity Securities",
securities available for sale are recorded at fair value; loans available for
sale are recorded at the lower of amortized cost or fair value. The
Company's assets available for sale portfolio is as follows:
(In thousands)
March 31, 1994 September 30, 1993
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
Mutual funds........... $ 2,083 $ - $ (8) $ 2,075 $ 2,039 $ 8 $ - $ 2,047
Mortgage-backed
securities:
FHLMC.............. 76,198 - (2,237) 73,961 128,217 68 (405) 127,880
FNMA............... 134,860 - (4,589) 130,271 167,045 194 (577) 166,662
Total mortgage-backed
securities........... 211,058 - (6,826) 204,232 295,262 262 (982) 294,542
FNMA debenture......... 5,147 - (66) 5,081 - - - -
Total securities....... 218,288 - (6,900) 211,388 297,301 270 (982) 296,589
Loans receivable:
Residential 1-4
units.............. - - - - 82,073 1,864 - 83,937
Home equity loans.... 27,866 278 - 28,144 24,339 243 - 24,582
Total loans
receivable........... 27,866 278 - 28,144 106,412 2,107 - 108,519
$ 246,154 $ 278 $ (6,900) $ 239,532 $ 403,713 $ 2,377 $ (982) $ 405,108
Note D - Securities Held to Maturity
The Company's securities held to maturity portfolio is as follows:
(In thousands)
March 31, 1994 September 30, 1993
Gross Gross Gross Gross
Amortized Unrealized Unrealized Fair Amortized Unrealized Unrealized Fair
Cost Gains Losses Value Cost Gains Losses Value
Municipal
securities........... $ 243 $ - $ (3) $ 240 $ 277 $ 4 $ - $ 281
Collateralized
mortgage
obligations......... 29,260 - (905) 28,355 29,352 223 (27) 29,548
Mortgage-backed
securities:
FHLMC............. 80,868 (3,511) 77,357 75,898 - (450) 75,448
FNMA.............. 201,939 - (8,405) 193,534 115,319 62 (346) 115,035
Total mortgage-backed
securities........... 282,807 - (11,916) 270,891 191,217 62 (796) 190,483
$ 312,310 $ - $ (12,824) $ 299,486 $ 220,846 $ 289 $ (823) $ 220,312
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note E - Earnings Per Share
The following table summarizes the calculation of primary
and fully diluted earnings per share for the periods indicated:
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
March 31, March 31,
Primary Earnings Per Share: 1994 1993 1994 1993
Income before cumulative effect of
accounting change....................... $ 929 $ 2,741 $ 2,440 $ 2,999
Cumulative effect of accounting change.... - - - 7,327
Dividends on cumulative convertible
preferred stock......................... (297) - (600) -
Preferred dividends in arrears............ - (297) - (600)
Net income available for primary
shares................................ $ 632 $ 2,444 $ 1,840 $ 9,726
Average number of common shares
outstanding............................. 3,674,996 3,536,921 3,620,468 3,535,930
Common stock equivalents of stock
options................................. 210,911 138,411 227,046 114,702
3,885,907 3,675,332 3,847,514 3,650,632
Income before cumulative effect of
accounting change....................... $ 0.24 $ 0.74 $ 0.64 $ 0.84
Cumulative effect of accounting change.... - - - 1.98
Dividends on cumulative convertible
preferred stock......................... (0.08) - (0.16) -
Preferred dividends in arrears............ - (0.08) - (0.16)
Net income.............................. $ 0.16 $ 0.66 $ 0.48 $ 2.66
Fully Diluted Earnings Per Share:(a)
Income before cumulative effect of
accounting change....................... $ 929 $ 2,741 $ 2,440 $ 2,999
Cumulative effect of accounting change.... - - - 7,327
Interest expense on convertible
subordinated debentures, net of taxes... 230 227 457 454
Net income available for fully diluted
shares................................ $ 1,159 $ 2,968 $ 2,897 $ 10,780
Average shares outstanding:
Average number of common
shares outstanding.................... 3,674,996 3,536,921 3,620,468 3,535,930
Common stock equivalents of stock
options............................... 213,433 137,489 237,530 132,186
Average shares assumed to be issued for:
Cumulative convertible preferred
stock............................... 1,138,000 1,138,000 1,138,000 1,138,000
Average preferred dividends in
arrears............................. - 317,922 - 419,649
Convertible subordinated debentures... 704,574 710,921 707,782 710,921
5,731,003 5,841,253 5,703,780 5,936,686
Income before cumulative effect of
accounting change..................... $ 0.20 $ 0.51 $ 0.51 $ 0.58
Cumulative effect of accounting change.. - - - 1.23
Net income............................ $ 0.20 $ 0.51 $ 0.51 $ 1.81
(a) Debt and equity securities were anti-dilutive for the three and six months ended March 31, 1994 and
are included for presentation purposes only.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note F - Supplemental Cash Flow Information
Six Months Ended
March 31,
1994 1993
Cash paid during the period for:
Interest (net of amount capitalized)................. $ 29,493 $ 33,772
Income taxes......................................... 2,287 3,855
Supplemental schedule of non-cash investing
and financing activities:
Exchange of loans for mortgage-backed securities..... $ 77,330 $ 57,441
Increase in assets available for sale................ 3,876 518,511
Assets acquired through foreclosure and repossession. 10,698 16,591
Mortgage loans originated to finance the sale of
foreclosed real estate............................. 4,575 13,011
Note G - Income Taxes
Included in other assets at March 31, 1994 is a net deferred tax asset of $1.6
million. The tax effects of the material temporary differences that comprise
the net deferred tax asset are as follows:
(In thousands)
Deferred Tax Assets:
Allowance for losses on loans and investments in real estate.... $ 7,336
Employee benefit plans.......................................... 583
Other........................................................... 168
8,087
Deferred Tax Liabilities:
Depreciation expense............................................ (2,626)
Change in tax accounting method................................. (1,554)
Deferred loan fee income........................................ (1,047)
FHLB stock dividends............................................ (1,304)
(6,531)
Net Deferred Tax Asset............................................ $ 1,556
The Company believes that it has paid sufficient taxes in prior carryback years
which will enable it to recover the net deferred tax asset and therefore no
valuation allowance as defined by FAS 109 "Accounting for Income Taxes" is
required at March 31, 1994.
Income tax expense of the Company differs from the amounts computed by
applying the United States federal income tax rate of 34 percent to income
before income taxes because of the following:
Six Months Ended
March 31,
1994 1993
Income tax expense at statutory federal rate................. 34.0% 34.0%
Increase (decrease) in income tax rate resulting from:
Tax exempt income.......................................... (3.6) (2.8)
Amortization of costs in excess of fair
value of net assets acquired............................. 2.6 2.2
State income taxes......................................... 1.2 1.6
Change in net deferred tax asset........................... 2.2 1.0
Other...................................................... 2.0 0.8
Effective tax rate........................................... 38.4% 36.8%
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The Company had net income of $929,000 or earnings per share of $0.16 for the
second quarter of fiscal 1994 compared to net income for the same period a year
ago of $2.7 million or primary earnings per share of $0.66 ($0.51 fully
diluted). For the six months ended March 31, 1994, the Company's net income
was $2.4 million or earnings per share of $0.48. This compared to net income
for the same period a year ago of $10.3 million or primary earnings per share
of $2.66 ($1.81 fully diluted) which included income of $7.3 million
representing the cumulative effect of a change in the method of accounting
for income taxes pursuant to the Company's adoption of FAS 109. Excluding
this adjustment, net income for the first six months of fiscal 1993
would have been $3.0 million or primary earnings per share of $0.68 ($0.58
fully diluted).
Total provisions for losses relating to loans and assets classified as
investments in real estate decreased to $82,000 and $445,000 for the three and
six months ended March 31, 1994 compared to $2.2 million and $6.9 million for
the same three and six month periods a year ago.
Total other income was $1.5 million and $4.3 million for the three and six
months ended March 31, 1994 compared to $4.4 million and $6.4 million for the
comparable three and six month periods a year ago. Net realized and
unrealized security transaction losses on mortgage-backed securities and loans
were $902,000 and $72,000 for the three and six month periods ended March 31,
1994 compared to net gains of $1.9 million and $1.8 million for the same three
and six month periods a year ago.
Total other expenses, exclusive of real estate operations, net, were $10.4
million and $20.2 million for the three and six months ended March 31, 1994
compared to $10.3 million and $20.7 million for the same three and six month
periods a year ago.
Real estate operations, net, produced income of $1.4 million and $2.8 million
for the three and six months ended March 31, 1994 compared to $2.1 million and
$5.4 million for the same three and six month periods a year ago.
Results of Operations - Net Interest Income
The principal source of recurring income for BancFlorida, a Federal Savings Bank
("BancFlorida" or the "Bank") is the difference between interest earned on loans
and investments and interest paid on deposits and borrowings. Net interest
income is affected by both interest rates and the volume of interest earning
assets and interest bearing liabilities.
Net interest income was $9.2 million and $17.2 million for the three and six
months ended March 31, 1994 compared to $9.6 million and $17.9 million for the
same three and six month periods a year ago.
Total interest income decreased to $23.9 million and $47.4 million for the three
and six months ended March 31, 1994 from $26.1 million and $51.6 million for
the same three and six month periods a year ago. During the current three and
six month periods, the Company has experienced lower interest income due to
the decline in interest rates on loans originated and mortgage-backed
securities purchased during the previous year.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Total interest expense decreased to $14.7 million and $30.1 million for
the three and six months ended March 31, 1994 from $16.5 million and $33.7
million during the same three and six month periods a year ago. The decrease
is attributable to the Company's further concentration of replacing higher cost
certificates of deposit and FHLB advances with lower cost transaction
accounts. The level of transaction accounts has increased $54 million between
March 31, 1993 and March 31, 1994 from $443 million at March 31, 1993 to
$497 million at March 31, 1994.
The table below indicates the impact that changes in interest rates have had on
the Company's interest rate spread and net interest income for the periods
indicated.
Net Interest Spread/Income Analysis
(Dollars in thousands)
Yield on Cost Net Spread Net
Earning of During the Interest
Quarter Ended Assets Funds Period Income
March 31, 1993............ 7.53% 4.68% 2.85% $ 9,638
June 30, 1993............. 6.89 4.53 2.36 7,826
September 30, 1993........ 6.90 4.46 2.44 8,538
December 31, 1993......... 6.76 4.29 2.47 8,068
March 31, 1994............ 6.93 4.16 2.77 9,175
The following tables presents net interest income of the Company by its
major components:
For the Three Months Ended March 31,
1994 1993
Income Income
Average Average or Average Average or
Balance Rate Expense Balance Rate Expense
(Dollars in thousands)
Interest earning assets:
Loans and mortgage-
backed securities (a)..... $1,354,933 6.97% $ 23,614 $1,357,270 7.59% $ 25,763
Investments................. 26,381 4.61 300 29,968 4.82 356
Total interest earning assets. $1,381,314 6.93% $ 23,914 $1,387,238 7.53% $ 26,119
Interest bearing liabilities:
Deposits.................... $1,220,436 3.88% $ 11,688 $1,187,630 4.45% $ 13,038
Borrowings.................. 216,512 5.71 3,051 238,386 5.86 3,443
Total interest bearing
liabilities................. $1,436,948 4.16% $ 14,739 $1,426,016 4.68% $ 16,481
Interest rate spread.......... 2.77% 2.85%
Net yield on interest
earning assets (b).......... 2.66% 2.78%
(a) Includes non-performing loans.
(b) Annualized net interest income divided by average interest earning assets.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the Six Months Ended March 31,
1994 1993
Income Income
Average Average or Average Average or
Balance Rate Expense Balance Rate Expense
(Dollars in thousands)
Interest earning assets:
Loans and mortgage-
backed securities (a)..... $1,362,529 6.86% $ 46,786 $1,332,746 7.60% $ 50,655
Investments................. 25,157 4.63 583 44,668 4.06 903
Total interest earning assets. $1,387,686 6.79% $ 47,369 $1,377,414 7.49% $ 51,558
Interest bearing liabilities:
Deposits.................... $1,199,561 3.93% $ 23,531 $1,175,762 4.55% $ 26,690
Borrowings.................. 232,133 5.70 6,595 236,333 5.91 6,970
Total interest bearing
liabilities................. $1,431,694 4.22% $ 30,126 $1,412,095 4.78% $ 33,660
Interest rate spread.......... 2.57% 2.71%
Net yield on interest
earning assets (b).......... 2.49% 2.60%
(a) Includes non-performing loans.
(b) Annualized net interest income divided by average interest earning assets.
The effect on net interest income due to changes in interest rates, interest
earning assets, and interest bearing liabilities is shown below. The change
due to volume is computed by multiplying the change in the average balance of
funds employed while holding interest rates steady. The change due to rate is
computed by multiplying the change in interest rates while holding the volume of
funds steady. For purposes of this table, changes attributable to both rate
and volume which cannot be segregated have been allocated proportionately to
volume and to rate.
RATE/VOLUME ANALYSIS
Three Months Ended March 31, Six Months Ended March 31,
1994 vs. 1993 1994 vs. 1993
Increase (Decrease) Due To Increase (Decrease) Due To
(In thousands)
RATE VOLUME TOTAL RATE VOLUME TOTAL
INTEREST EARNING ASSETS:
Mortgage loans (a)........... $ (2,533) $ 747 $ (1,786) $ (5,301) $ 2,199 $ (3,102)
Other loans.................. 785 (1,148) (363) 1,158 (1,925) (767)
Total loans................ (1,748) (401) (2,149) (4,143) 274 (3,869)
Investments.................. (15) (41) (56) 322 (642) (320)
Total.................... (1,763) (442) (2,205) (3,821) (368) (4,189)
INTEREST BEARING LIABILITIES:
Transaction accounts........ (959) 669 (290) (2,111) 1,369 (742)
Certificates................ (639) (421) (1,060) (1,386) (1,031) (2,417)
Total deposits............ (1,598) 248 (1,350) (3,497) 338 (3,159)
FHLB advances............... 480 (452) 28 301 (148) 153
Other borrowings............ (287) (133) (420) (412) (116) (528)
Total borrowings.......... 193 (585) (392) (111) (264) (375)
Total................... (1,405) (337) (1,742) (3,608) 74 (3,534)
NET CHANGE IN NET
INTEREST INCOME......... $ (358) $ (105) $ (463) $ (213) $ (442) $ (655)
(a) Includes non-performing loans and mortgage-backed and related securities.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations - Other
Total other income was $1.5 million and $4.3 million for the three and six
months ended March 31, 1994 compared to $4.4 million and $6.4 million for the
comparable periods a year ago.
Included in total other income during the current quarter were net losses of
$482,000 on the sales of $84.7 million of mortgage-backed securities and loans.
In addition the Company had an unrealized loss of $420,000 on its trading
securities during this quarter. This compares to net gains of $1.9 million on
the sales of $90 million of mortgage-backed securities in the quarter ended
March 31, 1993.
Included in total other income for the six months ended March 31, 1994 were net
gains of $115,000 on the sales of $170.5 million of mortgage-backed securities
and loans as well as a $187,000 unrealized loss on its trading securities
portfolio. This compares to a net gain of $1.8 million on the sales of $387.6
million of mortgage-backed securities and loans in the previous year.
Loan servicing fees totaled $281,000 for the three months ended March 31, 1994
compared to $620,000 for the same period a year ago. Included in loan
servicing fees are the amortizations of excess servicing fees ("ESF") relating
to loans serviced for others and of purchased mortgage servicing rights ("PMSR")
relating to the fees paid to acquire a mortgage loan servicing portfolio.
These amortizations reduced loan servicing fees by $524,000 and $255,000 during
the three months ended March 31, 1994 and 1993, respectively. Also reducing
loan servicing fees during the three months ended March 31, 1994 were
writedowns of $84,000 on the Bank's ESF and PMSR portfolios. There was no
related writedown during the same three month period a year ago. These
writedowns were necessitated by the accelerated prepayments on
the underlying mortgage loans that comprise these portfolios.
For the six months ended March 31, 1994 and 1993 loan servicing fees totaled
$245,000 and $759,000, respectively. Included in loan servicing fees during
these six month periods are the amortizations of the Bank's ESF and PMSR
portfolios of $959,000 and $552,000, respectively. In addition, writedowns
on these portfolios were $584,000 and $500,000, respectively, during these
six month periods. At March 31, 1994 the estimated values of the Bank's ESF
and PMSR portfolios which are reported in other assets, were $1.1 million and
$3.2 million, respectively.
Service charges on deposit accounts totaled $1.4 million for each of the three
months ended March 31, 1994 and 1993. For the six months ended March 31, 1994
and 1993 these same fees totalled $3.1 million and $2.8 million. The
increase in the deposit account fee income is due to the continued emphasis
on obtaining transaction accounts rather than higher cost certificate accounts.
The following table summarizes the major components of miscellaneous other
income for the periods indicated:
Three Months Ended Six Months Ended
March 31, March 31,
(In thousands) 1994 1993 1994 1993
Mortgage loan application fees........ $ 114 $ 207 $ 210 $ 275
Income from investment subsidiary
agency relationship................. 238 221 467 444
Late payment fees..................... 132 132 252 321
Other, net............................ 150 10 174 11
Other income........................ $ 634 $ 570 $ 1,103 $ 1,051
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Total other expenses, including real estate operations, net, were $9.0
million and $17.3 million for the three and six months ended March 31, 1994
compared to $8.2 million and $15.3 million for the same periods a year ago.
Excluding real estate operations, net, total other expenses were $10.4 million
and $20.2 million for the three and six months ended March 31, 1994 compared
to $10.3 million and $20.7 million for the same periods a year ago. The
decrease in total other expenses excluding real estate operations, net, during
the current six month period is primarily attributable to occupancy and
miscellaneous other expenses relating to the operations of five properties in
real estate owned subsidiaries that had been sold prior to the current six
month periods.
Real estate operations, net, produced income of $1.4 million and $2.8 million
for the three and six months ended March 31, 1994 compared to $2.1 million and
$5.4 million for the same three and six month periods a year ago. Provisions
charged to real estate operations were $82,000 and $170,000 for the three and
six months ended March 31, 1994 compared to $621,000 and $2.7 million for the
same three and six months period a year ago. However, for the six months
ended March 31, 1993, real estate operations, net, included a $2.7 million gain
recognized from the sale of a motel owned by a subsidiary of the Bank. In
addition, income from real estate owned properties decreased by $1.1 million
and $2.5 million during the three and six months ended March 31, 1994 compared
to the same three and six month periods a year ago. This was due to the
sale of five properties in real estate owned subsidiaries
that had been sold prior to fiscal 1994 and the sale of one subsidiary property
during the first quarter of fiscal 1994.
The following table summarizes the major components of total other expenses:
Three Months Ended Six Months Ended
March 31, March 31,
(In thousands) 1994 1993 1994 1993
Compensation and benefits....................... $ 4,723 $ 4,467 $ 9,358 $ 8,884
Direct loan origination costs................... (409) (364) (932) (912)
Real estate owned subsidiaries only............. 70 404 254 843
Total compensation and benefits............. 4,384 4,507 8,680 8,815
Real estate operations, net..................... (124) (123) (909) (336)
Provision charged to real estate operations..... 82 621 170 2,662
Gain on sale of real estate owned............... (1,042) (1,207) (1,365) (4,579)
Real estate owned subsidiaries only............. (343) (1,437) (719) (3,182)
Total real estate operations, net........... (1,427) (2,146) (2,823) (5,435)
Occupancy....................................... 1,600 1,482 3,062 2,836
Real estate owned subsidiaries only............. 272 721 555 1,899
Total occupancy............................. 1,872 2,203 3,617 4,735
Advertising and promotion....................... 282 243 602 440
Real estate owned subsidiaries only............. 13 18 59 42
Total advertising and promotion............. 295 261 661 482
Federal insurance premium....................... 946 970 1,924 1,736
Data processing................................. 486 425 912 847
Other expenses.................................. 2,237 1,571 4,037 3,199
Real estate owned subsidiaries only............. 313 453 525 1,104
Direct loan origination costs................... (90) (82) (201) (186)
Other expenses............................... 2,460 1,942 4,361 4,117
Total other expenses......................... $ 9,016 $ 8,162 $17,332 $15,297
Classified Assets
BancFlorida regularly reviews problem assets to determine the adequacy of the
loss reserves based on information such as collectibility, collateral values
and economic conditions. In addition, the classification of assets,
delinquency experience and status of non-performing assets are monitored
through an on-going management process.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Bank's internal asset review system is designed to provide for early
detection of problem assets. The Bank's policy provides for the
classification of assets as satisfactory, special mention, substandard,
doubtful and loss. Substandard assets consist of performing and
non-performing loans, loans to facilitate, real estate
acquired through foreclosure ("REO"), and other repossessed assets. The
allowances are reviewed and updated quarterly based on historical loss
experience and current economic conditions. Although this system will not
eliminate future losses due to unanticipated declines in the real estate
market or economic downturns, it is designed to provide for timely
identification of those losses.
The following table sets forth the Company's classified assets at March 31,
1994, December 31, 1993 and September 30, 1993 pursuant to federal
regulations as follows:
(In thousands)
March 31, December 31, September 30,
1994 1993 1993
Substandard Loans
Performing
Commercial real estate.......... $ 11,331 $ 11,369 $ 16,932
Construction.................... 2,693 3,852 3,829
Commercial...................... 2,027 2,061 2,567
Agricultural.................... 5,466 5,822 3,138
Total performing.............. 21,517 23,104 26,466
Non-performing
Residential..................... 3,242 3,310 3,311
Commercial real estate.......... 15,569 14,503 16,522
Construction.................... 7,251 7,642 7,928
Commercial...................... 2,564 3,429 2,979
Agricultural.................... 4,764 5,029 17,057
Consumer........................ 329 355 399
Total non-performing.......... 33,719 34,268 48,196
Substandard loans................. 55,236 57,372 74,662
Other Substandard Assets
Loans to facilitate............... 9,619 9,637 9,677
Real estate acquired through
foreclosure..................... 47,885 49,169 44,370
Other repossessed assets.......... 170 232 449
Other substandard assets, net... 57,674 59,038 54,496
Total substandard assets, net... 112,910 116,410 129,158
Loss
Commercial real estate............ 25 - -
Construction...................... 1,924 1,825 1,825
Commercial........................ 1,145 1,100 1,384
Agricultural...................... 1,650 1,800 4,500
Less specific reserves............ (4,744) (4,725) (7,709)
Assets classified loss, net..... - - -
Total classified assets, net.... $ 112,910 $ 116,410 $ 129,158
Percent of total assets......... 7.32% 7.62% 8.33%
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Substandard assets decreased $3.5 million during the second quarter of
fiscal 1994 to $112.9 million at March 31, 1994. Total non-performing loans
and other substandard assets, net, declined by $1.9 million during the current
quarter to $91.4 million, net, at March 31, 1994.
The following table summarizes the change in non-performing assets for the
three months ended March 31, 1994.
(In thousands)
Total
Non- REO & Other Non-
Performing Loans to Repossessed Performing
Loans Facilitate Assets Assets
At December 31, 1993..... $ 34,268 $ 58,806 $ 232 $ 93,306
Additions.............. 5,603 106 100 5,809
Loans transferred
to REO............... (1,940) 1,940 - -
Writedowns............. (283) (185) (56) (524)
Loans brought current
or paid in full..... (3,879) - - (3,879)
Sold................... - (2,742) (106) (2,848)
Other decrease......... (50) (421) - (471)
At March 31, 1994........ $ 33,719 $ 57,504 $ 170 $ 91,393
Special mention loans are those which are current under the terms of their
respective loan agreements. However, due to potential credit weaknesses, the
loans merit management's close attention. At March 31, 1994, such loans
totaled $58.2 million compared to $63.0 million at December 31, 1993 and $55.5
million at September 30, 1993. The decrease in the current three month period
is attributable to the payments on three loans totaling $2.5 million and the
downgrade to non-performing of two loans totaling $2.3 million. Management
believes it has identified all potential problem loans at March 31, 1994.
However, included in loans classified substandard and special mention are a
total of $79.7 million of performing loans where known information about
possible credit problems of borrowers has caused management to have doubts
as to the ability of such borrowers to comply with the present loan repayment
terms and which may result in these loans becoming non-performing in
subsequent periods. These same loans totaled $86.1 million at December 31,
1993 and $81.9 million at September 30, 1993. The ultimate resolution
of the Bank's substandard and non-performing assets will be highly dependent
upon economic conditions in the Bank's primary market area.
Allowance and Provision for Losses on Assets
The Company has a policy regarding the allowances for loan losses and valuation
of investments in real estate which, in management's judgment, provides the
level of allowances and write-downs appropriate to absorb potential losses in
these portfolios. The policy is based on a review of both individual loans and
real estate properties and various factors affecting the portfolios generally,
including historical loss experience, economic conditions and trends. The
following is a summary of activity in the allowance for loan losses for the
periods indicated.
Three Months Ended Six Months Ended
(In thousands) March 31, March 31,
1994 1993 1994 1993
Balance, beginning of period........ $ 22,472 $ 29,522 $ 26,701 $ 28,981
Provisions charged to operations.. - 1,572 275 4,244
Recoveries........................ 577 63 632 120
Charge-offs ...................... (814) (710) (5,373) (2,898)
Balance, end of period............. $ 22,235 $ 30,447 $ 22,235 $ 30,447
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the quarter ended March 31, 1994, the Bank did not post provisions
for loan losses compared to $1.6 million for the same period a year ago.
Provisions for assets classified as investments in real estate totaled $82,000
in the second quarter of fiscal 1994 compared to $621,000 for the same period a
year ago. For the six months ended March 31, 1994 and 1993 provisions for loan
losses were $275,000 and $4.2 million, respectively, and provisions for assets
classified as investments in real estate were $170,000 and $2.7 million,
respectively. The decrease in total provisions during the current periods
reflects the overall improvement in the Bank's level of classified assets
which have decreased 32% from $165.9 million at March 31,
1993 to $112.9 million at March 31, 1994.
Recoveries totaled $577,000 and $632,000 for the three and six months ended
March 31, 1994 compared to $63,000 and $120,000 for the same periods a year
ago. The current three and six month periods included a $385,000 court
awarded judgement for legal and other expenses incurred by the Bank in a
lawsuit regarding the Bank's discontinued builder program.
Charge-offs during the current quarter included $200,000 relating to specific
reserves on an agricultural loan transferred to REO which during the period. In
addition, $107,000 of specific and general reserves transferred to REO related
to loans foreclosed during the current period and $206,000 related to losses on
unsecured consumer loans and repossessed assets. During the same three month
period a year ago charge-offs included $509,000 related to losses on unsecured
consumer loans and repossessed assets.
For the six months ended March 31, 1994 charge-offs included $2.9 million of
specific reserves relating to two loans transferred to REO, $556,000 of general
and specific reserves related to other loans transferred to REO and $565,000
related to losses on unsecured consumer loans and repossessed assets. For the
same six month period a year ago charge-offs included $1.2 million in specific
reserves on five loans transferred to REO and $1.2 million related to losses
on unsecured consumer loans and repossessed assets.
Based on its assessment of the Bank's loan and real estate owned portfolios,
management believes that the level of allowances and write-downs are adequate to
cover potential losses. However, management will continue to monitor the
economic environment and assess future stability of the loan and real estate
owned portfolios in order to determine the need for additional reserves.
Total allowance for loan losses as a percent of classified assets are shown
below for the periods indicated.
Quarter Ended Percent
March 31, 1993................. 17.21%
September 30, 1993............. 19.51%
March 31, 1994................. 18.90%
Included in the Company's loan portfolio are various loans identified as non-
performing loans (loans that have ceased to accrue interest income) and
restructured loans (loans in which concessions, including reduction of
interest rates or deferral of interest or principal payments, have been
granted to borrowers due to their financial condition). A summary of
these types of loans is as follows:
(In thousands) March 31,
1994 1993
Non-performing loans............... $ 33,719 $ 32,360
Restructured loans................. $ 5,783 $ 10,330
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following table summarizes the interest income which would have been
recorded under the original terms of non-performing and restructured loans at
March 31, 1994 and 1993 and the interest income actually recognized for the
periods indicated:
Six Months Ended
(In thousands) March 31,
1994 1993
Interest income which would
have been recorded............... $ 2,258 $ 4,087
Interest income recognized......... (535) (695)
Interest income foregone........... $ 1,723 $ 3,392
At March 31, 1994 there were no outstanding commitments to lend additional
funds to borrowers with non-performing or restructured loans.
Asset/Liability Management
The table below sets forth the major balance sheet categories and the dollar
amounts which are rate sensitive and are estimated to reprice within the
periods specified. The approximate contractual repayment data, adjusted for
amortization and anticipated prepayments or, for adjustable rate and
floating-rate instruments, repricing date, at March 31, 1994 are reflected
below for BancFlorida. The table does not address the degree to which
repricing mechanisms are subject to limitations and thus may not reflect
completely the ability of the assets to adjust to changes in market
interest rates. The interest rate sensitivity of the Bank's assets and
liabilities illustrated in the table would vary if significantly different
assumptions were used or if actual experience differs from the prepayment
assumptions used.
BancFlorida, a Federal Savings Bank
GAP Position
March 31, 1994
(Dollars in thousands)
6 Months 7 - 12 1 - 3 3 - 5 5 Years
or Less Months Years Years or More Total
Loans (a)....... $ 583,164 $ 195,035 $ 295,811 $ 128,668 $ 110,967 $ 1,313,645
Investments..... 18,589 1,081 45 - 16,429 36,144
Total....... 601,753 196,116 295,856 128,668 127,396 1,349,789
Deposits (b).... 489,628 259,802 310,406 118,919 53,891 1,232,646
Borrowings...... 74,112 70,020 60,385 410 2,618 207,545
Total...... 563,740 329,822 370,791 119,329 56,509 1,440,191
Non-cumulative
gap position.. $ 38,013 $(133,706) $ (74,935) $ 9,339 $ 70,887 $ (90,402)
Cumulative
gap position.. $ 38,013 $ (95,693) $(170,628) $(161,289) $ (90,402) $ (90,402)
Cumulative % to
total assets.. 2.47% (6.22%) (11.09%) (10.48%) (5.87%) (5.87%)
(a) Includes all mortgage-backed and related securities. The amounts shown
reflect prepayment assumptions.
(b) For presentation purposes, 10% of regular savings accounts are assumed
to reprice in each of the six months or less and seven to twelve months
categories, and 20% of interest bearing transaction deposit accounts are
assumed to reprice in each of such categories. Money market deposit
accounts are assumed to reprice within six months or less.
Historically, regular savings and interest bearing transaction deposit
accounts are considered long term and non-rate sensitive.
The Bank's cumulative six-month gap as a percent of total assets was a
positive 2.47% at March 31, 1994 compared to a negative 13.35% at
September 30, 1993, and the cumulative one year gap was negative 6.22%
at March 31, 1994 compared to a negative 14.99% at September 30, 1993.
The movement to a positive six month gap position and the decrease in the
negative one year gap position are attributable to a change in the first
quarter in the reporting methodology to include mortgage-backed securities
designated for trading or available for sale in the first maturity period.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For a savings bank with a negative gap for a given period, the amount of its
interest bearing liabilities maturing or otherwise repricing within such period
exceeds the amount of the interest earning assets repricing within the
same period. Accordingly, in a declining interest rate environment,
institutions with a negative gap will experience a greater decline in their
cost of funds than in the yield on their assets. Conversely, in a rising
interest rate environment, savings institutions with a negative gap will
generally experience a greater increase in the cost of their liabilities than
in the yield on their assets. A rising interest rate environment imposes
risks on institutions with a negative gap because the cost of liabilities
will accelerate at a greater rate than the income earned on assets during
the relevant period. Changes in interest rates will generally have the
opposite effect on savings banks with a positive gap.
Liquidity
Liquidity management encompasses the maintenance of cash or liquid assets (such
as assets available for sale and interest bearing deposits) sufficient to fund
the normal volume of deposit withdrawals and loan commitments. The maintaining
of an appropriate level of liquid resources to meet not only regulatory
requirements but also to provide the funding necessary to meet the Bank's
business activities and obligations is an integral element in the successful
management of the Bank's assets.
Federal regulations currently require that Savings Association Insurance Fund
insured savings banks, such as the Bank, maintain an average daily balance for
each calendar month of cash and certain marketable securities which are not
committed (as determined by the Office of Thrift Supervision ("OTS") Director)
of no less than 5% of net withdrawable accounts and borrowings with maturities
of one year or less. The liquidity requirement may be changed from time to time
by the OTS to any percentage within the range of 4% to 10%. During March 1994,
the Bank's liquidity ratio was 5.1%.
The primary sources of funds for BancFlorida have been repayments of loans and
mortgage-backed securities, sales of loans and securities, customer deposits,
and borrowings from the FHLB of Atlanta. The principal uses of funds are the
origination of loans and the purchase of mortgage-backed securities. Deposits
are priced as a function of funding needs with respect to liquidity, market
conditions, alternative borrowings and borrowing rates. For the three and six
months ended March 31, 1994, FHLB advances decreased by $7 million and $73
million, respectively, whereas total customer deposits increased by $19.9
million and $78.5 million, respectively. The mix of deposit accounts, FHLB
advances and other borrowings at any given time reflects management's view of
the least costly source of funds available to the Bank at that time.
For the three months ended March 31, 1994, proceeds from the sales of loans and
mortgage-backed securities totaled $84.7 million compared to $89.6 million for
the same three month period a year ago. For the six months ended March 31,
1994 and 1993 proceeds from these same sales totaled $170.5 million and $387.6
million, respectively. Proceeds from the sales during fiscal 1994 were used to
pay off FHLB advances as well as reinvest in mortgage-backed securities
totaling $161.9 million. During fiscal 1993, the proceeds from these sales
were primarily reinvested in mortgage-backed securities totaling $360.8
million. At March 31, 1994 and 1993 mortgage-backed securities totaling
$20.8 million and $30.7 million, respectively, qualified for regulatory
liquidity. As part of the Bank's interest rate risk
management program, mortgage-backed securities are now purchased with shorter
average lives than those mortgage-backed securities historically held by the
Bank. In addition these securities have relatively higher anticipated prepayment
rates. While there has been some decrease in yield on these securities, the
cash flows received from the securities provide a significant funding source
for lending opportunities as well as protecting against the potential risk of
rising rates by shortening the overall average life of the portfolio.
Loan originations and mortgage-backed securities purchases totaled $198 million
for the three months ended March 31, 1994 compared to $393 million for the same
three month period a year ago.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Capital Resources
The Bank is required to satisfy three separate capital standards under
currently applicable OTS regulations. The following table shows the
capital amounts and ratios of BancFlorida as compared to OTS requirements
at March 31, 1994.
Current Minimum
(In thousands) Actual Capital Requirement
As a % of As a % of
Applicable Applicable Excess
Amount Assets Amount Assets Capital
Capital per BancFlorida
financial statements.......... $ 87,118
Adjustments for tangible and
core capital:
Goodwill...................... (2,411)
Investments in and advances
to non-permissible
subsidiaries................ (1,140)
Non-qualifying purchased
mortgage servicing rights... (288)
Total tangible capital.......... 83,279 5.41% $23,071 1.50% $60,208
Supervisory goodwill (a)...... 2,179
Total core capital.............. 85,458 5.56% $46,141 3.00% $39,317
Adjustments for risk-based
capital:
Allowance for general loan
losses...................... 11,080
Subordinated debt............. 2,247
Equity risk investments
required to be deducted..... (859)
Total risk-based capital........ $ 97,926 11.13% $70,402 8.00% $27,525
(a) Qualifying supervisory goodwill is being phased out over the
five year period ending December 31, 1994.
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), the federal banking agencies established, by regulation for each
capital measure, the levels at which an insured institution is well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized, and requires insured
institutions which fall below minimum capital standards to take prompt
corrective action.
Under the prompt corrective action regulation adopted by the OTS, an institution
is considered (i) "well capitalized" if the institution has a total risk-based
capital ratio of 10% or greater, a Tier 1 or core capital to risk-weighted
assets ratio of 6% or greater, and a leverage ratio of 5% or greater (provided
that the institution is not subject to an order, written agreement, capital
directive or prompt corrective action directive to meet and maintain a
specific capital level for any capital measure); (ii) "adequately capitalized"
if the institution has a total risk-based capital ratio of 8% or greater, a
Tier 1 or core capital to risk-weighted assets ratio of 4% or greater,
and a leverage ratio of 4% or greater (3% or greater if the institution
is rated composite 1 in its most recent report of examination);
(iii) "undercapitalized" if the institution has a total risk-based capital ratio
that is less than 8%, a Tier 1 or core capital to risk-weighted assets ratio of
less than 4%, or a leverage ratio that is less than 4% (3% if the institution is
rated composite 1 in its most recent report of examination); (iv)
"significantly undercapitalized" if the institution has a total risk-based
capital ratio that is less than 6%, a Tier 1 or core capital to risk-weighted
assets ratio that is less than 3%, or a leverage ratio that is less than 3%;
and (v) "critically undercapitalized" if the institution has a ratio of
tangible equity to total assets that is less than or equal to 2%. The
regulation also permits the OTS to determine that a savings institution should
be classified in a lower category based on other information, such as the
institution's examination report, after written notice. In December 1993,
the Bank received notification from the Federal Deposit Insurance
Corporation that it is currently classified as well-capitalized based on its
capital ratios at September 30, 1993.
BANCFLORIDA FINANCIAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
At March 31, 1994, the Bank's total risk-based capital, Tier 1 risk-based
capital, and leverage ratios were 11.13%, 9.71%, and 5.56%, respectively,
which continued to exceeded the well-capitalized criteria; however, a Written
Agreement, dated April 19, 1991, between the Bank and the OTS remains in effect.
FDICIA requires that the federal banking agencies amend their risk-based capital
requirements to include components for interest rate risk, concentration of
credit risk and the risk of non-traditional activities by June 19, 1993.
In August 1993, the OTS issued a final rule which adds an interest rate
component to the OTS risk-based capital requirement effective January 1,
1994. The first time savings institutions will be required to incorporate
interest rate risk ("IRR") into their risk-based capital calculation will be
July 1, 1994. Under the rule, IRR is measured as the ratio of the greater
of the increase or decline in net portfolio value resulting from a 200
basis point increase or decrease in market interest rates to the
estimated economic value of assets, as calculated by an OTS model. A savings
institution whose measured IRR exceeds 2% must deduct from total capital an IRR
component equal to one-half of the difference between its measured IRR and 2%,
multiplied by the estimated economic value of its total assets. Based upon
financial data as of March 31, 1994, compliance with the new IRR measure will
not have a material impact on the Bank's risk-based capital position.
FDICIA amended the threshold ratio for the qualified thrift lender ("QTL") test
from 70% to 65% as measured on a monthly average basis in nine out of every 12
months. In order to maintain its QTL status the Bank expects to hold in
portfolio existing qualifying loans and mortgage-backed securities, except
those designated as available for sale. The Bank expects to rely on loan
repayments as well as deposits for any loan funding needs.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
a) The Company held its Annual Meeting of Stockholders on February 18, 1994.
Represented at the meeting were 4,241,231 shares or 89.6% of total
common and cumulative convertible preferred stock outstanding.
b) No response required in accordance with instruction 3 to Item 4.
c) The following matters were voted on at the meeting:
(i) Election of two directors for three-year terms.
WITHHOLD
NOMINEES FOR AUTHORITY
Gerard A. McHale, Jr 4,210,566 30,665
Dale A. Myer 4,214,606 26,625
(ii) Ratification of the appointment of KPMG Peat Marwick as
independent auditors.
FOR: 4,165,832 AGAINST: 34,876 ABSTAIN: 39,814
Item 5. Other Information
On April 22, 1994 the Company announced that it had scheduled a
special meeting of stockholders for June 10, 1994 at 9:00 a.m. at the
Company's headquarters in Naples, Florida. The record date for such
meeting is May 2, 1994.
This meeting is being called to vote on a proposal to approve the
Agreement and Plan of Mergers dated as of January 17, 1994 pursuant
to which BancFlorida Financial Corporation will merge with and into
First Union Corporation of Florida and BancFlorida, a Federal Savings
Bank will merge with and into First Union National Bank of Florida.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit No. 10. Material Contracts
(i) Agreement Regarding Change in Control between the Company and
Rudolf P. Guenzel dated as of November 8, 1993.
(ii) Agreement Regarding Change in Control between the Company and
J. Michael Holmes dated as of November 8, 1993.
(iii) Agreement Regarding Change in Control between the Company and
John A. Abbott dated as of November 8, 1993.
(iv) Agreement Regarding Change in Control between the Company and
Dennis Reed dated as of November 8, 1993.
(v) Agreement Regarding Change in Control between the Company and
W. Terrell Upson dated as of November 8, 1993.
(vi) Agreement Regarding Change in Control between the Company and
William W. Flader dated as of November 8, 1993.
b) During the quarter ended March 31, 1994, the Company filed one Form 8-K.
The Form 8-K dated January 17, 1994, in response to Item 5, announced the
Agreement and Plan of Mergers among the Company, the Bank, First Union
Corporation, First Union Corporation of Florida and First Union
National Bank of Florida.
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.
BANCFLORIDA FINANCIAL CORPORATION
Registrant
DATE: May 13, 1994 By: /s/ Rudolf P. Guenzel
Rudolf P. Guenzel,
President and Chief Executive
Officer
DATE: May 13, 1994 By: /s/ J. Michael Holmes
J. Michael Holmes,
Secretary and Treasurer