U.S. 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 September 30, 2003
OR
---- 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 0-22608
FFLC BANCORP, INC.
------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 59-3204891
--------------------------------- -------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
800 North Boulevard West, Post Office Box 490420, Leesburg, Florida 34749-0420
------------------------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (352) 787-3311
---------------
Former Name,former Address and Former Fiscal Year, if Changed Since Last Report.
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 by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12B-2 of the Exchange Act): Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Common stock, par value $.01 per share
--------------------------------------
5,393,880 shares outstanding at October 28, 2003
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CONFORMED COPY
FFLC BANCORP, INC.
INDEX
Part I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
at September 30, 2003 (Unaudited) and at December 31, 2002..............................2
Condensed Consolidated Statements of Income (Unaudited) -
Three and Nine months ended September 30, 2003 and 2002.................................3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) -
Nine months ended September 30, 2003 and 2002.........................................4-5
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine months ended September 30, 2003 and 2002.........................................6-7
Notes to Condensed Consolidated Financial Statements (Unaudited).....................8-13
Review by Independent Certified Public Accountants.....................................14
Report on Review by Independent Certified Public Accountants...........................15
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.................................................................16-23
Item 3. Quantative and Qualitative Disclosures About Market Risk........................24
Item 4. Controls and Procedures.........................................................24
Part II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................................24
Item 2. Changes in Securities...........................................................24
Item 3. Default upon Senior Securities..................................................24
Item 4. Submission of Matters to a Vote of Security Holders.............................25
Item 5. Other Information...............................................................25
Item 6. Exhibits and Reports on Form 8-K................................................25
SIGNATURES..................................................................................26
FFLC BANCORP, INC.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
($ in thousands, except per share amounts)
At At
September 30, December 31,
------------- ------------
2003 2002
---- ----
Assets (unaudited)
Cash and due from banks $ 33,590 20,157
Interest-earning deposits 41,926 49,237
------------- ------------
Cash and cash equivalents 75,516 69,394
Securities available for sale 78,601 77,324
Loans, net of allowance for loan losses of $5,411 in 2003
and $5,181 in 2002 737,430 735,338
Accrued interest receivable 3,454 4,181
Premises and equipment, net 20,730 19,369
Foreclosed assets 727 626
Federal Home Loan Bank stock, at cost 6,900 7,700
Deferred income taxes 962 487
Other assets 1,364 1,402
------------- ------------
Total $ 925,684 915,821
============= =============
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits 26,402 18,867
NOW and money-market accounts 153,888 137,858
Savings accounts 26,023 25,403
Certificates 479,186 485,930
------------- ------------
Total deposits 685,499 668,058
Advances from Federal Home Loan Bank 133,000 149,000
Other borrowed funds 15,152 14,303
Guaranteed preferred beneficial interest in junior subordinated debentures 5,000 5,000
Accrued expenses and other liabilities 11,151 8,398
------------- ------------
Total liabilities 849,802 844,759
------------- ------------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none outstanding - -
Common stock, $.01 par value, 15,000,000 shares authorized,
6,393,928 in 2003 and 4,574,944 in 2002 shares issued 64 46
Additional paid-in-capital 31,811 31,638
Retained income 63,638 58,409
Accumulated other comprehensive income 283 636
Treasury stock, at cost (1,000,048 shares in 2003 and
991,669 shares in 2002) (19,914) (19,667)
------------- ------------
Total stockholders' equity 75,882 71,062
------------- ------------
Total $ 925,684 915,821
============= =============
See accompanying Notes to Condensed Consolidated Financial Statements.
FFLC BANCORP, INC.
Condensed Consolidated Statements of Income (Unaudited)
($ in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
2003 2002 2003 2002
Interest income: --------- ---------- ---------- ----------
Loans $ 12,264 13,300 37,576 39,293
Securities 482 782 1,607 2,322
Other interest-earning assets 160 298 629 722
Total interest income 12,906 14,380 39,812 42,337
--------- ---------- ---------- ----------
Interest expense:
Deposits 3,916 5,225 12,561 15,397
Borrowed funds 2,010 2,352 6,224 6,955
--------- ---------- ---------- ----------
Total interest expense 5,926 7,577 18,785 22,352
--------- ---------- ---------- ----------
Net interest income 6,980 6,803 21,027 19,985
Provision for loan losses 330 399 1,124 1,270
--------- ---------- ---------- ----------
Net interest income after provision
for loan losses 6,650 6,404 19,903 18,715
--------- ---------- ---------- ----------
Noninterest income:
Deposit account fees 276 245 762 696
Other service charges and fees 670 430 1,956 1,344
Net gain on sales of loans held for sale 381 73 1,011 225
Other 138 114 451 365
--------- ---------- ---------- ----------
Total noninterest income 1,465 862 4,180 2,630
--------- ---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits 2,624 2,254 7,570 6,404
Occupancy expense 704 630 2,054 1,788
Data processing expense 333 238 886 730
Professional services 123 115 346 312
Advertising and promotion 111 105 364 339
Other 540 432 1,600 1,242
--------- ---------- ---------- ----------
Total noninterest expense 4,435 3,774 12,820 10,815
--------- ---------- ---------- ----------
Income before income taxes 3,680 3,492 11,263 10,530
Income taxes 1,387 1,315 4,250 3,932
--------- ---------- ---------- ----------
Net income $ 2,293 2,177 7,013 6,598
========= ========== ========== ==========
Basic income per share $ .42 .41 1.30 1.23
========= ========== ========== ==========
Weighted-average number of shares outstanding
for basic 5,389,768 5,365,227 5,383,140 5,357,775
========= ========== ========== ==========
Diluted income per share $ .42 .40 1.28 1.21
========= ========== ========== ==========
Weighted-average number of shares outstanding
for diluted 5,482,560 5,471,244 5,481,431 5,466,338
========= ========== ========== ==========
Dividends per share $ .13 .09 .33 .28
========= ========== ========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements
3
FFLC BANCORP, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Nine Months Ended September 30, 2003 and 2002
($ in thousands)
Common Stock Accumulated
----------------------- Additional Other Total
Number of Paid-In Treasury Retained Comprehensive Stockholders'
Shares Amount Capital Stock Income Income Equity
------------ -------- ---------- -------- --------- ------------- -------------
Balance at December 31, 2001 4,542,953 $ 45 31,355 (19,347) 51,575 440 64,068
Comprehensive income:
Net income (unaudited) -- -- -- -- 6,598 -- 6,598
Change in unrealized gains on securities
available for sale, net of income taxes
of $111 (unaudited) -- -- -- -- -- 184 184
Change in unrealized loss on derivative
instrument, net of income tax
benefit of $27 (unaudited) -- -- -- -- -- (45) (45)
-------------
Comprehensive income (unaudited) 6,737
-------------
Net proceeds from the issuance of common
stock, stock options exercised
(unaudited) 28,741 1 249 -- -- -- 250
Dividends paid (unaudited) -- -- -- -- (1,500) -- (1,500)
Purchase of treasury stock, 11,871 shares
(unaudited) -- -- -- (298) -- -- (298)
------------ -------- ---------- -------- --------- ------------- -------------
Balance at September 30, 2002 (unaudited) 4,571,694 $ 46 31,604 (19,645) 56,673 579 69,257
============ ======== ========== ======== ========= ============= =============
(continued)
4
FFLC BANCORP, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited), Continued
Nine Months Ended September 30, 2003 and 2002
($ in thousands)
Common Stock Accumulated
----------------------- Additional Other Total
Number of Paid-In Treasury Retained Comprehensive Stockholders'
Shares Amount Capital Stock Income Income Equity
------------ -------- ---------- -------- --------- ------------- -------------
Balance at December 31, 2002 4,574,944 $ 46 31,638 (19,667) 58,409 636 71,062
-------------
Comprehensive income:
Net income (unaudited) -- -- -- -- 7,013 -- 7,013
Change in unrealized gains on securities
available for sale, net of income tax
benefit of $203 (unaudited) -- -- -- -- -- (336) (336)
Change in unrealized loss on derivative
instrument, net of income tax
benefit of $10 (unaudited) -- -- -- -- -- (17) (17)
-------------
Comprehensive income (unaudited) 6,660
-------------
Net proceeds from the issuance of common
stock, stock options exercised
(unaudited) 26,715 -- 191 -- -- -- 191
Dividends paid (unaudited) -- -- -- -- (1,784) -- (1,784)
Purchase of treasury stock, 8,379 shares
(unaudited) -- -- -- (247) -- -- (247)
Three-for-two stock split (unaudited) 1,792,269 18 (18) -- -- -- --
------------ -------- ---------- -------- --------- ------------- -------------
Balance at September 30, 2003 (unaudited) 6,393,928 $ 64 31,811 (19,914) 63,638 283 75,882
============ ======== ========== ======== ========= ============= =============
See accompanying Notes to Condensed Consolidated Financial Statements.
5
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
Nine Months Ended
September 30,
-------------------
2003 2002
Cash flows from operating activities: --------- --------
Net income $ 7,013 6,598
Adjustments to reconcile net income to net cash provided by operations:
Provision for loan losses 1,124 1,270
Depreciation and amortization 989 781
Credit for deferred income taxes (262) (169)
Net amortization of premiums and discounts on securities 912 130
Net amortization of deferred loan fees and costs 216 (83)
Net gain on sales of loans held for sale (1,011) (225)
Loans originated for sale (69,173) (18,769)
Proceeds from sales of loans held for sale 71,767 14,710
Decrease in accrued interest receivable 727 66
Decrease (increase) in other assets 38 (372)
Increase in accrued expenses and other liabilities 2,726 4,122
--------- --------
Net cash provided by operating activities 15,066 8,059
--------- --------
Cash flows from investing activities:
Proceeds from principal repayments and maturities on securities
available for sale 27,754 11,183
Purchase of securities available for sale (30,482) (33,067)
Loan disbursements (186,426) (170,865)
Principal repayments on loans 180,129 116,586
Purchase of premises and equipment, net (2,350) (5,209)
Redemption (purchase) of Federal Home Loan Bank stock 800 (500)
Net proceeds from sales of foreclosed assets 1,181 1,035
--------- --------
Net cash used in investing activities (9,394) (80,837)
--------- --------
(continued)
6
FFLC BANCORP, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited), Continued
(In thousands)
Nine Months Ended
September 30,
-------------------
2003 2002
Cash flows from financing activities: -------- --------
Net increase in deposits $ 17,441 71,076
Net (decrease) increase in advances from Federal Home Loan Bank (16,000) 10,000
Net increase in other borrowed funds 849 2,523
Increase in guaranteed preferred beneficial interest in junior
subordinated debentures -- 5,000
Issuance of common stock 191 250
Purchase of treasury stock (247) (298)
Cash dividends paid (1,784) (1,500)
-------- --------
Net cash provided by financing activities 450 87,051
-------- --------
Net increase in cash and cash equivalents 6,122 14,273
Cash and cash equivalents at beginning of period 69,394 49,792
-------- --------
Cash and cash equivalents at end of period $ 75,516 64,065
======== ========
Supplemental disclosures of cash flow information-
Cash paid during the period for:
Interest $ 18,891 22,503
======== ========
Income taxes $ 4,908 4,204
======== ========
Noncash investing and financing activities:
Accumulated other comprehensive income:
Net change in unrealized gain on securities available for sale, net of tax $ (336) 184
======== ========
Net change in unrealized loss on derivative instrument, net of tax$ (17) (45)
======== ========
Transfers from loans to foreclosed assets $ 1,418 1,097
======== ========
Loans originated on sales of foreclosed assets $ 136 238
======== ========
Loans funded by and sold to correspondent $ 12,264 10,640
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
7
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1.Basis of Presentation. In the opinion of the management of FFLC Bancorp, Inc.
(the "Holding Company"), the accompanying condensed consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position
at September 30, 2003 and the results of operations for the three- and
nine-month periods ended September 30, 2003 and 2002 and cash flows
for the nine-month periods ended September 30, 2003 and 2002. The
results of operations for the three-and nine-month periods ended
September 30, 2003 are not necessarily indicative of results that may
be expected for the year ending December 31, 2003.
The condensed consolidated financial statements include the accounts
of the Holding Company and its three subsidiaries, First Federal
Savings Bank of Lake County (the "Bank"), First Alliance Title, LLC
and FFLC Statutory Trust I and the Bank's wholly-owned subsidiary,
Lake County Service Corporation (together, the "Company"). All
significant intercompany accounts and transactions have been
eliminated in consolidation.
2. Loans. The following table sets forth the composition of the Company's loan
portfolio in dollar amounts and percentages at the dates indicated (in
thousands):
At September 30, 2003 At December 31, 2002
--------------------- ---------------------
% of % of
Amount Total Amount Total
Mortgage loans: --------- ------- --------- ---------
One-to-four-family residential * $ 378,163 49.33% $ 395,116 52.23%
Construction and land 38,978 5.08 30,792 4.07
Multi-family units 12,202 1.59 22,796 3.01
Commercial real estate, churches and other 155,824 20.32 140,770 18.61
--------- ------- --------- ---------
Total mortgage loans 585,167 76.32 589,474 77.92
Consumer loans 150,179 19.59 138,202 18.26
Commercial loans 31,338 4.09 28,879 3.82
--------- ------- --------- ---------
Total loans (1) 766,684 100.00% 756,555 100.00%
======= =========
Undisbursed portion of loans in process (24,570) (16,770)
Net deferred loan costs 727 734
Allowance for loan losses (2) (5,411) (5,181)
--------- ---------
Loans, net $ 737,430 $ 735,338
========= =========
* Includes $12.9 million and $14.4 million of loans held for sale at
September 30, 2003 and December 31, 2002, respectively.
(1) Total loans outstanding by department consists of the following (in
thousands):
At
-------------------
September 30, 2003 December 31, 2002
------------------- --------------------
% of % of
Amount Total Amount Total
--------- ------- --------- -------
Residential $ 368,821 48.10% $ 385,711 50.98%
Commercial 244,697 31.92 229,930 30.39
Consumer 153,166 19.98 140,914 18.63
--------- ------- --------- -------
$ 766,684 100.00% $ 756,555 100.00%
========= ======= ========= =======
(continued)
8
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
2. Loans, Continued.
(2) Total allowance for loan losses by department consist of the following (in
thousands):
At
-------------------
September 30, 2003 December 31, 2002
------------------- --------------------
% to % to
Gross Gross
Amount Loans Amount Loans
--------- ------- --------- ---------
Residential $ 1,094 .30% $ 1,175 .30%
Commercial 3,109 1.27 2,949 1.28
Consumer 1,208 .79 1,057 .75
--------- ------- --------- ---------
$ 5,411 .71% $ 5,181 .68%
========= ======= ========= =========
Total gross loans originated by department, including unfunded construction and
line of credit loans, consist of the following (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
2003 2002 2003 2002
--------- -------- ------- -------
Residential $ 57,583 34,290 154,174 105,243
Commercial 22,238 18,322 75,174 72,432
Consumer 24,381 19,626 71,628 62,107
--------- -------- ------- -------
$ 104,202 72,238 300,976 239,782
========= ======== ======== =======
3. Loan Impairment and Loan Losses. The Company prepares a quarterly review of
the adequacy of the allowance for loan losses to identify and value
impaired loans in accordance with guidance in the Statements of Financial
Accounting Standards No. 114 and 118.
An analysis of the change in the allowance for loan losses was as follows
(in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
2003 2002 2003 2002
--------- -------- ------- -------
Beginning balance $ 5,426 4,701 5,181 4,289
Provision for loan losses 330 399 1,124 1,270
Net loans charged-off (345) (319) (894) (778)
--------- -------- ------- -------
Ending balance $ 5,411 4,781 5,411 4,781
========= ======== ======= ========
(continued)
9
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
3. Loan Impairment and Loan Losses, Continued. The following summarizes the
amount of impaired loans, all of which were collateral dependent
(in thousands):
At
-------------------
September 30, December 31,
------------- ------------
2003 2002
---- ----
Loans identified as impaired:
Gross loans with no related allowance for losses $ 2,966 -
Gross loans with related allowance for losses recorded - 400
Less: Allowances on these loans - (50)
------------- ------------
Net investment in impaired loans $ 2,966 350
============= ============
The average net investment in impaired loans and interest income recognized and
received on impaired loans was as follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
-------- -------- ------- --------
Average net investment in impaired loans $ 3,149 170 1,742 50
======== ======== ======= ========
Interest income recognized on impaired loans $ 64 5 73 5
======== ======== ======= ========
Interest income received on impaired loans $ 64 5 73 5
======== ======== ======= ========
Nonaccrual and past due loans were as follows (in thousands):
At
-----------------
September 30, December 31,
------------- ------------
2003 2002
---- ----
Nonaccrual loans $ 5,181 2,592
Accruing loans past due ninety days or more - -
------- ------
Total $ 5,181 2,592
======= ======
The increase in impaired and nonaccrual loans during 2003 mainly resulted from
two loans to an agricultural borrower being identified as impaired and
placed on nonaccrual status. Management estimates that equity in the
related collateral is sufficient and no loss is anticipated on these two
loans.
(continued)
10
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
4. Income Per Share of Common Stock. Basic income per share of common stock has
been computed by dividing the net income for the period by the
weighted-average number of shares outstanding. Shares of common stock
purchased by the RRP incentive plans are only considered outstanding when
the shares are released or committed to be released for allocation to
participants. Diluted income per share is computed by dividing net income
by the weighted-average number of shares outstanding including the dilutive
effect of stock options computed using the treasury stock method. All per
share amounts reflect the three-for-two stock split declared on February
14, 2003. The following table presents the calculation of basic and diluted
income per share of common stock:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------
2003 2002 2003 2002
Weighted-average shares of common stock issued
and outstanding before adjustments for
RRP and common stock options 5,393,871 5,369,330 5,387,243 5,361,878
Adjustment to reflect the effect of unallocated
RRP shares (4,103) (4,103) (4,103) (4,103)
----------- ---------- --------- ---------
Weighted-average shares for basic income per
share 5,389,768 5,365,227 5,383,140 5,357,775
=========== ========== ========= =========
Basic income per share of common stock $ .42 .41 1.30 1.23
=========== ========== ========= =========
Total weighted-average common shares and
equivalents outstanding for basic income
per share computation 5,389,768 5,365,227 5,383,140 5,357,775
Additional dilutive shares using the average market
value for the period utilizing the treasury stock
method regarding stock options 92,792 106,017 98,291 108,563
----------- ---------- --------- ---------
Weighted-average shares and equivalents
outstanding for diluted income per share 5,482,560 5,471,244 5,481,431 5,466,338
=========== ========== ========= =========
Diluted income per share of common stock $ .42 .40 1.28 1.21
=========== ========== ========= =========
5. Stock Split. On February 14, 2003, the Board of Directors declared a
three-for-two stock split on all outstanding common shares for shareholders
of record on February 28, 2003, which were distributed on March 14, 2003.
Stockholders received cash in lieu of fractional shares resulting from the
split based on the closing price on the record date.
(continued)
11
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
6. Stock Option Plans. During 2002, the Company adopted a new stock option plan
(the "2002 Plan") which authorizes the Company to issue up to 375,000
shares (adjusted) in connection with options granted to directors, officers
or employees of the Company. The terms and vesting periods will be
determined as each option is granted, but the option price cannot be less
than the then current market value of the common stock at the grant date.
No options have been granted under the 2002 Plan through September 30,
2003.
The Company also has a 1993 stock option plan (the "1993 Plan") under which
common shares are authorized to be issued in connection with options
granted to directors, officers and employees of the Company. Options
granted under the Plan are exercisable at the market price of the common
stock at the date of grant. Incentive stock options granted to officers and
employees are exercisable in three equal annual installments, with the
first installment becoming exercisable one year from the date of grant.
Options granted to outside directors are exercisable immediately, but any
common shares obtained from exercise of the options may not be sold prior
to one year from the date of grant. All options expire at the earlier of
ten years for officers and employees or twenty years for directors from the
date of grant or one year following the date which the outside director,
officer or employee ceases to serve in such capacity. At September 30,
2003, 50,571 options (adjusted) remain available under the 1993 Plan for
future grant to directors, officers and employees.
The following is a summary of stock option transactions during the nine-month
periods ended September 30, 2003 and 2002 (All options and option price per
share information has been adjusted to reflect the three-for-two stock
split in 2003):
Weighted-
Range of Average
Number Per Share Per Share
1993 Plan: of Options Option Price Price
---------- ------------ ------------- --------------
Outstanding, December 31, 2001 200,312 $ 4.00-14.17 6.01
Exercised (43,111) 4.00-10.83 4.77
------------
Outstanding, September 30, 2002 157,201 $ 4.00-14.17 6.53
============ ============= ==============
Outstanding, December 31, 2002 152,327 4.00-14.17 6.61
Exercised (28,828) 4.00-11.75 6.03
------------
Outstanding, September 30, 2003 123,499 $ 4.00-14.17 6.99
============ ============= ==============
(continued)
12
FFLC BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited), Continued
6. Stock Option Plans, Continued
No stock options were granted under the plans during the nine-month periods
ended September 30, 2003 or 2002. SFAS No. 123 requires pro forma fair
value disclosures if the intrinsic value method is being utilized to value
stock-based compensation awards. For purposes of pro forma disclosures, the
estimated fair value of stock options granted is included in expense in the
period vesting occurs. The proforma information has been determined as if
the Company had accounted for its stock options under the fair value method
of SFAS No. 123. The Company accounts for their stock option plans under
the recognition and measurement principles of APB No. 25. No stock-based
employee compensation cost is reflected in net income during the periods
presented, as all stock options granted under the plans had an exercise
price equal to the market value of the underlying common stock on the date
of grant. The following table illustrates the effect on net income and
basic and diluted income per share as if the Company had applied the fair
value recognition provisions of SFAS No. 123 to stock-based employee
compensation (in thousands, except per share amounts):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2003 2002 2003 2002
------- --------- ------- ------
Net income, as reported $ 2,293 2,177 7,013 6,598
Deduct: Total stock-based employee compensation
determined under the fair value based method
for all awards, net of related tax benefit - (2) - (7)
------- --------- ------- ------
Proforma net income $ 2,293 2,175 7,013 6,591
======= ========= ======= ======
Basic income per share:
As reported $ .42 .41 1.30 1.23
======= ========= ======= ======
Proforma $ .42 .41 1.30 1.23
======= ========= ======= ======
Diluted income per share:
As reported $ .42 .40 1.28 1.21
======= ========= ======= ======
Proforma $ .42 .40 1.28 1.21
======= ========= ======= ======
7. Reclassifications. Certain amounts in the 2002 condensed consolidated
financial statements have been reclassified to conform to the 2003
presentation.
13
FFLC BANCORP, INC.
Review by Independent Certified Public Accountants
Hacker, Johnson & Smith PA, the Company's independent certified public
accountants, have made a limited review of the financial data as of September
30, 2003, and for the three- and nine-month periods ended September 30, 2003 and
2002 presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
14
Report on Review by Independent Certified Public Accountants
The Board of Directors
FFLC Bancorp, Inc.
Leesburg, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of
FFLC Bancorp, Inc. and Subsidiaries (the "Company") as of September 30, 2003,
the related condensed consolidated statements of income for the three- and
nine-month periods ended September 30, 2003 and 2002 and the related condensed
consolidated statements of changes in stockholders' equity and cash flows for
the nine-month periods ended September 30, 2003 and 2002. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with accounting principles generally accepted
in the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
December 31, 2002, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated January 15, 2003 we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 2002, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
HACKER, JOHNSON & SMITH PA
Orlando, Florida
October 10, 2003
15
FFLC BANCORP, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
General
FFLC Bancorp, Inc., (the "Holding Company") is the holding company for its three
subsidiaries, First Federal Savings Bank of Lake County (the "Bank"), First
Alliance Title, LLC and FFLC Statutory Trust I and the Bank's wholly-owned
subsidiary, Lake County Service Corporation ("LCSC") (together, the "Company").
The Company's consolidated results of operations are primarily those of the
Bank.
The Bank's principal business continues to be attracting retail deposits from
the general public and investing those deposits, together with principal
repayments on loans and investments and funds generated from operations,
primarily in mortgage loans secured by one-to-four-family, owner-occupied homes,
commercial loans, consumer loans and, to a lesser extent, construction loans,
other loans, and multi-family residential mortgage loans. In addition, the Bank
holds investments permitted by federal laws and regulations including securities
issued by the U.S. Government and agencies thereof. The Bank's revenues are
derived principally from interest on its loan and mortgage-backed securities
portfolios and interest and dividends on its investment securities. The Bank is
a member of the Federal Home Loan Bank ("FHLB") system and its deposits are
insured up to the applicable limits by the Savings Association Insurance Fund
("SAIF") of 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.
The Bank has 14 full-service banking facilities in Lake, Sumter, Citrus and
Marion Counties, Florida. The Bank is in the process of constructing two new
branches, one in Citrus County and the other in Sumter County.
The Company's results of operations depend primarily on net interest income,
which is the difference between the interest income earned primarily on its loan
and securities portfolios, and its cost of funds, consisting of the interest
paid on its deposits and borrowings. The Company's operating results are also
affected, to a lesser extent, by fee income. The Company's operating expenses
consist primarily of salaries and employee benefits, occupancy expenses, and
other general and administrative expenses. The Company's results of operations
are also significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies, and actions
of regulatory authorities.
16
FFLC BANCORP, INC.
Capital Resources
The Company's primary sources of funds include proceeds from payments and
prepayments on mortgage loans and mortgage-backed securities, proceeds from
maturities of investment securities, and increases in deposits and advances
from the Federal Home Loan Bank. While maturities and scheduled
amortization of loans and investment securities are predictable sources of
funds, deposit inflows and mortgage prepayments are greatly influenced by
local conditions, general interest rates, and regulatory changes.
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. The Company's exposure to credit loss in the event of
nonperformance by the other party to the off-balance-sheet financial
instrument is represented by the contractual amount of those instruments.
The Company uses the same credit policies in making commitments as it does
for on-balance-sheet instruments. A summary of the contractual amounts of
the Company's financial instruments with off-balance-sheet risk at
September 30, 2003 follows (in thousands):
Commitments to extend credit $ 31,923
========
Unused lines of credit $ 58,783
========
Undisbursed portion of loans in process $ 24,570
========
Standby letters of credit $ 3,600
========
The Company believes that it will have sufficient funds available to meet
its commitments. At September 30, 2003, certificates of deposit which were
scheduled to mature in one year or less totaled $273.8 million. Based on
past experience, management believes, that a significant portion of those
funds will remain with the Company.
The Bank is subject to various regulatory capital requirements administered
by the Federal banking agencies. Failure to meet minimum capital
requirements can require regulators to initiate certain mandatory- and
possibly additional discretionary-actions that, if undertaken, could have a
direct material effect on the Company's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgements by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts (set forth in the table) of
total and Tier I capital (as defined in the regulations) to risk-weighted
assets (as defined). Management believes that, as of September 30, 2003,
the Bank meets all capital adequacy requirements to which it is subject.
17
FFLC BANCORP, INC.
As of September 30, 2003, the most recent notification from the OTS categorized
the Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must maintain
minimum tangible, Tier I (core), Tier I (risk-based) and total risk-based
capital percentages as set forth in the table. There are no conditions or events
since that notification that management believes have changed the institution's
category.
The Bank's actual capital amounts and percentages at September 30, 2003 are also
presented in the table.
To Be Well
Minimum Capitalized
For Capital For Prompt
Adequacy Corrective Action
Actual Purposes Provisions
--------------- ------------- ----------------
% Amount % Amount % Amount
----- -------- ---- -------- ---- --------
($ in thousands)
Stockholders' equity,
and ratio to total
assets 8.4% $ 78,149
Less: investment in
nonincludable
subsidiary (254)
Less: unrealized gain on
securities available for sale (451)
--------
Tangible capital,
and ratio to adjusted
total assets 8.4% $ 77,444 1.5% $ 13,875
======== ========
Tier 1 (core) capital, and
ratio to adjusted total
assets 8.4% $ 77,444 3.0% $ 27,750 5.0% $ 46,250
======== ======== ========
Tier 1 capital, and ratio
to risk-weighted assets 12.6% 4.0% $ 24,619 6.0% $ 36,928
======== ========
Tier 2 capital (allowance for
loan losses) 5,296
--------
Total risk-based capital,
and ratio to risk-
weighted assets 13.4% $ 82,740 8.0% $ 49,237 10.0% $ 61,547
======== ======== ========
Total assets $925,713
========
Adjusted total assets $925,004
========
Risk-weighted assets $615,467
========
18
FFLC BANCORP, INC.
The following table shows selected ratios for the periods ended or at the dates
indicated:
Nine Months Nine Months
Ended Year Ended Ended
September 30, December 31, September 30,
2003 2002 2002
------------- ------------ -------------
Average equity as a percentage
of average assets 7.96% 7.67% 7.70%
Total equity to total assets at end of period 8.20% 7.76% 7.52%
Return on average assets (1) 1.01% 1.00% 1.01%
Return on average equity (1) 12.63% 13.05% 13.16%
Noninterest expense to average assets (1) 1.84% 1.68% 1.66%
Nonperforming assets to total assets
at end of period .64% .35% .28%
Operating efficiency ratio (1) 50.86% 48.23% 47.82%
(1) Annualized for the nine months ended September 30, 2003 and 2002.
At At At
September 30, December 31, September 30,
2003 2002 2002
------------- ------------ -------------
Weighted-average interest rates:
Interest-earning assets:
Loans 6.57% 7.10% 7.24%
Securities 3.90% 4.45% 4.63%
Other interest-earning assets 1.32% 1.77% 2.50%
Total interest-earning assets 6.03% 6.52% 6.76%
Interest-bearing liabilities:
Interest-bearing deposits 2.37% 2.78% 3.05%
Borrowed funds 5.13% 5.38% 5.15%
Total interest-bearing liabilities 2.80% 3.29% 3.51%
Interest-rate spread 3.23% 3.23% 3.25%
Changes in Financial Condition
Total assets increased $9.9 million or 1.1%, from $915.8 million at December 31,
2002 to $925.7 million at September 30, 2003 primarily as a result of a $2.1
million increase in net loans, an increase in securities available for sale of
$1.3 million and an increase in cash and cash equivalents of $6.1 million.
Deposits increased $17.4 million from $668.1 million at December 31, 2002 to
$685.5 million at September 30, 2003. Advances from the Federal Home Loan Bank
decreased $16.0 million from $149.0 million at December 31, 2002 to $133.0
million at September 30, 2003. The $4.8 million net increase in stockholders'
equity during the nine months ended September 30, 2003 resulted from net income
of $7.0 million and proceeds of $191,000 from stock options exercised, partially
offset by repurchases of the Company's stock of $247,000, dividends paid of $1.8
million and a $353,000, net of tax benefit decrease in accumulated other
comprehensive income.
19
FFLC BANCORP, INC.
Results of Operations
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average costs; (iii) net interest/dividend income; (iv) interest-rate spread;
and (v) net interest margin. Yields and costs were derived by dividing
annualized income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. The average balance of loans includes loans
on which the Company has discontinued accruing interest. The yields and costs
include certain fees which are considered to constitute adjustments to yields.
Three Months Ended September 30,
----------------------------------------------------
2003 2002
-------------------------------------------- -----------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
--------- -------- -------- ---------- --------- -------
($ in Thousands)
Interest-earning assets:
Loans $ 736,183 12,264 6.66% $ 738,259 13,300 7.21%
Securities 87,031 482 2.22 84,316 782 3.71
Other interest-earning assets (1) 42,478 160 1.51 45,206 298 2.64
--------- -------- ---------- --------
Total interest-earning assets 865,692 12,906 5.96 867,781 14,380 6.63
-------- --------
Noninterest-earning assets 57,500 46,971
--------- ----------
Total assets $923,192 $ 914,752
========= ==========
Interest-bearing liabilities:
NOW and money-market accounts 150,907 163 .43 129,895 332 1.02
Savings accounts 25,804 37 .57 24,051 52 .86
Certificates 478,979 3,716 3.10 484,962 4,841 3.99
Federal Home Loan Bank advances 133,000 1,891 5.69 164,000 2,283 5.57
Other borrowed funds 21,944 119 2.17 16,914 69 1.63
--------- -------- ---------- --------
Total interest-bearing liabilities 810,634 5,926 2.92 819,822 7,577 3.70
-------- --------
Noninterest-bearing deposits 26,059 17,284
Noninterest-bearing liabilities 10,902 9,437
Stockholders' equity 75,597 68,209
--------- ----------
Total liabilities and stockholders' equity $ 923,192 $ 914,752
========= ==========
Net interest income $ 6,980 $ 6,803
======== ========
Interest-rate spread (2) 3.04% 2.93%
======== =======
Net interest-earning assets, net margin (3) $ 55,058 3.23% $ 47,959 3.14%
========= ======== ========== =======
Ratio of interest-earning assets to interest-bearing
liabilities 1.07 1.06
========= ==========
(1) Includes interest-bearing deposits and Federal Home Loan Bank stock.
(2) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net margin is annualized net interest income divided by average
interest-earning assets.
20
FFLC BANCORP, INC.
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest and dividend income; (iv) interest-rate spread;
and (v) net interest margin. Yields and costs were derived by dividing
annualized income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. The average balance of loans includes loans
on which the Company has discontinued accruing interest. The yields and costs
include certain fees which are considered to constitute adjustments to yields.
Nine Months Ended September 30,
-------------------------------------------------------------
2003 2002
-------------------------------- --------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Cost Balance Dividends Cost
--------- --------- -------- ---------- --------- -------
($ in Thousands)
Interest-earning assets:
Loans $ 738,253 37,576 6.79% $ 715,484 39,293 7.32%
Securities 89,478 1,607 2.39 78,067 2,322 3.97
Other interest-earning assets (1) 47,718 629 1.76 31,889 722 3.02
--------- --------- ---------- ---------
Total interest-earning assets 875,449 39,812 6.06 825,440 42,337 6.84
--------- ---------
Noninterest-earning assets 54,377 42,559
--------- ----------
Total assets $ 929,826 $ 867,999
========= ==========
Interest-bearing liabilities:
NOW and money-market accounts 147,798 617 .56 125,246 1,137 1.21
Savings accounts 25,789 118 .61 23,113 165 .95
Certificates 485,195 11,826 3.25 453,255 14,095 4.15
Federal Home Loan Bank advances 141,136 5,856 5.53 159,385 6,738 5.64
Other borrowed funds 21,117 368 2.32 15,577 217 1.86
--------- --------- ---------- ---------
Total interest-bearing liabilities 821,035 18,785 3.05 776,576 22,352 3.84
--------- ---------
Noninterest-bearing deposits 24,006 16,100
Noninterest-bearing liabilities 10,738 8,496
Stockholders' equity 74,047 66,827
--------- ----------
Total liabilities and stockholders' equity $ 929,826 $ 867,999
========= ==========
Net interest income $ 21,027 $ 19,985
========= =========
Interest-rate spread (2) 3.01% 3.00%
======== =======
Net interest-earning assets, net margin (3) $ 54,414 3.20% $ 48,864 3.23%
========= ======== ========== =======
Ratio of interest-earning assets to
interest-bearing liabilities 1.07 1.06
========= ==========
(1) Includes interest-bearing deposits and Federal Home Loan Bank stock.
(2) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net margin is annualized net interest income divided by average
interest-earning assets.
21
FFLC BANCORP, INC.
Comparison of the Three-Month Periods Ended September 30, 2003 and 2002
General Operating Results. Net income for the three-month period ended September
30, 2003 was $2.3 million, or $.42 per basic and diluted share, compared to
$2.2 million, or $.41 per basic share and $.40 per diluted share, for the
comparable period in 2002. All per share information has been adjusted to
reflect the three-for-two stock split in 2003. The increase in net income
was primarily a result of an increase of $177,000 in net interest income,
an increase of $603,000 in noninterest income and a decrease in the
provision for loan losses of $69,000, partially offset by an increase of
$661,000 in noninterest expense.
Interest Income. Interest income decreased $1.5 million to $12.9 million for the
three-month period ended September 30, 2003. The decrease was due to a
decrease in the average yield earned on interest-earning assets from 6.63%
for the three months ended September 30, 2002 to 5.96% for the three months
ended September 30, 2003 and a $2.1 million decrease in average
interest-earning assets outstanding for the three months ended September
30, 2003 compared to the 2002 period.
Interest Expense. Interest expense decreased $1.7 million or 21.8%, from $7.6
million for the three-month period ended September 30, 2002 to $5.9 million
for the three-month period ended September 30, 2003. The decrease was
primarily due to a decrease in the average cost of interest-bearing
liabilities from 3.70% for the three months ended September 30, 2002 to
2.92% for the comparable 2003 period and a decrease of $9.2 million in
average interest-bearing liabilities outstanding. Average interest-bearing
deposits increased $16.8 million from $638.9 million outstanding during the
three months ended September 30, 2002 to $655.7 million outstanding during
the comparable period for 2003. Average borrowings decreased $26.0 million
from $180.9 million during the three months ended September 30, 2002 to
$154.9 million for the comparable 2003 period.
Provision for Loan Losses. The provision for loan losses is charged to income to
increase the total allowance to a level deemed appropriate by management.
It is based upon the volume and type of lending conducted by the Company,
the Company's charge-off experience, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they
relate to the Company's market area, and other factors related to the
collectibility of the Company's loan portfolio. The Company recorded
provisions for loan losses for the three-month periods ended September 30,
2003 and 2002 of $330,000 and $399,000, respectively. Net loans charged off
for the three-month periods ended September 30, 2003 and 2002 were $345,000
and $319,000, respectively. Management believes that the allowance for loan
losses, which was $5.4 million or .71% of gross loans at September 30, 2003
is adequate.
Noninterest Income. Noninterest income increased $603,000 or 70.0% from $862,000
during the 2002 period to $1.5 million during the 2003 period. The increase
was partly due to a $308,000 increase in gain on sales of loans held for
sale. The Company has decided to sell an increased number of fixed-rate
residential mortgage loans it originates in the secondary market due to the
low interest-rate environment.
Noninterest Expense. Noninterest expense increased by $661,000 or 17.5% from
$3.8 million for the three-month period ended September 30, 2002 to $4.4
million for the three-month period ended September 30, 2003. The increase
was primarily due to increases of $370,000 in salaries and employee
benefits, $74,000 in occupancy expense and $95,000 in data processing
expense related to the overall growth of the Company.
Income Taxes. The income tax provision increased from $1.3 million for the
three-month period ended September 30, 2002 (an effective tax rate of
37.7%) to $1.4 million (an effective tax rate of 37.7%) for the
corresponding period in 2003.
22
FFLC BANCORP, INC.
Comparison of the Nine-Month Periods Ended September 30, 2003 and 2002
General Operating Results. Net income for the nine-month period ended September
30, 2003 was $7.0 million, or $1.30 per basic share and $1.28 per diluted
share, compared to $6.6 million, or $1.23 per basic share and $1.21 per
diluted share, for the comparable period in 2002. All per share information
has been adjusted to reflect the three-for-two stock split in 2003. The
increase in net income was primarily a result of an increase of $1.0
million in net interest income and an increase of $1.6 million in
noninterest income, partially offset by an increase of $2.0 million in
noninterest expense.
Interest Income. Interest income decreased $2.5 million to $39.8 million for the
nine-month period ended September 30, 2003. The decrease was due to a
decrease in the average yield earned on interest-earning assets from 6.84%
for the nine months ended September 30, 2002 to 6.06% for the nine months
ended September 30, 2003, partially offset by a $50.0 million or 6.1%
increase in average interest-earning assets outstanding for the nine months
ended September 30, 2003 compared to the 2002 period.
Interest Expense. Interest expense decreased $3.6 million or 16.0%, from $22.4
million for the nine-month period ended September 30, 2002 to $18.8 million
for the nine-month period ended September 30, 2003. The decrease was
primarily due to a decrease in the average cost of interest-bearing
liabilities from 3.84% for the nine months ended September 30, 2002 to
3.05% for the comparable 2003 period, partially offset by an increase of
$44.5 million in average interest-bearing liabilities outstanding. Average
interest-bearing deposits increased $57.2 million from $601.6 million
outstanding during the nine months ended September 30, 2002 to $658.8
million outstanding during the comparable period for 2003. Average
borrowings decreased $12.7 million from $175.0 million during the nine
months ended September 30, 2002 to $162.3 million for the comparable 2003
period.
Provision for Loan Losses. The provision for loan losses is charged to income to
increase the total allowance to a level deemed appropriate by management.
It is based upon the volume and type of lending conducted by the Company,
the Company's charge-off experience, industry standards, the amount of
nonperforming loans, general economic conditions, particularly as they
relate to the Company's market area, and other factors related to the
collectibility of the Company's loan portfolio. The Company recorded
provisions for loan losses for the nine-month periods ended September 30,
2003 and 2002 of $1.1 million and $1.3 million, respectively. Net loans
charged off for the nine-month periods ended September 30, 2003 and 2002
were $894,000 and $778,000, respectively. Management believes that the
allowance for loan losses, which was $5.4 million or .71% of gross loans at
September 30, 2003 is adequate.
Noninterest Income. Noninterest income increased $1.6 million or 58.9% from $2.6
million during the 2002 period to $4.2 million during the 2003 period. The
increase was mainly due to a $786,000 increase in gain on sale of loans
held for sale. The Company has decided to sell an increased number of
fixed-rate residential mortgage loans it originates in the secondary market
due to the low interest-rate environment.
Noninterest Expense. Noninterest expense increased by $2.0 million or 18.5% from
$10.8 million for the nine-month period ended September 30, 2002 to $12.8
million for the nine-month period ended September 30, 2003. The increase
was primarily due to increases of $1.2 million in salaries and employee
benefits, $266,000 in occupancy expense and $156,000 in data processing
expense related to the overall growth of the Company.
Income Taxes. The income tax provision increased from $3.9 million for the
nine-month period ended September 30, 2002 (an effective tax rate of 37.3%)
to $4.3 million (an effective tax rate of 37.7%) for the corresponding
period in 2003.
23
FFLC BANCORP, INC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss from adverse changes in market prices and
rates. The Company's market risk arises primarily from interest-rate risk
inherent in its lending and deposit taking activities. The Company has
little or no risk related to trading accounts, commodities or foreign
exchange.
Management actively monitors and manages its interest rate risk exposure.
The primary objective in managing interest-rate risk is to limit, within
established guidelines, the adverse impact of changes in interest rates on
the Company's net interest income and capital, while adjusting the
Company's asset-liability structure to obtain the maximum yield-cost spread
on that structure. Management relies primarily on its asset-liability
structure to control interest rate risk. However, a sudden and substantial
increase in interest rates could adversely impact the Company's earnings,
to the extent that the interest rates borne by assets and liabilities do
not change at the same speed, to the same extent, or on the same basis.
There have been no significant change in the Company's market risk exposure
since December 31, 2002. The Company does not believe that the interest
rate swap entered into in September 2002 exposes the Company to significant
interest rate risk.
Item 4. Controls and Procedures
a. Evaluation of disclosure controls and procedures. The Company maintains
-------------------------------------------------
controls and procedures designed to ensure that information required to be
disclosed in the reports that the Company files or submits under the
Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, the Chief Executive and Chief Financial officers of the Company
concluded that the Company's disclosure controls and procedures were
adequate.
b. Changes in internal controls. The Company made no significant changes in
-----------------------------
its internal controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation of those controls
by the Chief Executive and Chief Financial officers.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceeding to which FFLC Bancorp, Inc.
or any of its subsidiaries is a party or to which any of their property is
subject.
Item 2. Changes in Securities
The Holding Company has the right at one or more times, unless an event of
default exists under the floating rate junior subordinated deferrable
interest debentures due September 26, 2032 (the "Debentures"), to defer
interest payments on the Debentures for up to twenty consecutive quarterly
periods. During that time, the Holding Company will be prohibited from
declaring or paying cash dividends on its common stock.
Item 3. Defaults upon Senior Securities
Not applicable
24
FFLC BANCORP, INC.
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.
3.1 Certificate of Incorporation of FFLC Bancorp, Inc.*
3.2 Bylaws of FFLC Bancorp, Inc. ***
4.0 Stock Certificate of FFLC Bancorp, Inc.*
10.1 First Federal Savings Bank of Lake County Recognition and
Retention Plan**
10.2 First Federal Savings Bank of Lake County Recognition and
Retention Plan for Outside Directors**
10.3 FFLC Bancorp, Inc. Incentive Stock Option Plans for Officers and
Employees**
10.4 FFLC Bancorp, Inc. Stock Option Plan for Outside Directors**
31.1 Certification of Chief Executive Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act
31.2 Certification of Chief Financial Officer required by Rule
13a-14(a)/15d-14(a) under the Exchange Act
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of Sarbanes-
Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of Sarbanes-
Oxley Act of 2002
* Incorporated herein by reference into this document from the Exhibits
to Form S-1, Registration Statement, initially filed on September 27,
1993, Registration No. 33-69466.
** Incorporated herein by reference into this document from the Proxy
Statement for the Annual Meeting of Stockholders held on May 12, 1994.
*** Incorporated herein by reference into this document from the September
30, 1999 FFLC Bancorp, Inc. Form 10-Q filed November 3, 1999.
(b) The following Forms 8-K's filed during the three-month period ended
September 30, 2003:
On July 11, 2003, the Company filed a Form 8-K to disclose that the
Company had issued three press releases to announce (i) the Company
joined the Russell 3000 Index, (ii) the Company's second quarter
earnings and (iii) declaration of a dividend.
On July 28, 2003, the Company filed a Form 8-K to disclose that the
Company was participating in a community bank investor conference in
New York.
25
FFLC BANCORP, INC.
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 hereunto duly authorized.
Date: October 28, 2003
FFLC Bancorp Inc.
By: /s/ Stephen T. Kurtz
-----------------------------
Name: Stephen T. Kurtz
Title:President and
Chief Executive Officer
By: /s/ Paul K. Mueller
-----------------------------
Name: Paul K. Mueller
Title:Executive Vice President
and Chief Financial Officer
26