SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly
Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2010
Commission File Number 000-50091
BANK OF
FLORIDA CORPORATION
A Florida Corporation
IRS Employer Identification No. 59-3535315
1185 Immokalee Road
Naples, Florida 34110
(239) 254-2100
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 has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes
¨
No
¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act).
|
|
|
|
|
|
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
x
|
|
|
|
|
Non-accelerated filer
|
|
¨
|
|
Smaller Reporting Company
|
|
¨
|
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
¨
No
x
The number of shares outstanding of the Registrants common stock, as of April 30, 2010 was 12,957,898 shares of $.01 par value
common stock.
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
Index
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2010 and December 31, 2009
(In Thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
March 31,
2010
|
|
|
December 31,
2009
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
8,839
|
|
|
$
|
10,161
|
|
Interest-bearing deposits due from other banks
|
|
|
172,010
|
|
|
|
58,506
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
180,849
|
|
|
|
68,667
|
|
|
|
|
Securities held to maturity
|
|
|
536
|
|
|
|
554
|
|
Securities available for sale
|
|
|
127,837
|
|
|
|
98,120
|
|
|
|
|
Loans
|
|
|
1,147,079
|
|
|
|
1,213,033
|
|
Less: Allowance for loan losses
|
|
|
46,147
|
|
|
|
42,063
|
|
|
|
|
|
|
|
|
|
|
Net loans
|
|
|
1,100,932
|
|
|
|
1,170,970
|
|
|
|
|
Restricted securities, at cost
|
|
|
8,643
|
|
|
|
8,643
|
|
Premises and equipment
|
|
|
26,873
|
|
|
|
27,282
|
|
Accrued interest receivable
|
|
|
4,925
|
|
|
|
4,805
|
|
Cash surrender value of life insurance
|
|
|
3,712
|
|
|
|
3,679
|
|
Deferred tax asset, net
|
|
|
|
|
|
|
200
|
|
Other real estate owned, net
|
|
|
18,323
|
|
|
|
14,357
|
|
Intangible assets, net
|
|
|
|
|
|
|
2,471
|
|
Other assets
|
|
|
3,446
|
|
|
|
2,595
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
1,476,076
|
|
|
$
|
1,402,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY/(DEFICIT)
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
1,310,021
|
|
|
$
|
1,187,318
|
|
Subordinated debt
|
|
|
16,000
|
|
|
|
16,000
|
|
Other borrowings
|
|
|
32,928
|
|
|
|
32,681
|
|
Federal Home Loan Bank advances
|
|
|
118,453
|
|
|
|
118,457
|
|
Accrued interest payable
|
|
|
2,092
|
|
|
|
2,045
|
|
Accrued expenses and other liabilities
|
|
|
2,348
|
|
|
|
2,006
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
1,481,842
|
|
|
|
1,358,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity/(Deficit):
|
|
|
|
|
|
|
|
|
Series A Preferred stock, par value $.01 per share, no shares designated, authorized, issued or outstanding at March 31,
2010 and December 31, 2009
|
|
|
|
|
|
|
|
|
Series B Preferred stock, par value $.01 per share, 520 shares designated, 172 and 0 shares issued and outstanding at
March 31, 2010 and December 31, 2009, respectively
|
|
|
3,971
|
|
|
|
3,971
|
|
Undesignated Preferred stock, par value $.01 per share, 9,949,480 shares authorized, no shares issued and outstanding at
March 31, 2010 and December 31, 2009
|
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share, 100,000,000 shares authorized, 12,957,898 and 12,968,898 shares issued and outstanding at
March 31, 2010 and December 31, 2009, respectively
|
|
|
130
|
|
|
|
130
|
|
Additional paid-in capital
|
|
|
201,185
|
|
|
|
201,173
|
|
Restricted stock, 115,600 and 168,500 shares at March 31, 2010 and December 31, 2009, respectively
|
|
|
(355
|
)
|
|
|
(436
|
)
|
Accumulated deficit
|
|
|
(210,842
|
)
|
|
|
(162,634
|
)
|
Accumulated other comprehensive income
|
|
|
145
|
|
|
|
1,632
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS EQUITY/(DEFICIT)
|
|
|
(5,766
|
)
|
|
|
43,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY/(DEFICIT)
|
|
$
|
1,476,076
|
|
|
$
|
1,402,343
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
1
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2010 and 2009
(In Thousands, except share data, unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three-months
ended
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
INTEREST INCOME
|
|
|
|
|
|
|
|
|
Interest and fees on loans
|
|
$
|
14,811
|
|
|
$
|
17,299
|
|
Interest on securities and other
|
|
|
1,093
|
|
|
|
1,492
|
|
Interest on federal funds sold
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
TOTAL INTEREST INCOME
|
|
|
15,904
|
|
|
|
18,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
Interest on deposits
|
|
|
6,514
|
|
|
|
7,686
|
|
Interest on subordinated debt
|
|
|
(4
|
)
|
|
|
147
|
|
Interest on Federal Home Loan Bank advances and other
|
|
|
1,366
|
|
|
|
1,365
|
|
|
|
|
|
|
|
|
|
|
TOTAL INTEREST EXPENSE
|
|
|
7,876
|
|
|
|
9,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES
|
|
|
8,028
|
|
|
|
9,595
|
|
|
|
|
PROVISION FOR LOAN LOSSES
|
|
|
43,077
|
|
|
|
6,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INTEREST INCOME (EXPENSE) AFTER PROVISION FOR LOAN LOSSES
|
|
|
(35,049
|
)
|
|
|
2,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST INCOME
|
|
|
|
|
|
|
|
|
Service charges and other income
|
|
|
3,506
|
|
|
|
472
|
|
Trust fees
|
|
|
525
|
|
|
|
654
|
|
Gain (loss) on securities, net
|
|
|
(1,113
|
)
|
|
|
|
|
Gain (loss) on sale of assets, net
|
|
|
(267
|
)
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
TOTAL NONINTEREST INCOME
|
|
|
2,651
|
|
|
|
1,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST EXPENSES
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
4,619
|
|
|
|
5,211
|
|
Occupancy
|
|
|
1,799
|
|
|
|
1,769
|
|
Equipment rental, depreciation and maintenance
|
|
|
751
|
|
|
|
837
|
|
Data processing
|
|
|
682
|
|
|
|
585
|
|
Stationary, postage and office supplies
|
|
|
153
|
|
|
|
154
|
|
Professional fees
|
|
|
853
|
|
|
|
483
|
|
Advertising, marketing and public relations
|
|
|
187
|
|
|
|
219
|
|
Other real estate owned and repossession expense
|
|
|
1,416
|
|
|
|
337
|
|
Intangible impairment
|
|
|
2,471
|
|
|
|
|
|
Other
|
|
|
1,695
|
|
|
|
1,436
|
|
|
|
|
|
|
|
|
|
|
TOTAL NONINTEREST EXPENSES
|
|
|
14,626
|
|
|
|
11,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES (BENEFIT)
|
|
|
(47,024
|
)
|
|
|
(6,974
|
)
|
Income taxes (benefit)
|
|
|
1,184
|
|
|
|
(2,601
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(48,208
|
)
|
|
$
|
(4,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE: BASIC
|
|
$
|
(3.76
|
)
|
|
$
|
(0.34
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS PER SHARE: DILUTED
|
|
$
|
(3.76
|
)
|
|
$
|
(0.34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING: BASIC
|
|
|
12,807,847
|
|
|
|
12,779,020
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING: DILUTED
|
|
|
12,807,847
|
|
|
|
12,779,020
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
2
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY/(DEFICIT)
For the Year Ended December 31, 2009 and the Three-Months Ended March 31, 2010 (Unaudited)
(In Thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Additional
Paid-In
|
|
|
Restricted
|
|
|
Accumulated
|
|
|
Accumulated
Other
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
Capital
|
|
|
Stock
|
|
|
Deficit
|
|
|
Income
|
|
|
Total
|
|
Balance, December 31, 2008
|
|
|
|
$
|
|
|
12,779,020
|
|
|
$
|
128
|
|
$
|
199,862
|
|
|
|
|
|
|
$
|
(15,030
|
)
|
|
$
|
5,019
|
|
|
$
|
189,979
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(147,498
|
)
|
|
|
|
|
|
|
(147,498
|
)
|
|
|
|
|
|
|
|
|
|
|
Preferred stock issued
|
|
172
|
|
|
3,971
|
|
|
|
|
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,300
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued
|
|
|
|
|
|
|
189,878
|
|
|
|
2
|
|
|
704
|
|
|
|
(706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in-capital from stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
520
|
|
Tax benefit from stock options exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
Dividends on Series B preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(106
|
)
|
|
|
|
|
|
|
(106
|
)
|
Changes in fair value of interest rate swap, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,217
|
)
|
|
|
(1,217
|
)
|
Changes in fair value on available-for-sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,170
|
)
|
|
|
(2,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
172
|
|
$
|
3,971
|
|
12,968,898
|
|
|
$
|
130
|
|
$
|
201,173
|
|
|
$
|
(436
|
)
|
|
$
|
(162,634
|
)
|
|
$
|
1,632
|
|
|
$
|
43,836
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,208
|
)
|
|
|
|
|
|
|
(48,208
|
)
|
|
|
|
|
|
|
|
|
|
|
Common stock forfeited
|
|
|
|
|
|
|
(11,000
|
)
|
|
|
|
|
|
(41
|
)
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in-capital from stock compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
Recognition of ineffective portion of interest rate swap, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,964
|
)
|
|
|
(1,964
|
)
|
Changes in fair value on available-for-sale securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
477
|
|
|
|
477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2010
|
|
172
|
|
$
|
3,971
|
|
12,957,898
|
|
|
$
|
130
|
|
$
|
201,185
|
|
|
$
|
(355
|
)
|
|
$
|
(210,842
|
)
|
|
$
|
145
|
|
|
$
|
(5,766
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In Thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three-months ended
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Net loss
|
|
$
|
(48,208
|
)
|
|
$
|
(4,373
|
)
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on available-for-sale securities:
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during the year, net of income taxes (benefit) of ($130) in 2010 and $388 in 2009,
respectively
|
|
|
(217
|
)
|
|
|
644
|
|
|
|
|
Reclassification adjustment for losses realized in net loss:
|
|
|
|
|
|
|
|
|
Reclassification adjustment for losses realized in net loss, net of income taxes (benefit) of $418 and $0 in 2010 and 2009,
respectively
|
|
|
694
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on interest rate swap:
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during the year, net of income taxes (benefit) of ($144) in 2010 and $2 in 2009,
respectively
|
|
|
|
|
|
|
3
|
|
|
|
|
Reclassification adjustment for gains realized in net loss:
|
|
|
|
|
|
|
|
|
Reclassification adjustment for gains realized in net loss, net of income taxes of ($1,184) and $0 in 2010 and 2009, respectively
|
|
|
(1,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(49,695
|
)
|
|
$
|
(3,726
|
)
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
3
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three-Months Ended March 31, 2010 and 2009
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Three-Months Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(48,208
|
)
|
|
$
|
(4,373
|
)
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
734
|
|
|
|
785
|
|
Provision for loan losses
|
|
|
43,077
|
|
|
|
6,693
|
|
Accretion of deferred loan fees and costs, net
|
|
|
(64
|
)
|
|
|
(113
|
)
|
Accretion of premiums and discounts on investments, net
|
|
|
214
|
|
|
|
3
|
|
Loss (gain) on assets, net
|
|
|
268
|
|
|
|
(29
|
)
|
Other than temporary impairment on securities
|
|
|
1,113
|
|
|
|
|
|
Originations of loans held for sale
|
|
|
(1,987
|
)
|
|
|
(8,681
|
)
|
Proceeds from sale of loans held for sale
|
|
|
2,002
|
|
|
|
8,532
|
|
Amortization and writeoff of intangible assets
|
|
|
2,471
|
|
|
|
112
|
|
Decrease in accrued interest receivable
|
|
|
(120
|
)
|
|
|
(131
|
)
|
Deferred income taxes
|
|
|
1,184
|
|
|
|
1,820
|
|
Increase in cash surrender value of bank-owned life insurance
|
|
|
(33
|
)
|
|
|
(38
|
)
|
Increase in other assets
|
|
|
(4,001
|
)
|
|
|
(2,412
|
)
|
Stock compensation expense
|
|
|
93
|
|
|
|
81
|
|
Increase (decrease) in accrued interest payable
|
|
|
47
|
|
|
|
(146
|
)
|
Decrease in accrued expenses and other liabilities
|
|
|
255
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
|
|
(2,955
|
)
|
|
|
2,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net change in loans held for investment
|
|
|
22,143
|
|
|
|
(25,156
|
)
|
Purchase of securities available for sale
|
|
|
(32,760
|
)
|
|
|
|
|
Purchase of restricted securities
|
|
|
|
|
|
|
(2,271
|
)
|
Proceeds from sale of restricted securities
|
|
|
|
|
|
|
2,870
|
|
Proceeds from maturing securities and principal payments on available for sale securities
|
|
|
2,498
|
|
|
|
5,947
|
|
Proceeds from sale of other real estate owned
|
|
|
635
|
|
|
|
171
|
|
Purchase of premises and equipment, net
|
|
|
(325
|
)
|
|
|
(313
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(7,809
|
)
|
|
|
(18,752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits
|
|
|
122,703
|
|
|
|
(1,015
|
)
|
Proceeds from other borrowings
|
|
|
19,308
|
|
|
|
196,900
|
|
Payment of other borrowings
|
|
|
(19,061
|
)
|
|
|
(136,900
|
)
|
Proceeds from FHLB Advances
|
|
|
25,000
|
|
|
|
52,278
|
|
Repayment of FHLB Advances
|
|
|
(25,004
|
)
|
|
|
(86,282
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
122,946
|
|
|
|
24,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
112,182
|
|
|
|
8,384
|
|
|
|
|
CASH AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
68,667
|
|
|
|
47,938
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
180,849
|
|
|
$
|
56,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash paid during the period for
:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
7,829
|
|
|
$
|
9,344
|
|
|
|
|
|
|
|
|
|
|
Taxes
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Noncash Transactions
:
|
|
|
|
|
|
|
|
|
Unrealized holding (gain) loss on securities available-for-sale
|
|
$
|
(217
|
)
|
|
$
|
644
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gain on derivatives
|
|
$
|
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
Transfer of loans to other real estate owned
|
|
$
|
4,882
|
|
|
$
|
812
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
4
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 Organization and Basis of Presentation
The consolidated financial statements of Bank of Florida Corporation (the
Company) include the accounts of the Company and its wholly-owned subsidiaries, Bank of Florida Southwest, Bank of Florida Southeast, Bank of Florida Tampa Bay (collectively, the Banks), and Bank of
Florida Trust Company (the Trust Company). All significant intercompany balances and transactions have been eliminated.
As of March 31, 2010, each of our three subsidiary banks was critically undercapitalized under Federal Deposit Insurance
Corporation (FDIC) rules. In addition, the FDIC has issued to each bank a Prompt Corrective Action Directive which required each bank to return to adequately capitalized condition by April 17, 2010; none of the banks met
this deadline. If, in the very near term, we are not successful in our current $71.8 million capital raising effort, it is likely that each of the three banks will be closed by the Florida Office of Financial Regulation (OFR) and placed
into receivership with the FDIC. In such case, our only remaining operations will be those of Bank of Florida Trust Company, which can not be expected to provide significant revenues or profits.
The Banks provide a broad range of commercial and consumer banking services primarily within the Naples, Ft. Myers, Ft. Lauderdale, Palm
Beach, Miami-Dade and Tampa Bay areas of Florida. The Banks are subject to regulation by both the Florida Department of Financial Services and the Federal Deposit Insurance Corporation.
The Trust Company offers investment management, trust administration, estate planning, and financial planning services. The assets under
administration of Bank of Florida Trust Company, as well as the obligations associated with those assets, are not included as part of the consolidated financial statements of the Company.
In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments necessary
(consisting of normal recurring adjustments) to present fairly our financial position as of March 31, 2010 and December 31, 2009, and the results of operations and cash flows for the three month periods ended March 31, 2010 and 2009,
and the stockholders equity for the three and twelve months ended March 31, 2010 and December 31, 2009. The results of operations for interim periods are not necessarily indicative of the results of operations to be expected for the
fiscal year ending December 31, 2010 or any other interim period.
The accounting and reporting policies of the Company
are in conformity with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q, Article 10 of Regulation S-X and prevailing practices within the financial
services industry. Accordingly, they do not include all of the footnotes and information required by accounting principles generally accepted in the United States of America. The preparation of consolidated financial statements, in conformity with
accounting principles generally accepted in the United States of America, requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of income and expense during the reporting period. Such estimates are subject to change in the future as additional information becomes available or previously existing circumstances are
modified. Management has evaluated subsequent events for potential recognition or disclosure in the financial statements through the date upon which the Companys quarterly report on Form 10-Q was filed with the Securities and Exchange
Commission. We did not identify subsequent events that were not reflected in the results herein.
The Companys
significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in its 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission. For interim reporting purposes, the Company
follows the same basic accounting policies and considers each interim period as an integral part of an annual period.
These
unaudited consolidated financial statements included herein should be read in conjunction with the financial statements and related footnotes included in the Companys 2009 Form 10-K. The results of operations for interim periods are not
necessarily indicative of the results of operations to be expected for the fiscal year ending December 31, 2010 or any other interim period.
5
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 1 Organization and Basis of Presentation (contd)
Reclassifications:
Certain reclassifications have been made to prior period financial statements to conform to the March 31, 2010 financial statement
presentation. These reclassifications only changed the reporting categories but did not affect our results of operations or financial position.
NOTE 2GOING CONCERN
The Companys capital and that of its Banks has been significantly depleted. The net loss of $147.6 million recorded by the Company
in 2009 and the net loss of $48.2 million recorded by the Company in the first quarter of 2010 were primarily the result of significant increases in the provision for credit losses, the recognition of goodwill impairment and the establishment of a
valuation reserve against the Companys deferred tax asset. We cannot assure you that we will be able to continue meaningful operations, or resume profitable operations in the near future, or at all.
As a result of these losses, as of March 31, 2010, our total stockholders deficit decreased to ($5.8) million and our Tier 1
leverage capital ratio was (0.66)%, our total risk based capital ratio was (0.86)% and our Tier 1 risk based capital ratio was (0.86)%. These losses also resulted in each of our three subsidiary Banks being critically undercapitalized.
As a result, the FDIC has issued to each bank a Prompt Corrective Action Directive (Directives) which required each Bank to return to adequately capitalized condition by April 17, 2010; none of the Banks met this
deadline. If we are not successful in completing our $71.8 million common stock offering in the very near term, it is likely that each of our three subsidiary Banks will be closed by the Florida Office of Financial Regulation (OFR) and
placed into receivership with the FDIC. In such case, our only remaining operations will be those of Bank of Florida Trust Company, which can not be expected to provide significant revenues or profits.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the discharge of liabilities in the normal course of business for the foreseeable future, and do not include any adjustments to reflect the possible future effects on the recoverability or classification of assets, and the amounts or
classification of liabilities that may result from the outcome of any regulatory action, which would affect our ability to continue as a going concern
.
It is likely that any sale of our assets or transfer of our liabilities by the FDIC if it
is named receiver will be at a discount to the values recorded on a going concern basis.
Based upon the financial condition
of the Banks, each of our bank subsidiaries has received a Directive, due to its capital status. The Directives require that within 30 days of the effective date of the Directives (by April 17, 2010), the subsidiary banks must: (1) be
adequately capitalized under regulatory capital guidelines; and/or (2) accept an offer to be acquired by a depository institution holding company or combine with another insured depository institution. Federal law also requires the
FDIC to place a bank into receivership if it has remained critically undercapitalized for 90 days, unless the FDIC determines that other action is more appropriate. If one of our subsidiary banks fails and is placed into receivership, it
is highly likely the FDIC will exercise its cross guarantee rights and close the other subsidiary banks (even if they have complied with their Directives) in order to reduce any loss or cost to the FDIC. Therefore, if we are unable to
successfully complete our $71.8 million stock offering in the very near term, it is highly likely that all three banks will be placed into receivership with the FDIC.
6
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 2GOING CONCERN (contd)
The Directives also prohibit our subsidiary banks from: (1) paying rates of interest in excess of prescribed limits;
(2) accepting, renewing or rolling over any brokered deposits; (3) engaging in any new line of business; (4) making any capital distributions, dividend or subordinated debt payments to the Company or any affiliate;
(5) establishing or acquiring a new branch and also require the subsidiary banks to obtain the approval of the FDIC prior to relocating, selling or disposing of any existing branch; (6) paying management fees to the Company; and
(7) growth in average assets and loans, except in certain limited circumstances. In addition, the Directives provide that the subsidiary banks may not pay any bonus to, or increase the compensation of, any director or officer without the prior
approval of the FDIC, and that the subsidiary banks must comply with Section 23A of the Federal Reserve Act without the exemption for transactions with certain affiliated institutions. Lastly, the Directives prohibit the subsidiary banks from
entering into any material transaction, including any investment, expansion, acquisition, sale of assets or other similar transaction which would have a significant financial impact on the bank without prior approval of the FDIC.
NOTE 3Stock-based Compensation
The Company has a stock option plan which provides for the grant of options at the discretion of the Board of Directors or a committee
designated by the Board of Directors to administer the Plan. Each stock option granted under the Plan has a maximum term of ten years subject to earlier termination in the event the participant ceases to be an employee. The exercise price of the
stock options may not be less than the book value of common stock on the date the option is granted. The committee shall determine the period during which stock options vest at the date of grant. The Plan will terminate on June 8, 2016. At
March 31, 2010, there were 477,708 shares available for grant under the Plan.
The total fair value of shares vested and
recognized as compensation expense for the three months ended March 31, 2010 and 2009 was approximately $53,000 and $68,000, respectively. There was no associated tax benefit recognized in connection with these incentive stock options. As of
March 31, 2010, the Company had 88,852 nonvested options outstanding and there was approximately $460,000 of total unrecognized compensation cost related to these nonvested options. This cost is expected to be recognized monthly on a
straight-line basis, over the vesting periods, through December 31, 2013.
The Company has examined its historical
pattern of option exercises in an effort to determine if there were any patterns based on certain employee populations. From this analysis, the Company could not identify any patterns in the exercise of options. As such, the Company determined the
estimated life of options issued to be the midpoint of the vesting term and the contractual term ((vesting term and original contractual term)/2). Expected volatility is based on historical volatility of the Companys stock. The risk-free
interest rates are based on U. S. Treasury notes in effect at the time of the grant. The dividend yield assumption is based on the Companys history and expectation of dividends payments.
There were no stock options granted or exercised during the first quarter of 2010 and 2009. Stock option activity during the three months
ended March 31, 2010 was as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPTIONS
OUTSTANDING
|
|
|
WEIGHTED
AVERAGE OPTION
PRICE PER SHARE
|
|
REMAINING
CONTRACTUAL
TERM
|
|
AGGREGATE
INTRINSIC
VALUE
|
Balance December 31, 2009
|
|
539,768
|
|
|
$
|
14.19
|
|
|
|
$
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
(25,010
|
)
|
|
|
13.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2010
|
|
514,758
|
|
|
|
14.21
|
|
4.7 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 31, 2010
|
|
425,906
|
|
|
|
14.47
|
|
4.0 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 3Stock-based Compensation (contd)
The Company granted restricted stock for 176,500 shares to Executive Officers as of March 16, 2009. Certain of the shares vest in
installments and others vest in total upon satisfaction of the stipulated conditions. If the restrictions are not satisfied, the shares are forfeited and again become available for grant under the 2006 Stock Compensation Plan. All shares of
restricted stock will be held by the Company until the restrictions are satisfied. The grants are divided into the following three categories: restricted shares vesting in one year (31,500 shares), performance based restricted shares vesting over
three years and upon the Companys achieving certain performance goals (63,000 shares) and restricted shares vesting over five years (82,000 shares). As of March 31, 2010, there were 115,600 nonvested and 41,900 vested shares of restricted
stock and 19,000 shares of restricted stock were forfeited upon the cessation of two officers employment. Compensation expense totaling $39,000 and $11,000 was recognized during the three months ended March 31, 2010 and 2009,
respectively, in connection with restricted stock.
In connection with the issuance of Series B Preferred Stock, a total of
124,852 warrants were granted in 2009. Each warrant permits its holder to purchase 720, 742, or 772 shares of Company common stock at $3.47, $3.37, or $3.24, respectively, per share at any time during the ten year period commencing on issuance. The
warrants are nontransferable. At March 31, 2010 and December 31, 2009 warrants to purchase 124,852 common shares at an average exercise price of $3.44 were outstanding.
The Company has also issued warrants to certain members of the Boards of Directors and Advisory Boards of the Company and its
subsidiaries in connection with the formations of the Company and its subsidiaries. All of these warrants have been exercised or have expired. Compensation expense totaling $1,000 was recognized during the three months ended March 31, 2009.
NOTE 4Accounting Standards Updates
In February 2010, the FASB issued Accounting Standards Update No. 2010-09 (ASU 2010-09),
Subsequent Events (Topic 855)
- Amendments to Certain Recognition and Disclosure Requirements.
ASU 2010-09 provides amendments to Subtopic 855-10 as follows: 1) An entity that is an SEC filer or a conduit bond obligor for conduit debt securities traded in a public market is
required to evaluate subsequent events through the date the financial statements are issued, 2) An SEC filer is an entity that is required to file or furnish its financial statements with either the SEC or the appropriate entity under
Section 12(i) of the Securities Exchange Act of 1934, 3) An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated, 4) The definition of public entity has been removed, and 5) The
scope of the reissuance disclosure requirements is refined to include revised financial statements only. All amendments in this Update are effective upon issuance of the final Update, except for the use of the issued date for conduit debt obligors
which is effective for interim and annual periods ending after June 15, 2010. The adoption of this guidance did not have a material effect on the Companys consolidated financial condition or results of operations.
In March 2010, the FASB issued Accounting Standards Update No. 2010-11 (ASU 2010-11),
Derivatives and Hedging (Topic
815) Scope Exception Related to Embedded Credit Derivatives.
ASU 2010-11 provides amendments to Subtopic 855-15 as follows: 1) Subtopic 815-15 clarifies the scope exception for embedded credit derivative features related to the transfer
of credit risk in the form of subordination of one financial instrument to another. The amendments address how to determine which embedded credit derivative features are considered to be embedded derivatives that should not be analyzed for potential
bifurcation and separate accounting, 2) The embedded credit derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another is not subject to Section 815-15-25, 3) Other
embedded credit derivative features are considered embedded derivatives subject to the application of Section 815-15-25 provided the overall contract is not a derivative in its entirety under Section 815-10-15, 4) The economic
characteristics and risks of an embedded credit derivative feature should be considered to be not clearly and closely related to the economic characteristics and risks of the host contract and thus to meet the criterion in paragraph 815-15-25-1(a),
and 5) An entity may elect the fair value option for any investment in a beneficial interest in a securitized financial asset in its entirety. The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal
quarter beginning after June 15, 2010 with early adoption permitted. The adoption of this guidance will not have a material effect on the Companys consolidated financial condition or results of operations.
8
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 5
Securities
The amortized cost, gross unrealized gains and losses and estimated fair value of securities available for sale shown in the consolidated
balance sheets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
|
Fair Value
|
At March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
116,536
|
|
$
|
214
|
|
$
|
|
|
|
$
|
116,750
|
U.S. Treasury securities and other U.S. agency obligations
|
|
|
10,557
|
|
|
12
|
|
|
|
|
|
|
10,569
|
Equity securities
|
|
|
514
|
|
|
4
|
|
|
|
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities available for sale
|
|
$
|
127,607
|
|
$
|
230
|
|
$
|
|
|
|
$
|
127,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity- other bonds
|
|
$
|
536
|
|
$
|
|
|
$
|
|
|
|
$
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
Gross Unrealized
|
|
|
Estimated
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
|
Fair Value
|
At December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
87,547
|
|
$
|
41
|
|
$
|
(548
|
)
|
|
$
|
87,040
|
U.S. Treasury securities and other U.S. agency obligations
|
|
|
10,598
|
|
|
12
|
|
|
(39
|
)
|
|
|
10,571
|
Equity securities
|
|
|
508
|
|
|
1
|
|
|
|
|
|
|
509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities available for sale
|
|
$
|
98,653
|
|
$
|
54
|
|
$
|
(587
|
)
|
|
$
|
98,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity- other bonds
|
|
$
|
554
|
|
$
|
|
|
$
|
(18
|
)
|
|
$
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no sales of securities for the three months
ended March 31, 2010.
The composition of the investment securities portfolio reflects the Companys investment
strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of revenue. The securities portfolio also provides a balance to interest rate risk in other categories of the balance sheet while providing a
vehicle for the investment of available funds, furnishing liquidity, and supplying securities to pledge as required collateral for certain deposits.
There were securities pledged with approximate market values of $29,912,000, $25,529,000, $23,313,000, $13,439,000, $9,569,000, and
$541,000 as collateral to the Federal Home Loan Bank, Internal Repurchase Agreements, Citigroup Repo, Pacific Coast Bankers Bank, Federal Reserve, and the State of Florida, respectively, as of March 31, 2010.
Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or
market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the
intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Due to changes in circumstances, as further discussed in
Note 2 Going
Concern
, the Company recognized other than temporary impairment on held to maturity and available for sale securities. It is highly likely that all three banks will be placed into receivership with the FDIC, therefore, we cannot assert the
ability to hold the securities for a sufficient amount of time to allow recovery. For the three months ended March 31, 2010, the Company recognized an impairment charge of $1.1 million.
9
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 5 Securities (contd)
At March 31, 2010, there were twenty six out of forty one securities at a loss position. The losses on investment securities
available for sale were caused by interest rate changes. Although the decline in fair value is attributable to changes in interest rates and not credit quality, and because it is highly likely that all three banks will be placed into
receivership with the FDIC, we do not have the ability to hold the securities for a sufficient amount of time to allow recovery. Thus, the securities are considered other-than-temporarily impaired.
Information pertaining to securities with gross unrealized losses at December 31, 2009, aggregated by investment category and length
of time that individual securities have been in a continuous loss position, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than Twelve Months
|
|
Over Twelve Months
|
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
Gross
Unrealized
Losses
|
|
|
Fair Value
|
|
|
|
|
|
Securities available for sale
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
$
|
(548
|
)
|
|
$
|
30,350
|
|
$
|
|
|
|
$
|
|
U.S. Treasury and other U.S. agency obligations
|
|
|
(39
|
)
|
|
|
5,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
(587
|
)
|
|
$
|
35,884
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and political subdivisions
|
|
|
(1
|
)
|
|
|
124
|
|
|
(17
|
)
|
|
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
(1
|
)
|
|
$
|
124
|
|
|
(17
|
)
|
|
|
388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 5 Securities (contd)
Expected maturities of investment securities may differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Periodic payments are received of mortgage-backed securities based on the payment patterns of the underlying collateral. As of March 31, 2010, the amortized cost and estimated fair value
of investment securities, by contractual maturities, are as follows (in thousands):
|
|
|
|
|
|
|
Securities available for sale:
|
|
Amortized
Cost
|
|
Fair Value
|
Due less than one year
|
|
$
|
50
|
|
$
|
50
|
Due after one through five years
|
|
|
10,018
|
|
|
10,028
|
Due after ten years
|
|
|
489
|
|
|
491
|
|
|
|
|
|
|
|
Subtotal
|
|
|
10,557
|
|
|
10,569
|
Mortgage-backed securities
|
|
|
116,536
|
|
|
116,750
|
Equity securities
|
|
|
514
|
|
|
518
|
|
|
|
|
|
|
|
Totals
|
|
$
|
127,607
|
|
$
|
127,837
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity:
|
|
Amortized
Cost
|
|
Fair Value
|
Due less than one year
|
|
$
|
25
|
|
$
|
25
|
Due after five through ten years
|
|
|
124
|
|
|
124
|
Due after ten years
|
|
|
387
|
|
|
387
|
|
|
|
|
|
|
|
Totals
|
|
$
|
536
|
|
$
|
536
|
|
|
|
|
|
|
|
11
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 6
Loans
The composition of the loan portfolio at March 31, 2010 and December 31, 2009 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
2010
|
|
|
December 31,
2009
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
612,206
|
|
|
$
|
625,703
|
|
Land and construction
|
|
|
185,060
|
|
|
|
216,565
|
|
One-to-four family residential
|
|
|
161,891
|
|
|
|
167,015
|
|
Multi-family
|
|
|
33,311
|
|
|
|
35,522
|
|
|
|
|
|
|
|
|
|
|
Total real estate loans
|
|
$
|
992,468
|
|
|
$
|
1,044,805
|
|
Commercial and industrial loans
|
|
|
101,860
|
|
|
|
112,385
|
|
Lines of credit
|
|
|
43,695
|
|
|
|
45,247
|
|
Consumer loans
|
|
|
10,269
|
|
|
|
11,925
|
|
|
|
|
|
|
|
|
|
|
Total gross loans held for investment
|
|
|
1,148,292
|
|
|
|
1,214,362
|
|
Less: allowance for loan losses
|
|
|
(46,147
|
)
|
|
|
(42,063
|
)
|
Less: deferred loan fees, net
|
|
|
(1,213
|
)
|
|
|
(1,329
|
)
|
|
|
|
|
|
|
|
|
|
Total loans held for investment, net
|
|
$
|
1,100,932
|
|
|
$
|
1,170,970
|
|
|
|
|
|
|
|
|
|
|
A loan is considered impaired when, based on current information and events, it is probable that the Company
will be unable to collect all amounts due according to the contractual terms of the loan agreement. Specific impairment on loans in this category is calculated based on the present value of expected future cash flows discounted at the loans
effective interest rate, or for collateral-dependent loans, at the fair value of the collateral. The following is a summary of information pertaining to nonaccrual loans (in thousands):
|
|
|
|
|
|
|
|
|
March 31,
2010
|
|
December 31,
2009
|
|
|
|
Impaired loans without a valuation allowance
|
|
$
|
154,824
|
|
$
|
72,343
|
Impaired loans with a valuation allowance
|
|
|
68,224
|
|
|
141,037
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
223,048
|
|
$
|
213,380
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance related to impaired loans
|
|
$
|
18,155
|
|
$
|
27,707
|
|
|
|
Total nonaccrual loans
|
|
$
|
153,513
|
|
$
|
164,474
|
Loans defined as Troubled Debt Restructuring accruing
|
|
$
|
52,011
|
|
$
|
48,899
|
Total loans ninety days or more past due and still accruing
|
|
$
|
17,524
|
|
$
|
7
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
223,048
|
|
$
|
213,380
|
|
|
|
|
|
|
|
|
|
|
Total other real estate owned
|
|
$
|
18,323
|
|
$
|
14,357
|
Loans defined as Troubled Debt Restructuring
|
|
$
|
91,287
|
|
$
|
90,592
|
12
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 6 Loans (contd)
There were no outstanding commitments to extend credit related to those loans in nonaccrual status or 90 days or more past due. In certain
isolated cases, the Company has executed forbearance agreements whereby the Company will continue to fund construction loans to completion as long as the borrower meets the conditions of the forbearance agreement.
Of the $80.3 million total undisbursed lines of credit, there was approximately $8,600, or less than 1%, related to nonaccrual loans. Of
the $171.0 million in nonperforming loans, $68.2 million was charged down to net realizable value of the collateral.
At
March 31, 2010 the primary source of repayment with respect to $223.0 million of the impaired loans is sale of the related collateral. Approximately $116 million of the impaired loans were written down to collateral value during the first
quarter of 2010.
The Company had $91.3 million and $27.3 million in loans that would be defined as troubled debt
restructuring at March 31, 2010 and 2009, respectively. Of those amounts, $52.0 million and $9.4 million were accruing as of March 31, 2010 and 2009, respectively, as they were performing in accordance with their restructured terms. The
majority of the restructurings involve extending the interest only period, reducing the interest rate to give the borrower relief, or other modifications of terms that deviate from the original contract. There were no unfunded lines of credit
related to any troubled debt restructured loan at March 31, 2010.
Subsequent to March 31, 2010, we adjusted our
provision due to further evaluation of our collateral values which we deemed material.
The activity in the allowance for loan
losses for March 31, 2010 and the year ended December 31, 2009 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
2010
|
|
|
December 31,
2009
|
|
Balance at beginning of year
|
|
$
|
42,063
|
|
|
$
|
29,533
|
|
Provision charged to operations
|
|
|
43,077
|
|
|
|
73,670
|
|
Charge-offs
|
|
|
(39,146
|
)
|
|
|
(61,334
|
)
|
Recoveries
|
|
|
153
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
46,147
|
|
|
$
|
42,063
|
|
|
|
|
|
|
|
|
|
|
The composition of net chargeoffs for the three months ended March 31, 2010 and 2009, respectively, is
as follows (in thousands):
|
|
|
|
|
|
|
Net Chargeoffs
|
|
March 31,
2010
|
|
March 31,
2009
|
|
|
|
Real estate:
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
13,930
|
|
$
|
431
|
Land and construction
|
|
|
12,810
|
|
|
8,145
|
One-to-four family residential
|
|
|
6,349
|
|
|
1,581
|
Multi-family
|
|
|
1,952
|
|
|
87
|
|
|
|
|
|
|
|
Total real estate net chargeoffs
|
|
$
|
35,041
|
|
$
|
10,244
|
Commercial and industrial loans
|
|
|
1,943
|
|
|
1,428
|
Lines of credit
|
|
|
1,705
|
|
|
|
Consumer loans
|
|
|
304
|
|
|
101
|
|
|
|
|
|
|
|
Total net chargeoffs
|
|
$
|
38,993
|
|
$
|
11,773
|
|
|
|
|
|
|
|
13
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 6 Loans (contd)
The composition of the nonperforming loans, which includes nonaccrual loans and loans ninety days or more past due and still accruing, for
March 31, 2010 and the year ended December 31, 2009 is as follows (in thousands):
|
|
|
|
|
|
|
Nonperforming loans
|
|
March 31,
2010
|
|
December 31,
2009
|
|
|
|
Real estate:
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
77,359
|
|
$
|
60,961
|
Land and construction
|
|
|
63,689
|
|
|
70,908
|
One-to-four family residential
|
|
|
22,514
|
|
|
24,657
|
Multi-family
|
|
|
4,503
|
|
|
2,764
|
|
|
|
|
|
|
|
Total real estate nonperforming loans
|
|
$
|
168,065
|
|
$
|
159,290
|
Commercial and industrial loans
|
|
|
1,369
|
|
|
1,953
|
Lines of credit
|
|
|
1,154
|
|
|
2,646
|
Consumer loans
|
|
|
449
|
|
|
592
|
|
|
|
|
|
|
|
Total nonperforming loans
|
|
$
|
171,037
|
|
$
|
164,481
|
|
|
|
|
|
|
|
14
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 7 Loss Per Common Share
Basic loss per share represents net loss divided by the weighted-average number of common shares outstanding during the period. Due to the
Companys reported loss, common stock equivalents are deemed to be anti-dilutive and are excluded from the computation.
Components used in computing loss per share for the three months ended March 31, 2010 and 2009, are summarized as follows (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
Net
Loss
|
|
|
Weighted-
Average
Shares
Outstanding
|
|
Loss
Per
Share
|
|
|
Net
Income
|
|
|
Weighted-
Average
Shares
Outstanding
|
|
Income
Per
Share
|
|
Loss available to common shareholders - basic
|
|
$
|
(48,208
|
)
|
|
12,807,847
|
|
(3.76
|
)
|
|
$
|
(4,373
|
)
|
|
12,779,020
|
|
(0.34
|
)
|
Dilutive effect of stock options outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of warrants outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss available to common shareholders - diluted
|
|
$
|
(48,208
|
)
|
|
12,807,847
|
|
(3.76
|
)
|
|
$
|
(4,373
|
)
|
|
12,779,020
|
|
(0.34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31, 2010 and 2009, all stock options and warrants were excluded
from diluted earnings per share calculations because the Company recorded a loss for those periods.
15
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 8
Fair Value Measurements
The fair value estimates are presented for financial instruments without attempting to
estimate the value of the Banks long-term relationships with depositors and the benefit that results from low cost funding provided by deposit liabilities. In addition, significant assets which are not considered financial instruments and are,
therefore, not a part of the fair value estimates include office properties and equipment.
The following methods and
assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents
: For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Securities
: Investment securities classified as available-for-sale are recorded at fair value on a recurring basis
while securities classified as held to maturity are recorded at fair value on a non recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair
values are measured utilizing independent valuation techniques of identical or similar investment securities. Third party vendors compile prices from various sources and may apply such techniques as matrix pricing to determine the value of
identical or similar investment securities (Level 2). Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for the specific investment
securities but rather relying on the investment securities relationship to other benchmark quoted investment securities. Any investment securities not valued based upon the methods above are considered Level 3.
Loans
: Loans with no significant change in credit risk and with rates that are repriced in coordination with movements in market
rates were valued at carrying amounts. The fair value of other loans is estimated by discounting scheduled cash flows to maturity using current market rates at which loans with similar terms would be made to borrowers of similar credit quality.
Appropriate adjustments were made to reflect probable credit losses. Impaired loans are valued at the net realizable value of the collateral or the present value of the cash flows.
Restricted securities
: The carrying value of restricted securities, including Federal Home Loan Bank stock, approximates fair value
since there is no active market for such investments.
Cash surrender value of life insurance
: The carrying value is
based upon the initial cash premium to the insurance company plus the income earned on the policy over time.
Interest-rate
swap:
The interest-rate swap is recognized on the consolidated balance sheet at fair value. The Company utilizes third-party vendors for derivative valuation purposes. These vendors determine the appropriate fair value based on a net
present value calculation of the cash flows related to the interest rate swaps using primarily observable market inputs such as interest rate yield curves. The discounted net present value calculated represents the cost to terminate the swap if
the Company should choose to do so on the applicable measurement date (Level 2). Additionally, any credit valuation adjustment is recorded as an adjustment to the fair value of the derivative asset or liability on the applicable measurement
date (Level 3).
Deposits
: The fair value of demand deposits, savings accounts and certain money market deposits is
the amount payable on demand at the reporting date. The fair value of fixed-maturity deposits is estimated by discounting future cash flows using rates currently offered for deposits of similar remaining maturities. The fair value estimates do not
include the benefits that result from low-cost funding provided by the deposit liabilities compared to the cost of alternate sources of funds.
Subordinated debt
: The fair value of this variable rate debt was previously estimated by discounting future cash flows using
rates currently offered for instruments of similar remaining maturities. However, due to current market conditions, the fair value is calculated using a premium over LIBOR.
16
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 8
Fair Value Measurements (contd)
Federal Home Loan Bank Advances and Other Borrowings
: The fair
value for Federal Home Loan Bank Advances and Other Borrowings are estimated by discounting future cash flows using rates currently offered for instruments of similar remaining maturities.
Accrued interest
: The carrying amounts of accrued interest receivable and accrued interest payable approximate their fair
values.
Off-balance-sheet instruments
: The fair values for off-balance-sheet, credit-related financial instruments
are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties credit standing. The fair value of these financial instruments is not significant.
The following tables present the estimates of fair value of financial instruments as of March 31, 2009 and
December 31, 2009 (in thousands):
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
CARRYING
AMOUNT
|
|
ESTIMATED FAIR
VALUE
|
Financial assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
180,849
|
|
$
|
180,849
|
Securities held to maturity
|
|
|
536
|
|
|
536
|
Securities available for sale
|
|
|
127,837
|
|
|
127,837
|
Net loans held for investment
|
|
|
1,100,932
|
|
|
1,096,667
|
Restricted securities
|
|
|
8,643
|
|
|
8,643
|
Accrued interest receivable
|
|
|
4,925
|
|
|
4,925
|
Cash surrender value of life insurance
|
|
|
3,712
|
|
|
3,712
|
Financial liabilities:
|
|
|
|
|
|
|
Deposits
|
|
|
1,310,021
|
|
|
1,325,129
|
Subordinated debt
|
|
|
16,000
|
|
|
13,622
|
Other borrowings
|
|
|
32,928
|
|
|
34,330
|
Federal Home Loan Bank advances
|
|
|
118,453
|
|
|
125,215
|
Accrued interest payable
|
|
|
2,092
|
|
|
2,092
|
|
|
|
|
December 31, 2009
|
|
|
CARRYING
AMOUNT
|
|
ESTIMATED FAIR
VALUE
|
Financial assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
68,667
|
|
$
|
68,667
|
Securities held to maturity
|
|
|
554
|
|
|
536
|
Securities available for sale
|
|
|
98,120
|
|
|
98,120
|
Net loans held for investment
|
|
|
1,170,970
|
|
|
1,150,690
|
Restricted securities
|
|
|
8,643
|
|
|
8,643
|
Accrued interest receivable
|
|
|
4,805
|
|
|
4,805
|
Cash surrender value of life insurance
|
|
|
3,679
|
|
|
3,679
|
Financial liabilities:
|
|
|
|
|
|
|
Deposits
|
|
|
1,187,318
|
|
|
1,199,259
|
Subordinated debt
|
|
|
16,000
|
|
|
10,698
|
Other borrowings
|
|
|
32,681
|
|
|
34,087
|
Federal Home Loan Bank advances
|
|
|
118,457
|
|
|
125,081
|
Accrued interest payable
|
|
|
2,045
|
|
|
2,045
|
17
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 8
Fair Value Measurements (contd)
The following table sets forth the Companys assets that are measured at
fair value on a recurring basis at March 31, 2010 and December 31, 2009 (in thousands).
Fair Value Measurements at
March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
Measurements
3/31/10
|
|
Quoted Prices in
Active
Markets
for Identical
Assets
(Level
1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities
|
|
$
|
116,750
|
|
$
|
56,555
|
|
$
|
60,195
|
|
$
|
|
U.S Treasury and other U.S agency obligations
|
|
|
10,569
|
|
|
5,096
|
|
|
5,473
|
|
|
|
Total available for sale debt securities
|
|
|
127,319
|
|
|
61,651
|
|
|
65,668
|
|
|
|
Available for sale equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
518
|
|
|
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale equity securities
|
|
|
518
|
|
|
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
127,837
|
|
$
|
61,651
|
|
$
|
66,186
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
Measurements
12/31/09
|
|
Quoted Prices in
Active
Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage backed securities
|
|
$
|
87,040
|
|
$
|
45,414
|
|
$
|
41,626
|
|
$
|
|
U.S Treasury and other U.S agency obligations
|
|
|
10,571
|
|
|
5,112
|
|
|
5,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale debt securities
|
|
|
97,611
|
|
|
50,526
|
|
|
47,085
|
|
|
|
Available for sale equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
509
|
|
|
|
|
|
509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale equity securities
|
|
|
509
|
|
|
|
|
|
509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
$
|
98,120
|
|
$
|
50,526
|
|
$
|
47,594
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain other assets are measured at fair value on a
nonrecurring basis. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets due to impairment.
18
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 8
Fair Value Measurements (contd)
Nonrecurring fair value adjustments to loans reflect full or partial
write-downs that are based on the loans observable market price or current appraised value of the collateral
.
Since the market for impaired loans is not active, loans subjected to nonrecurring fair value adjustments based on the
loans observable market price are generally classified as Level 2. Loans subjected to nonrecurring fair value adjustments based on the current appraised value of the collateral may be classified as Level 2 or Level 3 depending on the type of
asset and the inputs to the valuation. When appraisals are used to determine impairment and these appraisals are based on a market approach incorporating a dollar-per-square-foot multiple, the related loans are classified as Level 2. If the
appraisals require significant adjustments to market-based valuation inputs or apply an income approach based on unobservable cash flows to measure fair value, the related loans subjected to nonrecurring fair value adjustments are typically
classified as Level 3 due to the fact that Level 3 inputs are significant to the fair value measurement.
During the three
months ended March 31, 2010 and year ended December 31, 2009, the Company recognized losses related to certain assets that are measured at fair value on a nonrecurring basis (i.e. impaired loans, other real estate owned, and held to
maturity securities). For assets measured at fair value on a nonrecurring basis that were still held on the balance sheet at the end of the period, the following tables provide the level of valuation assumptions used to determine each adjustment and
the carrying value of the related individual assets at March 31, 2010 and December 31, 2009 (in thousands):
Carrying
value at March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
Measurements
03/31/10
|
|
Quoted Prices in
Active
Markets
for Identical
Assets
(Level
1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
173,650
|
|
|
|
|
|
$
|
45,108
|
|
$
|
128,542
|
Other real estate owned
|
|
|
18,323
|
|
|
|
|
|
|
18,323
|
|
|
|
Held to maturity securities
|
|
|
536
|
|
|
|
|
|
|
536
|
|
|
|
Carrying
value at December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
Measurements
12/31/09
|
|
Quoted Prices in
Active
Markets
for Identical
Assets
(Level
1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
178,820
|
|
|
|
|
|
$
|
48,086
|
|
$
|
130,734
|
Other real estate owned
|
|
|
14,357
|
|
|
|
|
|
|
|
|
|
14,357
|
Impaired loans had a
carrying amount of $223,048,000 with a valuation allowance of $18,155,000 at March 31, 2010. Included in this balance were impaired loans with a carrying value of $49,398,000 at March 31, 2010 that were measured for impairment and had fair
value in excess of carrying value.
19
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 9
Derivative Financial Instruments
The Company may utilize certain derivative financial instruments. Stand
alone derivative financial instruments, such as interest-rate swaps, are used to economically hedge interest-rate risk related to the Companys liabilities. These derivative instruments involve both credit and market risk. The notional amounts
are amounts on which calculations, payments, and the value of the derivative are based. Notional amounts do not represent direct credit exposures. Direct credit exposure is limited to the net difference between the calculated amounts to be received
and paid, if any. Such difference, which represents the fair value of the derivative instruments, is reflected on the Companys consolidated balance sheet as derivative assets, derivative liabilities or trading activities for stand alone
derivative financial instruments.
The Company is exposed to credit related losses in the event of nonperformance by the
counterparties to those agreements. The Company controls the credit risk of its financial contracts through credit approvals, limits and monitoring procedures, and does not expect any counterparties to fail to satisfy their obligations.
Derivative instruments are generally either negotiated over the counter contracts (OTC) or standardized contracts executed on
a recognized exchange. Negotiated OTC derivative contracts are generally entered into between two counterparties that negotiate specific agreement terms, including the underlying instrument, amount, exercise prices and maturity.
As of September 30, 2009, the interest rate swap was terminated because the forecasted transaction was no longer probable. The
resulting gain is recognized over the remaining life of the interest rate swap. Hedge ineffectiveness is generally measured as the amount by which the cumulative change in the fair value of the hedging instrument exceeds the present value of the
cumulative change in the hedged items expected cash flows. Ineffectiveness is reported within other noninterest income in the Consolidated Statements of Operation. As of March 31, 2010, the cash flow hedge became entirely ineffective. For
the three months ended March 31, 2010 ineffectiveness on cash flow hedges was approximately $2.9 million. The derivative transaction was deemed to be ineffective because it is highly likely that all three banks will be placed into receivership
with the FDIC. The effective portion of the gains or losses on cash flow hedges are reported within accumulated other comprehensive income and are reclassified from accumulated other comprehensive income to current period earnings when the
forecasted transaction affects earnings.
The Company originally entered into interest rate swaps which provided for the
Company to receive payments at a fixed rate in exchange for paying a floating rate on certain loans. Management believes that entering into the interest rate swaps helps manage the Companys exposure variabilities in cash flows due to changes
in the level of interest rates. It is the Companys objective to hedge the change in cash flows, and maintain coverage levels that are appropriate, given anticipated or existing interest rate levels and other market considerations, as well as
the relationship of change in this asset to other assets of the Company. To meet this objective, the Company utilized interest rate swaps as an asset/liability management strategy. These interest rate swap agreements are contracts to make a series
of floating rate payments in exchange for receiving a series of fixed rate payments. The information pertaining to interest rate swap agreements used to hedge floating rate loans is as follows (dollars in thousands):
|
|
|
|
|
|
|
March 31,
|
|
|
|
2009
|
|
Notional amount
|
|
$
|
45,000
|
|
Pay rate (Prime)
|
|
|
3.25
|
%
|
Receive rate
|
|
|
7.51
|
%
|
Maturity in years
|
|
|
4
|
|
Unrealized gain relating to interest-rate swaps
|
|
$
|
5,103
|
|
These agreements
provided for the Company to receive payments at a fixed-rate determined by a specified index (WSJ Prime) in exchange for making payments at a floating rate.
20
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 10
Other Borrowings
Pursuant to the Repos, each subsidiary bank sold Citi $10.0 million of
securities, subject to their obligation to repurchase such securities at a specific price in 2013. The Repos provide that if either of our subsidiary Banks fails to remain well capitalized for regulatory purposes, an event of default
will be deemed to have occurred under each of the Repos. We notified Citi that an event of default has occurred and is continuing under each of the Repos, and Citi has reserved all its rights upon an event of default under each Repo.
If Citi exercises its remedies under the Repos, then: (i) our subsidiary Banks would be obligated to immediately repurchase all
securities sold to Citi under the Repos; (ii) all income paid after the declaration on the securities sold would be retained by Citi and applied to the aggregate unpaid repurchase prices and any other amounts owing by our subsidiary banks; and
(iii) our subsidiary banks would have to immediately deliver to Citi any purchased securities subject to the Repos then in their possession or control. We have been informed that Citi would also charge our subsidiary banks an approximately $1.5
million of total penalty for early termination of these Repos. If Citi exercises its right to declare an event of default and exercises its remedies under the Repos, then our financial position, liquidity and earnings may be materially and adversely
affected. Citi has not exercised their right to declare an event of default nor has made any indication to do so.
During June
2009, the Company established the Corporate Sweep Program. Funds from customers, who participate in the sweep program and whose balances exceed a target balance, will be placed in a repurchase agreement with the Company. Repurchase agreements are
collateralized borrowings and are, therefore, not FDIC insured. The Company pledges securities as collateral to secure its obligation to pay the amount due under the repurchase agreement. The client repurchase obligations mature daily and the
associated interest rate fluctuates accordingly. As of March 31, 2010, the Company had $12.9 million in funding through client repurchase agreements.
The following table provides the amount, interest rate and repurchase or maturity date of outstanding other borrowings at March 31,
2010 and December 31, 2009, respectively (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2010
|
|
|
At December 31, 2009
|
|
|
|
Amount
|
|
Rate
|
|
|
Amount
|
|
Rate
|
|
Repurchase agreements; repurchase date 3/18/2013
|
|
$
|
20,000
|
|
3.29
|
%
|
|
$
|
20,000
|
|
3.29
|
%
|
Client repurchase agreements; mature daily
|
|
|
12,900
|
|
1.65
|
|
|
|
12,700
|
|
0.85
|
|
21
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 11
Regulatory Matters
General
We are currently subject to a number of regulatory enforcement actions and may become subject to additional actions. Our failure to comply
with our current enforcement actions, or any future ones, may result in the closure of our subsidiary banks and the placement of them into receivership with the FDIC. If one of our subsidiary banks fails and is placed into receivership, it is highly
likely the FDIC will exercise its cross guarantee rights and close the other subsidiary banks (even if they are in compliance with their enforcement actions) in order to reduce any cost or loss to the FDIC. As of March 31, 2010,
stockholders equity/(deficit) of Bank of Florida Southwest, Bank of Florida Southeast and Bank of Florida Tampa Bay were ($15.8) million, $7.1 million and ($2.2) million, respectively.
Prompt Corrective Action Directives
Each of our bank subsidiaries has received a Prompt Corrective Action Directive (the Directives) from the FDIC, due to their
capital status. The Directives require that within 30 days of the effective date of the Directives (by April 17, 2010), the subsidiary banks must: (1) be adequately capitalized under regulatory capital guidelines; and/or
(2) accept an offer to be acquired by a depository institution holding company or combine with another insured depository institution. Federal law also requires the FDIC to place a bank into receivership if it has remained critically
undercapitalized for 90 days, unless the FDIC determines that other action is more appropriate. If a bank remains critically undercapitalized on average during the quarter beginning 270 days after the bank first became
critically undercapitalized, the FDIC must place the bank into receivership. Bank of Florida Southwest became critically undercapitalized on December 31, 2009 and Bank of Florida Southeast and Bank of
Florida Tampa Bay became critically undercapitalized on March 31, 2010. If one of our subsidiary banks fails and is placed into receivership, it is highly likely the FDIC will exercise its cross guarantee rights
and close the other subsidiary banks (even if they have complied with their Directives) in order to reduce any loss or cost to the FDIC. Therefore, if we are unable to successfully complete our $71.8 million stock offering in the very near term, it
is highly likely that all three banks will be placed into receivership with the FDIC.
The Directives also prohibit our
subsidiary banks from: (1) paying rates of interest in excess of prescribed limits; (2) accepting, renewing or rolling over any brokered deposits; (3) engaging in any new line of business; (4) making any capital distributions,
dividend or subordinated debt payments to the Company or any affiliate; (5) establishing or acquiring a new branch and also require the subsidiary banks to obtain the approval of the FDIC prior to relocating, selling or disposing of any
existing branch; (6) paying management fees to the Company; and (7) growth in average assets and loans, except in certain limited circumstances. In addition, the Directives provide that the subsidiary banks may not pay any bonus to, or
increase the compensation of, any director or officer without the prior approval of the FDIC, and that the subsidiary banks must comply with Section 23A of the Federal Reserve Act without the exemption for transactions with certain affiliated
institutions. Lastly, the Directives prohibit the subsidiary banks from entering into any material transaction, including any investment, expansion, acquisition, sale of assets or other similar transaction which would have a significant financial
impact on the bank without prior approval of the FDIC. The subsidiary banks were already substantially subject to each of these prohibitions immediately prior to the issuance of the Directives.
Each Directive will remain in effect until the respective subsidiary bank maintains adequately capitalized status for four
consecutive quarters. Therefore, if a bank subsidiary falls below adequately capitalized during the four quarters following the issuance of the Directives, we will be required to quickly increase its capital. If our subsidiary banks fail
to meet or satisfy the requirements of the Directives, it is likely that the FDIC will take further regulatory enforcement actions against our subsidiary banks, including the imposition of the consent orders or the closure of the subsidiary banks
and the placement of them into receivership with the FDIC.
Subsidiary Bank Corrective Resolutions
The board of directors of each of our subsidiary banks has adopted corrective resolutions (Corrective Resolutions) at the
request of the OFR. The Corrective Resolutions are specific to each of our subsidiary banks, but contain similar provisions and requirements, the material provisions and requirements of which are summarized below.
22
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 11
Regulatory Matters (contd)
|
|
|
Ensure that each subsidiary bank remains well capitalized at all times. Prepare and submit a capital plan to the OFR and the FDIC to
achieve, by December 31, 2009, a Tier 1 leverage capital ratio of at least 8% and a total risk-based capital ratio of at least 11% and to achieve by June 30, 2010, a total risk-based capital ratio of at least 12%.
|
|
|
|
Prepare and submit a written risk reduction plan to reduce, in the aggregate, the balance of specific assets classified by the OFR as
Substandard, Doubtful or Loss according to a specific schedule for each subsidiary bank.
|
|
|
|
Direct management to systematically reduce the subsidiary banks concentration in high-risk commercial real estate loans, which include land,
non-owner occupied commercial construction, and residential construction loans.
|
|
|
|
Amend the subsidiary banks liquidity policy to address and take into consideration the banks liquidity objectives and current risk profile,
including a reduction in the net non-core funding dependence ratio to a specified percentage by December 31, 2010, with ongoing efforts to further reduce its dependence, and review the liquidity policy annually for adequacy and make appropriate
revisions to the liquidity policy when necessary.
|
|
|
|
Submit to the OFR and the FDIC a strategic business plan and a comprehensive annual budget and earnings forecast for the remainder of 2009 and for 2010
and direct management to prepare a report detailing the subsidiary banks actual performance compared with the strategic plan and budget at each regular meeting of the subsidiary banks board of directors.
|
|
|
|
Amend the subsidiary banks written policies and procedures to address examination report comments and recommendations regarding the use of
interest reserves.
|
|
|
|
Establish a sound ALLL methodology, submit the revised ALLL methodology to the OFR and the FDIC for review and comment and review the adequacy of the
ALLL prior to the end of each calendar quarter.
|
|
|
|
Improve commercial real estate lending underwriting and portfolio management.
|
|
|
|
Notify the OFR and the FDIC in writing when the subsidiary bank proposes to add any individual to its board of directors or employ any individual as an
executive officer.
|
|
|
|
Furnish quarterly progress reports to the FDIC and the OFR along with a report detailing the subsidiary banks actual performance compared with
the strategic plan and budget presented at each regular board meeting.
|
|
|
|
Refrain from extending any additional credit to, or for the benefit of, any borrower who has a loan or other extension of credit from the subsidiary
bank that has been charged off or classified.
|
We consider the capital and asset quality provisions of the
Corrective Resolutions to be the most significant and imperative. As of March 31, 2010, none of our subsidiary banks were in compliance with either requirement. Our subsidiary banks were not considered well capitalized as of
March 31, 2010, and certain balances of classified assets and commercial real estate loans remain above the levels contemplated by the Corrective Resolutions. As of March 31, 2010, Bank of FloridaSouthwest had a Tier 1 leverage capital
ratio of (2.36%), total risk based capital ratio of (2.98%) and Tier 1 risk based capital ratio of (2.98%), Bank of FloridaSoutheast had a Tier 1 leverage capital ratio of 1.19%, total risk based capital ratio of 3.33% and Tier 1 risk based
capital ratio of 1.67%, and Bank of FloridaTampa Bay had a Tier 1 leverage capital ratio of (0.85)%, total risk based capital ratio of (1.12)% and Tier 1 risk based capital ratio of (1.12)%. Bank of FloridaSouthwest and Bank of Florida
Tampa Bay had also not sufficiently reduced the net non-core funding dependence ratio to the required 40%, and had only reached 44.95% and 48.51%, respectively, at March 31, 2010.
Potential Consent Orders
Based on the subsidiary banks financial condition, we understand that the FDIC plans to pursue and implement formal enforcement
actions with respect to our subsidiary banks in the form of consent orders (FDIC Orders). We expect the FDIC to pursue these even if we do comply with the requirements of the Directives.
We currently expect the FDIC Orders will focus on the areas addressed by our existing Corrective Resolutions and the Directives: to raise
and maintain certain capital ratios, to improve asset quality, to reduce non-core funding dependence, and to reduce our commercial real estate loan concentrations, although the scope and terms of any FDIC Orders or any other action that the FDIC may
take is unknown.
23
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(Unaudited)
NOTE 11
Regulatory Matters (contd)
Holding Company Board Resolutions
The Company is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the
Federal Reserve). On June 12, 2009, we received a letter from the Federal Reserve Bank of Atlanta (the Reserve Bank) requiring us to provide advance notice to the Reserve Bank before appointing any new directors or
senior executive officers, which the Federal Reserve may approve or disapprove, or entering into any agreement to provide indemnification or severance payments. The letter also requested our board of directors to adopt certain resolutions (the
Board Resolutions). Our board of directors adopted the Board Resolutions on October 19, 2009.
The Board Resolutions provide that the Company may not, without prior Federal Reserve approval, incur debt, including trust preferred
securities; declare or pay dividends including the payment of dividends on our outstanding Series B Preferred Stock; reduce the Companys capital position by purchasing or redeeming any shares of our capital stock except for any redemption of
shares of our outstanding Series B Preferred Stock following an equity offering of not less than $30 million; or make any payment representing a reduction of capital other than the payment of normal and routine operating expenses. The Board
Resolutions also require our board of directors to submit financial statements and confirmation of compliance with the Board Resolutions.
24
BANK OF FLORIDA CORPORATION AND SUBSIDIARIES
(Unaudited)
SELECTED QUARTERLY CONSOLIDATED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31,
2010
|
|
|
Dec. 31,
2009
|
|
|
Sept. 30,
2009
|
|
|
June 30,
2009
|
|
|
March 31,
2009
|
|
|
|
(dollars in thousands, except per share data)
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
15,904
|
|
|
$
|
16,668
|
|
|
$
|
17,933
|
|
|
$
|
18,069
|
|
|
$
|
18,793
|
|
Total interest expense
|
|
|
7,876
|
|
|
|
8,600
|
|
|
|
8,379
|
|
|
|
8,634
|
|
|
|
9,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income before provision for loan losses
|
|
|
8,028
|
|
|
|
8,068
|
|
|
|
9,554
|
|
|
|
9,435
|
|
|
|
9,595
|
|
Provision for loan losses
|
|
|
43,077
|
|
|
|
31,494
|
|
|
|
25,719
|
|
|
|
9,764
|
|
|
|
6,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) after provision for loan losses
|
|
|
(35,049
|
)
|
|
|
(23,426
|
)
|
|
|
(16,165
|
)
|
|
|
(329
|
)
|
|
|
2,902
|
|
Noninterest income
|
|
|
2,651
|
|
|
|
3,443
|
|
|
|
1,595
|
|
|
|
2,676
|
|
|
|
1,155
|
|
Noninterest expense
|
|
|
14,626
|
|
|
|
11,802
|
|
|
|
73,014
|
|
|
|
12,704
|
|
|
|
11,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income before income taxes (benefit)
|
|
|
(47,024
|
)
|
|
|
(31,785
|
)
|
|
|
(87,584
|
)
|
|
|
(10,357
|
)
|
|
|
(6,974
|
)
|
Income taxes (benefit)
|
|
|
1,184
|
|
|
|
26,760
|
|
|
|
(9,504
|
)
|
|
|
(3,857
|
)
|
|
|
(2,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(48,208
|
)
|
|
|
(58,545
|
)
|
|
|
(78,080
|
)
|
|
$
|
(6,500
|
)
|
|
|
(4,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) income per share
|
|
$
|
(3.76
|
)
|
|
$
|
(4.58
|
)
|
|
$
|
(6.10
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.34
|
)
|
Diluted (loss) income per share
|
|
|
(3.76
|
)
|
|
|
(4.58
|
)
|
|
|
(6.10
|
)
|
|
|
(0.51
|
)
|
|
|
(0.34
|
)
|
Weighted-average shares outstandingbasic
|
|
|
12,807,847
|
|
|
|
12,800,398
|
|
|
|
12,795,054
|
|
|
|
12,779,020
|
|
|
|
12,779,020
|
|
Weighted-average shares outstandingdiluted
|
|
|
12,807,847
|
|
|
|
12,800,398
|
|
|
|
12,795,054
|
|
|
|
12,779,020
|
|
|
|
12,779,020
|
|
Total shares outstanding
|
|
|
12,957,898
|
|
|
|
12,968,898
|
|
|
|
12,968,898
|
|
|
|
12,947,520
|
|
|
|
12,955,520
|
|
Book value per common share (period end)
|
|
|
(0.75
|
)
|
|
|
3.07
|
|
|
|
7.68
|
|
|
|
13.69
|
|
|
|
14.38
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,476,076
|
|
|
|
1,402,343
|
|
|
$
|
1,488,008
|
|
|
$
|
1,528,879
|
|
|
$
|
1,570,255
|
|
Total cash and cash equivalents
|
|
|
180,849
|
|
|
|
68,667
|
|
|
|
75,117
|
|
|
|
39,173
|
|
|
|
56,322
|
|
Interest-earning assets
|
|
|
1,456,105
|
|
|
|
1,378,856
|
|
|
|
1,367,131
|
|
|
|
1,380,871
|
|
|
|
1,410,313
|
|
Investment securities
|
|
|
128,373
|
|
|
|
98,674
|
|
|
|
104,950
|
|
|
|
104,822
|
|
|
|
113,058
|
|
Loans, gross
|
|
|
1,147,079
|
|
|
|
1,213,033
|
|
|
|
1,253,258
|
|
|
|
1,267,349
|
|
|
|
1,288,177
|
|
Allowance for loan losses
|
|
|
46,147
|
|
|
|
42,063
|
|
|
|
38,002
|
|
|
|
24,778
|
|
|
|
24,479
|
|
Intangible assets
|
|
|
|
|
|
|
2,471
|
|
|
|
2,569
|
|
|
|
64,631
|
|
|
|
64,738
|
|
Deposit accounts
|
|
|
1,310,021
|
|
|
|
1,187,318
|
|
|
|
1,223,369
|
|
|
|
1,167,052
|
|
|
|
1,165,267
|
|
Other borrowings
|
|
|
167,381
|
|
|
|
167,138
|
|
|
|
156,369
|
|
|
|
175,162
|
|
|
|
214,470
|
|
Stockholders equity/(deficit)
|
|
|
(5,766
|
)
|
|
|
43,836
|
|
|
|
103,883
|
|
|
|
180,803
|
|
|
|
186,334
|
|
|
|
|
|
|
|
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
(12.89
|
)%
|
|
|
(15.21
|
)%
|
|
|
(20.47
|
)%
|
|
|
(1.70
|
)%
|
|
|
(1.15
|
)%
|
Return on average common stockholders equity
|
|
|
(500.06
|
)
|
|
|
(237.05
|
)
|
|
|
(180.22
|
)
|
|
|
(14.19
|
)
|
|
|
(9.23
|
)
|
Interest-rate spread during the period
|
|
|
2.57
|
|
|
|
2.53
|
|
|
|
2.99
|
|
|
|
2.89
|
|
|
|
2.71
|
|
Net interest margin
|
|
|
2.51
|
|
|
|
2.48
|
|
|
|
3.02
|
|
|
|
2.97
|
|
|
|
2.93
|
|
Efficiency ratio
1
|
|
|
124.04
|
|
|
|
129.29
|
|
|
|
686.42
|
|
|
|
118.07
|
|
|
|
102.61
|
|
|
|
|
|
|
|
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to period end loans
|
|
|
4.02
|
%
|
|
|
3.47
|
%
|
|
|
3.03
|
%
|
|
|
1.96
|
%
|
|
|
1.90
|
%
|
Allowance for loan losses to nonperforming loans
|
|
|
26.98
|
|
|
|
25.57
|
|
|
|
25.32
|
|
|
|
17.58
|
|
|
|
21.28
|
|
Net charge-offs to average loans
|
|
|
15.18
|
|
|
|
10.10
|
|
|
|
4.52
|
|
|
|
3.29
|
|
|
|
3.92
|
|
Nonperforming assets to period end total assets
|
|
|
12.83
|
|
|
|
12.75
|
|
|
|
10.79
|
|
|
|
9.74
|
|
|
|
7.67
|
|
|
|
|
|
|
|
Capital and Liquidity Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average equity to average assets
|
|
|
2.84
|
%
|
|
|
6.70
|
%
|
|
|
11.64
|
%
|
|
|
11.99
|
%
|
|
|
12.43
|
%
|
Leverage (4.00% required minimum)
|
|
|
(0.66
|
)
|
|
|
2.41
|
|
|
|
5.60
|
|
|
|
7.23
|
|
|
|
7.62
|
|
|
|
|
|
|
|
Risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1
|
|
|
(0.86
|
)%
|
|
|
2.94
|
%
|
|
|
6.73
|
%
|
|
|
8.18
|
%
|
|
|
8.49
|
%
|
Total
|
|
|
(0.86
|
)
|
|
|
5.33
|
|
|
|
9.28
|
|
|
|
10.68
|
|
|
|
10.98
|
|
Average loans to average deposits
|
|
|
80.11
|
|
|
|
84.78
|
|
|
|
95.67
|
|
|
|
99.21
|
|
|
|
104.04
|
|
|
|
|
|
|
|
Trust Assets Under Administration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under administration
|
|
$
|
601,445
|
|
|
$
|
740,545
|
|
|
$
|
734,469
|
|
|
$
|
630,657
|
|
|
$
|
522,541
|
|
|
|
|
|
|
|
Trust fee income
|
|
|
525
|
|
|
|
700
|
|
|
|
651
|
|
|
|
574
|
|
|
|
654
|
|
Trust fees as a % of average assets under administration (annualized)
|
|
|
0.35
|
%
|
|
|
0.38
|
%
|
|
|
0.35
|
%
|
|
|
0.36
|
%
|
|
|
0.50
|
%
|
1
|
Efficiency ratio = Noninterest expense divided by the total of net interest income before provision for loan losses plus noninterest income (excluding
net securities gains and losses).
|
25
Item 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations
|
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements made herein (or incorporated herein by reference) are forward-looking statements within the meaning and
protections of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future
performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements.
Words such as may, will, could, should, would, believe,
anticipate, estimate, expect, intend, plan, project, assume, indicate, continue, target, goal, and similar words or
expressions of the future are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties and a variety of factors could cause our actual results and experience to differ materially from the
anticipated results or other expectations expressed in these forward-looking statements.
Forward-looking statements may not
be realized due to factors that include, but are not limited to:
|
|
|
the closure of our bank subsidiaries by the Florida Office of Financial Regulation and the placement of them into receivership with the Federal Deposit
Insurance Corporation;
|
|
|
|
our inability to continue to operate as a going concern due to our cumulative losses or failure of our bank subsidiaries;
|
|
|
|
the effects of future economic, business and market conditions and changes, domestic and foreign, including seasonality;
|
|
|
|
governmental monetary and fiscal policies;
|
|
|
|
legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by our regulators, and
changes in the scope and cost of Federal Deposit Insurance Corporation, or FDIC, insurance and other coverages;
|
|
|
|
changes in regulatory requirements specifically applicable to us, including enforcement actions and the effects of new FDIC policy statements;
|
|
|
|
changes in accounting policies, rules and practices;
|
|
|
|
the effects of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values and liquidity of loan
collateral, securities, and other interest sensitive assets and liabilities;
|
|
|
|
the failure of assumptions and estimates underlying the establishment of reserves for possible loan losses and other estimates;
|
|
|
|
the failure of estimates regarding the amount of capital we need to return our bank subsidiaries to adequately capitalized status;
|
|
|
|
changes in borrowers credit risks and payment behaviors;
|
26
|
|
|
changes in the availability and cost of credit and capital in the financial markets;
|
|
|
|
changes in the prices, values and sales volumes of residential and commercial real estate;
|
|
|
|
the effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;
|
|
|
|
the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions,
integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings from such transactions;
|
|
|
|
changes in technology or products that may be more difficult, costly, or less effective than anticipated;
|
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the effects of war or other conflicts, acts of terrorism or other catastrophic events, including hurricanes, storms and flooding, that may affect
general economic conditions;
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the failure of assumptions and estimates and differences in and changes to economic, market and credit concentrations, including borrowers credit
risks and payment behaviors from those used in our reviews of our loan portfolio and our loan portfolio stress test;
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the risk that sales of our capital stock in this offering and/or other transfers of our capital stock could trigger a reduction in the amount of net
operating loss carryforwards that we may be able to recover for income tax purposes; and
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other factors and risks described under Risk Factors herein and in our Form 10-K for the year ended December 31, 2009.
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All written and oral forward-looking statements that are made by or are attributable to us are expressly
qualified in their entirety by this cautionary notice. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date hereof.
OVERVIEW
Bank of Florida Corporation, incorporated in Florida in September 1998, is a $1.5 billion financial services company and a registered bank
holding company. We are currently undertaking a $71.8 million common stock offering. As of March 31, 2010, each of our three subsidiary banks was critically undercapitalized under Federal Deposit Insurance Corporation
(FDIC) rules. In addition, the FDIC has issued to each bank a Prompt Corrective Action Directive which required each bank to return to adequately capitalized condition by April 17, 2010; none of the banks met this
deadline. If, in the very near term, we are not successful in our current capital raising efforts, it is likely that each of the three banks will be closed by the Florida Office of Financial Regulation (OFR) and placed into receivership
with the FDIC. In such case, our only remaining operations will be those of Bank of Florida Trust Company, which can not be expected to provide significant revenues or profits. Our subsidiary banks are separately chartered independent community
banks with local boards that provide full-service commercial banking in a private banking environment. Our trust company offers investment management, trust administration, estate planning, and financial planning services largely to the Banks
commercial borrowers and other high net worth individuals. The Companys overall focus is to develop a total financial services relationship with its client base, which is primarily businesses, professionals, and entrepreneurs with commercial
real estate borrowing needs. The Banks also provide technology-based cash management and other depository services. The holding company structure provides flexibility for expansion of the Companys banking business, including possible
acquisitions of other financial institutions, and support of banking-related services to its subsidiary banks. Our ability to execute the growth oriented aspects of our strategy is currently severely limited by our, and our subsidiary banks
financial condition, capital levels and the regulatory enforcement actions to which we, and our subsidiary banks, are currently subject.
The primary market areas of the Company continue to show growth in population, but at a nominal pace in comparison to the past ten years.
Those markets include Collier and Lee Counties on the southwest coast of Florida (served by Bank of FloridaSouthwest), Broward, Miami-Dade, and Palm Beach Counties on the southeast coast (served by Bank of FloridaSoutheast), and
Hillsborough and Pinellas Counties in the Tampa Bay area (served by
27
Bank of FloridaTampa Bay). The continued population growth and income demographics of the counties in which the Company operates support its plans to grow loans, deposits, and wealth
management revenues with limited, highly selective, full-service locations. These counties together constitute nearly 50% of the deposit market share in the state of Florida.
REGULATORY ENFORCEMENT MATTERS
General
We are
currently subject to a number of regulatory enforcement actions and may become subject to additional actions. Our failure to comply with our current enforcement actions, or any future ones, may result in the closure of our subsidiary banks and the
placement of them into receivership with the FDIC. If one of our subsidiary banks fails and is placed into receivership, it is highly likely the FDIC will exercise its cross guarantee rights and close the other subsidiary banks (even if
they are in compliance with their enforcement actions) in order to reduce any cost or loss to the FDIC. As of March 31, 2010, stockholders equity/(deficit) of Bank of Florida Southwest, Bank of Florida Southeast and Bank of
Florida Tampa Bay were ($15.8) million, $7.1 million and ($2.2) million, respectively.
Prompt Corrective Action Directives
Each of our bank subsidiaries has received a Prompt Corrective Action Directive (the Directives) from the
FDIC, due to their capital status. The Directives require that within 30 days of the effective date of the Directives (by April 17, 2010), the subsidiary banks must: (1) be adequately capitalized under regulatory capital
guidelines; and/or (2) accept an offer to be acquired by a depository institution holding company or combine with another insured depository institution. Federal law also requires the FDIC to place a bank into receivership if it has remained
critically undercapitalized for 90 days, unless the FDIC determines that other action is more appropriate. If a bank remains critically undercapitalized on average during the quarter beginning 270 days after the bank first
became critically undercapitalized, the FDIC must place the bank into receivership. Bank of Florida Southwest became critically undercapitalized on December 31, 2009 and Bank of Florida Southeast and Bank
of Florida Tampa Bay became critically undercapitalized on March 31, 2010. If one of our subsidiary banks fails and is placed into receivership, it is highly likely the FDIC will exercise its cross guarantee
rights and close the other subsidiary banks (even if they have complied with their Directives) in order to reduce any loss or cost to the FDIC. Therefore, if we are unable to successfully complete our $71.8 million stock offering in the very near
term, it is highly likely that all three banks will be placed into receivership with the FDIC.
The Directives also prohibit
our subsidiary banks from: (1) paying rates of interest in excess of prescribed limits; (2) accepting, renewing or rolling over any brokered deposits; (3) engaging in any new line of business; (4) making any capital
distributions, dividend or subordinated debt payments to the Company or any affiliate; (5) establishing or acquiring a new branch and also require the subsidiary banks to obtain the approval of the FDIC prior to relocating, selling or disposing
of any existing branch; (6) paying management fees to the Company; and (7) growth in average assets and loans, except in certain limited circumstances. In addition, the Directives provide that the subsidiary banks may not pay any bonus to,
or increase the compensation of, any director or officer without the prior approval of the FDIC, and that the subsidiary banks must comply with Section 23A of the Federal Reserve Act without the exemption for transactions with certain
affiliated institutions. Lastly, the Directives prohibit the subsidiary banks from entering into any material transaction, including any investment, expansion, acquisition, sale of assets or other similar transaction which would have a significant
financial impact on the bank without prior approval of the FDIC. The subsidiary banks were already substantially subject to each of these prohibitions immediately prior to the issuance of the Directives.
Each Directive will remain in effect until the respective subsidiary bank maintains adequately capitalized status for four
consecutive quarters. Therefore, if a bank subsidiary falls below adequately capitalized during the four quarters following the issuance of the Directives, we will be required to quickly increase its capital. If our subsidiary banks fail
to meet or satisfy the requirements of the Directives, it is likely that the FDIC will take further regulatory enforcement actions against our subsidiary banks, including the imposition of the consent orders or the closure of the subsidiary banks
and the placement of them into receivership with the FDIC.
28
Subsidiary Bank Corrective Resolutions
The board of directors of each of our subsidiary banks has adopted corrective resolutions (Corrective Resolutions) at the
request of the OFR. The Corrective Resolutions are specific to each of our subsidiary banks, but contain similar provisions and requirements, the material provisions and requirements of which are summarized below.
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Ensure that each subsidiary bank remains well capitalized at all times. Prepare and submit a capital plan to the OFR and the FDIC to
achieve, by December 31, 2009, a Tier 1 leverage capital ratio of at least 8% and a total risk-based capital ratio of at least 11% and to achieve by June 30, 2010, a total risk-based capital ratio of at least 12%.
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Prepare and submit a written risk reduction plan to reduce, in the aggregate, the balance of specific assets classified by the OFR as
Substandard, Doubtful or Loss according to a specific schedule for each subsidiary bank.
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Direct management to systematically reduce the subsidiary banks concentration in high-risk commercial real estate loans, which include land,
non-owner occupied commercial construction, and residential construction loans.
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Amend the subsidiary banks liquidity policy to address and take into consideration the banks liquidity objectives and current risk profile,
including a reduction in the net non-core funding dependence ratio to a specified percentage by December 31, 2010, with ongoing efforts to further reduce its dependence, and review the liquidity policy annually for adequacy and make appropriate
revisions to the liquidity policy when necessary.
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Submit to the OFR and the FDIC a strategic business plan and a comprehensive annual budget and earnings forecast for the remainder of 2009 and for 2010
and direct management to prepare a report detailing the subsidiary banks actual performance compared with the strategic plan and budget at each regular meeting of the subsidiary banks board of directors.
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Amend the subsidiary banks written policies and procedures to address examination report comments and recommendations regarding the use of
interest reserves.
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Establish a sound ALLL methodology, submit the revised ALLL methodology to the OFR and the FDIC for review and comment and review the adequacy of the
ALLL prior to the end of each calendar quarter.
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Improve commercial real estate lending underwriting and portfolio management.
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Notify the OFR and the FDIC in writing when the subsidiary bank proposes to add any individual to its board of directors or employ any individual as an
executive officer.
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Furnish quarterly progress reports to the FDIC and the OFR along with a report detailing the subsidiary banks actual performance compared with
the strategic plan and budget presented at each regular board meeting.
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Refrain from extending any additional credit to, or for the benefit of, any borrower who has a loan or other extension of credit from the subsidiary
bank that has been charged off or classified.
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We consider the capital and asset quality provisions of the
Corrective Resolutions to be the most significant and imperative. As of March 31, 2010, none of our subsidiary banks were in compliance with either requirement. Our subsidiary banks were not considered well capitalized as of
March 31, 2010, and certain balances of classified assets and commercial real estate loans remain above the levels contemplated by the Corrective Resolutions. As of March 31, 2010, Bank of FloridaSouthwest had a Tier 1 leverage capital
ratio of (2.36%), total risk based capital ratio of (2.98%) and Tier 1 risk based capital ratio of (2.98%), Bank of FloridaSoutheast had a Tier 1 leverage capital ratio of 1.19%, total risk based capital ratio of 3.33% and Tier 1 risk based
capital ratio of 1.67%, and Bank of FloridaTampa Bay had a Tier 1 leverage capital ratio of (0.85)%, total risk based capital ratio of (1.12)% and Tier 1 risk based capital ratio of (1.12)%. Bank of FloridaSouthwest and Bank of Florida
Tampa Bay had also not sufficiently reduced the net non-core funding dependence ratio to the required 40%, and had only reached 44.95% and 48.51%, respectively, at March 31, 2010.
Potential Consent Orders
Based on the subsidiary banks financial condition, we understand that the FDIC plans to pursue and implement formal enforcement
actions with respect to our subsidiary banks in the form of consent orders (FDIC Orders). We expect the FDIC to pursue these even if we do comply with the requirements of the Directives.
We currently expect the FDIC Orders will focus on the areas addressed by our existing Corrective Resolutions and the Directives: to raise
and maintain certain capital ratios, to improve asset quality, to reduce non-core funding dependence, and to reduce our commercial real estate loan concentrations, although the scope and terms of any FDIC Orders or any other action that the FDIC may
take is unknown.
Holding Company Board Resolutions
The Company is subject to the supervision and regulation of the Board of Governors of the Federal Reserve System (the Federal
Reserve). On June 12, 2009, we received a letter from the Federal Reserve Bank of Atlanta (the Reserve Bank) requiring us to provide advance notice to the Reserve Bank before appointing any new directors or senior executive
officers, which the Federal Reserve may approve or disapprove, or entering into any agreement to provide indemnification or severance payments. The letter also requested our board of directors to adopt certain resolutions (the Board
Resolutions). Our board of directors adopted the Board Resolutions on October 19, 2009.
29
The Board Resolutions provide that the Company may not, without prior Federal Reserve
approval, incur debt, including trust preferred securities; declare or pay dividends including the payment of dividends on our outstanding Series B Preferred Stock; reduce the Companys capital position by purchasing or redeeming any shares of
our capital stock except for any redemption of shares of our outstanding Series B Preferred Stock following an equity offering of not less than $30 million; or make any payment representing a reduction of capital other than the payment of normal and
routine operating expenses. The Board Resolutions also require our board of directors to submit financial statements and confirmation of compliance with the Board Resolutions.
CRITICAL ACCOUNTING POLICIES
The Companys consolidated financial statements are prepared in conformity with accounting principles generally accepted in the
United States of America. The financial information contained within these statements is, to a significant extent, based on approximate measures of the financial effects of transactions and events that have already occurred. Critical
accounting policies are those that involve the most complex and subjective decisions and assessments, and have the greatest potential impact on the Companys stated results of operations. The notes to the consolidated financial statements
include a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. Management believes that, of our significant accounting policies, the following involve a higher degree of
judgment and complexity. Our management has discussed these critical accounting assumptions and estimates with the Board of Directors Audit Committee.
Allowance for Loan Losses
:
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to
operations. Loan losses are charged against the allowance when management believes the collectability of a loan balance is unlikely. Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is comprised of: (1) a component for individual loan impairment, and (2) a measure of collective
loan impairment. The allowance for loan losses is established and maintained at levels deemed adequate to cover losses inherent in the portfolio as of the balance sheet date. This estimate is based upon managements evaluation of the risks in
the loan portfolio and changes in the nature and volume of loan activity. Estimates for loan losses are derived by analyzing historical loss experience, current trends in delinquencies and charge-offs, historical bank experience, changes in the size
and composition of the loan portfolio, adverse situations that may affect the borrowers ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective, as it
requires estimates that are susceptible to significant revision as more information becomes available.
A loan is considered
impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors
considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Larger impaired credits that are measured for impairment have been defined to include loans classified as substandard and on nonaccrual or doubtful risk grades where the borrower relationship is
greater than $500,000. For such loans that are considered impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.
Loans that are not measured individually for impairment are measured collectively and include commercial real estate loans
that are performing and large groups of smaller balance homogeneous loans evaluated based on historical loss experience adjusted for qualitative factors.
EXECUTIVE SUMMARY
The
Company realized a first quarter net loss of $48.2 million, or ($3.76) per diluted share, versus ($0.34) per diluted share during the same period in 2009. The net loss was primarily due to a $36.4 million increase in provision for loan losses in
addition to a $1.6 million or 16.3% decrease in net interest income mostly attributable to the decline in interest rates. As a result of these losses, as of March 31, 2010, our total stockholders equity/(deficit) decreased to $(5.8) million and
our Tier 1 leverage capital ratio was (0.66)%, our total risk based capital ratio was (0.86)% and our Tier 1 risk based capital ratio was (0.86)%. These losses also resulted in each of our three
30
subsidiary banks being critically undercapitalized. As a result, the FDIC has issued to each bank a Prompt Corrective Action Directive which required each bank to return to
adequately capitalized condition by April 17, 2010; none of the banks met this deadline. If we are not successful in completing our $71.8 million common stock offering in the very near term, it is likely that each of our three
subsidiary banks will be closed by the Florida Office of Financial Regulation (OFR) and placed into receivership with the FDIC. In such case, our only remaining operations will be those of Bank of Florida Trust Company, which can not be
expected to provide significant revenues or profits.
Total assets grew to $1.5 billion at March 31, 2010, up $73.7
million or 5.3% from December 31, 2009. The increase is primarily the result of cash and due from banks and securities purchases partially offset by a decline in loan balances. Loans declined $66.0 million or 5.4% during the first three months
of this year and investments securities increased $29.7 million or 30.1%, and cash and due from banks increased $112.2 million or 163.4%. Total deposits increased $122.7 million, or 10.3% since yearend, to $1.3 billion. Total core deposits, which
exclude wholesale brokered CDs, wholesale CDAR deposits, and CDs with balances in excess of $100 thousand, decreased $14.7 million or 1.9% during the first three months of this year. Book value per share declined to $(0.75), down $3.82 over the last
three months.
ANALYSIS OF FINANCIAL CONDITION
Asset quality
The
Banks loan portfolios are subject to periodic reviews by our internal loan review department, our external loan review consultant and state and federal bank regulators. The Companys nonperforming loans (nonaccrual and 90+ days past due)
totaled $171.0 million at March 31, 2010, 14.91% of total loans outstanding, compared to $164.5 million at the end of 2009. Thirty-to-ninety day delinquent loans were $67.2 million or 5.86% of loans outstanding at March 31, 2010, an
increase of $3.4 million in total loan delinquencies from December 31, 2009. There were $39.0 million in net charge-offs for the first three months of 2010, resulting in net charge-offs to average loans of 15.18%, an increase of 11.26% from the
first three months of 2009. The increased level of nonperforming assets in 2010 is a result of a slowing economy and real estate market which is discussed further in
Note 6 Loans
.
Real estate values in our markets deteriorated at an accelerated pace over recent quarters, resulting in increased credit losses. Our
non-performing assets have increased since the beginning of the economic downturn in 2007 as management continues to recognize impaired loans based on our ongoing process of identifying early signs of stress in our loan portfolio. Additionally, we
continue to track loans from pre-watch identification through disposition, using our history of trend analysis by loan type, industry, market and vintage. Subsequent to March 31, 2010, we adjusted our provision due to further evaluation of our
collateral values which we deemed material.
Our Special Assets Division continues to monitor and manage our most problematic
loans and other real estate owned. This division has grown to include five professionals with experience in managing non-performing loans. This division reports to our Senior Executive Vice President who has experience in managing special assets
divisions, as well as reporting to the Special Assets Committee, a subcommittee of our Board of Directors, which meets monthly and oversees the management, marketing, and overall dissolution of these assets.
We had $91.3 million in loans that were defined as troubled debt restructuring as of March 31, 2010. Of those amounts, $52.0 million
were accruing as they were performing in accordance with their restructured terms. The majority of the restructurings involve extending the interest-only period, reducing the interest rate to give the borrower relief, or other modifications of terms
that deviate from the original contract.
Loans
Total gross loans outstanding (excluding deferred fees and including loans held for sale), totaled $1.1 billion at March 31, down
$66.1 million or 5.4% for the first three months of 2010. Construction loans, largely secured by commercial real estate, totaled $185.1 million (16.1% of total loans) at March 31, 2010, down $31.5 million since the end of last year. Commercial
real estate loans, including multi-family dwellings but excluding those in construction, decreased by $15.7 million to $645.5 million and total 56.2% of total loans outstanding, while commercial and industrial loans declined $10.5 million to $101.9
million or approximately 8.9% of total loans outstanding. One-to-four family residential loans, including loans held for sale, were $161.9 million (14.1% of total loans), down $5.1 million from year-end. Consumer lines of credit and installment and
other loans decreased $3.2 million to $53.9 million (4.7% of total loans).
31
Investment securities and overnight investments
Securities available for sale totaled $127.8 million, an increase of $29.7 million from the level held at December 31, 2009. The
Company had $536,000 classified as held to maturity at March 31, 2010 and December 31, 2009. The Company does not currently engage in trading activities and, therefore, did not hold any securities classified as trading at March 31,
2010 or December 31, 2009. Additional details related to the securities portfolio can be found in
Note 5 Securities
.
Deposits
Total
deposits increased $122.7 million or 10.3% during the first quarter of 2010 to $1.3 billion. Core deposits, which exclude wholesale brokered CDs, wholesale CDAR deposits, and CDs with balances in excess of $100 thousand, decreased $14.7 million or
1.9% in the past 90 days, with the decline in money market and NOW ($112.2 million) and retail CDARs ($9.5 million) accounts more than offsetting the increase in CDs greater than $100 thousand ($97.1 million), non interest bearing deposits
($9.0 million) and savings ($900 thousand) accounts. Non-core deposit accounts increased $137.4 million or 34.3% in the first three months of 2010.
The annualized average rate paid on total interest bearing deposits during the first three months of 2010 was 2.27%, a decrease of 69
basis points compared to the first quarter last year. This decrease resulted primarily from lower interest rate environment under which we currently operate.
Due to the Banks capital positions and the Resolutions as described under
Supervision and Regulation
in our
Annual Report on Form 10-K for the year ended December 31, 2009, we are presently prohibited from accepting, renewing or rolling over brokered depositis, including CDARs, and from paying interest rates greater than 0.75% of the prevailing
local rate or the national rates published by the FDIC.
Borrowings
While client deposits remain our primary source of funding for asset growth, management uses other borrowings as a funding source for loan
growth, regulatory capital needs, and as a tool to manage the Companys interest rate risk and margin. At March 31, 2010 borrowings totaled $167.4 million, an increase of $243 thousand compared to December 31, 2009. Total borrowings
at March 31, 2010 consisted of $32.9 million of repurchase agreements, $16.0 million of subordinated debt and $118.5 million of FHLB advances compared to $32.7 million of repurchase agreements, 16.0 million in subordinated debt and $118.5
million in Federal Home Loan Bank (FHLB) Advances, respectively, at the end of 2009. Repurchase agreements and FHLB advances include $37.9 million that mature daily. The maturities of all borrowings range from October 2011 through July
2017.
Stockholders equity
Total stockholders equity was $(5.8) million at March 31, 2010 a $49.6 million decrease since December 31, 2009. Book
value per common share was $(0.75) at March 31, 2010 while the tangible book value per common share was $(0.75). The Companys Tier 1 leverage ratio decreased 307 basis points to (0.66)% at March 31, 2010 from 2.41% at
December 31, 2009. The minimum Tier 1 leverage ratio for bank holding companies is 4.0%; however, regulators can require bank holding companies to satisfy higher capital requirements. At March 31, 2010, the Companys three banks were
critically undercapitalized. Additional details regarding stockholders equity and regulatory matters can be found in
Note 2 Going Concern
and
Note 11 Regulatory Matters
.
32
ANALYSIS OF RESULTS OF OPERATIONS
First Quarter 2010 Compared to First Quarter 2009
Consolidated net loss for the first quarter of 2010 totaled $48.2 million, an increase of $43.8 million or 995.5% compared to first
quarter 2009.
The $1.6 million decrease in net interest income and $1.5 million increase in non-interest income against a
$3.6 million or 32.6% increase in noninterest expense resulted in an efficiency ratio for the quarter of 124.0%. The increase in noninterest expense primarily relates to the writeoff of the intangible assets, repossession expenses, regulatory
assessments, and professional fees. The provision for loan losses increased $36.4 million compared to the same period last year due to additional provisions for loan downgrades.
Net interest income
Net interest income in the first quarter totaled $8.0 million, down $1.6 million or 16.3% less than the first quarter of 2009. The spread
between the yield on earning assets and cost of interest-bearing liabilities declined 14 basis points when comparing first quarter 2010 versus first quarter 2009. The yield on earning assets decreased 78 basis points over the same period last year
to 4.97%, with continued pressures from the low rate environment under which we currently operate and the impact of non-earning assets. Interest bearing liabilities repriced during the quarter and resulted in a 64 basis point decrease in the cost of
funds to 2.40%. Interest income was negatively impacted by approximately $785,000 in first quarter 2010 due to interest that was reversed on loans that migrated to nonaccrual status.
33
The following table represents, for the years indicated, certain information related to our
average balance sheet and average yields on assets and average costs of liabilities (in thousands).
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For the Three Months Ended March 31,
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2010
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2009
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Average
Balance
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Interest
and
Dividends
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|
|
Average
Yield/
Rate
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|
|
Average
Balance
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|
Interest
and
Dividends
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|
|
Average
Yield/
Rate
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Assets:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Earning assets:
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|
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|
|
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|
|
|
|
|
|
|
|
Loans
1
|
|
$
|
1,027,698
|
|
$
|
14,811
|
|
|
5.84
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%
|
|
$
|
1,202,565
|
|
$
|
17,299
|
|
|
5.83
|
%
|
Interest earning deposits
|
|
|
142,472
|
|
|
86
|
|
|
0.24
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%
|
|
|
599
|
|
|
1
|
|
|
0.68
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%
|
Securities
2
|
|
|
128,405
|
|
|
1,007
|
|
|
3.18
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%
|
|
|
121,540
|
|
|
1,491
|
|
|
4.98
|
%
|
Federal funds sold
|
|
|
|
|
|
|
|
|
0.00
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%
|
|
|
1,581
|
|
|
2
|
|
|
0.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
1,298,575
|
|
|
15,904
|
|
|
4.97
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%
|
|
|
1,326,285
|
|
|
18,793
|
|
|
5.75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non interest-earning assets
|
|
|
194,781
|
|
|
|
|
|
|
|
|
|
199,154
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
1,493,356
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|
|
|
|
|
|
|
|
$
|
1,525,439
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|
|
|
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|
|
|
|
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|
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|
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Liabilities:
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest-bearing liabilities:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest bearing checking
|
|
$
|
54,316
|
|
|
23
|
|
|
0.17
|
%
|
|
$
|
46,782
|
|
|
21
|
|
|
0.18
|
%
|
Money market accounts
|
|
|
255,147
|
|
|
902
|
|
|
1.43
|
%
|
|
|
333,778
|
|
|
1,553
|
|
|
1.89
|
%
|
Savings
|
|
|
6,425
|
|
|
6
|
|
|
0.38
|
%
|
|
|
5,975
|
|
|
3
|
|
|
0.20
|
%
|
Time deposits
|
|
|
847,889
|
|
|
5,583
|
|
|
2.67
|
%
|
|
|
666,861
|
|
|
6,109
|
|
|
3.72
|
%
|
Other borrowings
|
|
|
167,211
|
|
|
1,362
|
|
|
3.30
|
%
|
|
|
174,691
|
|
|
1,512
|
|
|
3.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
1,330,988
|
|
|
7,876
|
|
|
2.40
|
%
|
|
|
1,228,087
|
|
|
9,198
|
|
|
3.04
|
%
|
Non-interest bearing deposits
|
|
|
119,074
|
|
|
|
|
|
|
|
|
|
102,522
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
761
|
|
|
|
|
|
|
|
|
|
5,252
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
42,533
|
|
|
|
|
|
|
|
|
|
189,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities & Stockholders Equity
|
|
$
|
1,493,356
|
|
|
|
|
|
|
|
|
$
|
1,525,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
$
|
8,028
|
|
|
|
|
|
|
|
|
$
|
9,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-rate spread
|
|
|
|
|
|
|
|
|
2.57
|
%
|
|
|
|
|
|
|
|
|
2.71
|
%
|
Net interest margin
|
|
|
|
|
|
|
|
|
2.51
|
%
|
|
|
|
|
|
|
|
|
2.93
|
%
|
Ratio of average interest-bearing liabilities to average earning assets
|
|
|
|
|
|
102.5
|
%
|
|
|
|
|
|
|
|
|
92.6
|
%
|
|
|
|
INCREASE (DECREASE) DUE TO CHANGE IN (IN THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VOLUME
|
|
|
RATE
|
|
|
CHANGE
|
|
Increase (decrease) in interest income
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
1
|
|
$
|
(2,520
|
)
|
|
$
|
32
|
|
|
$
|
(2,488
|
)
|
Interest earning deposits
|
|
|
86
|
|
|
|
(1
|
)
|
|
|
85
|
|
Securities
2
|
|
|
54
|
|
|
|
(538
|
)
|
|
|
(484
|
)
|
Federal funds sold
|
|
|
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
(2,380
|
)
|
|
|
(509
|
)
|
|
|
(2,889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in interest expense
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing checking and money market deposits
|
|
|
(275
|
)
|
|
|
(374
|
)
|
|
|
(649
|
)
|
Savings deposits
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Time deposits
|
|
|
1,192
|
|
|
|
(1,718
|
)
|
|
|
(526
|
)
|
Other borrowings
|
|
|
(68
|
)
|
|
|
(82
|
)
|
|
|
(150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
849
|
|
|
|
(2,171
|
)
|
|
|
(1,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total change in net interest income
|
|
$
|
(3,229
|
)
|
|
$
|
1,662
|
|
|
$
|
(1,567
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
For purposes of this analysis, non-accruing loans are not included in the average balances.
|
2
|
Tax-exempt income, to the extent included in the amounts above, is not reflected on a tax equivalent basis.
|
34
Noninterest income
Noninterest income was $2.7 million in the first quarter of 2010, an increase of $1.5 million or 129.6% over the same quarter last year.
Gains on sale of assets, which includes gains (losses) on securities, decreased $1.4 million (down 4818.0%) as a result of securities losses ($1,112,000), more losses on sale of other real estate owned ($303,000) partially offset by greater
secondary market fee income ($7,000).
Trust fees declined $129,000 or 19.7% to $525 thousand over the first quarter of 2009
primarily the result of the distressed equity market conditions. Over the past twelve months, assets under administration have increased $78.9 million, or 15.1%, to $601.4 million at March 31, 2010.
Service charges and other income increased approximately $3.0 million, or 642.2%, over the same quarter last year, due to hedge
ineffectiveness ($2.9 million), greater service charge income ($60,000) due to the implementation of a more efficient process for commercial account analysis, and increased other income ($97,000) due to corrections from prior year, increased foreign
exchange fees and miscellaneous fee income.
Noninterest expense
Noninterest expense totaled $14.6 million for the first quarter of 2010 compared to $11.0 million for the comparable quarter last year.
This increase reflected a 32.6% or $3.6 million increase compared to first quarter 2009. Increases occurred in the areas of intangible amortization ($2.4 million or 2104.1%) related to the writeoff of the unamortized intangible balances,
repossession expenses ($1.1 million or 320.5% increase) related to the increase in other real estate owned properties, regulatory assessments ($570,000 or 179.8% increase) driven by the increase in FDIC assessments, professional fees ($370,000 or
76.5% increase) driven by the capital campaign, and data processing ($97,000 or 16.6% increase). These increases in expense were partially offset by decreases in salaries and benefits ($592,000 or 11.4% decrease), equipment rental, depreciation and
maintenance ($86,000 or 10.2% decrease), travel ($68,000 or 31.5% decrease), and advertising ($32,000 or 14.4% decrease).
Provision and
Allowance for Loan Losses
The first quarter provision for loan losses was $43.1 million, up $36.4 million
(543.3%) from first quarter 2009 as a result of loan downgrades and an increased level of net charge-offs due to the continued weakness in real estate values. At March 31, 2010, the loan loss allowance was 4.02% of total loans or 26.98% of
the nonperforming loans. In comparison, the allowance for loan losses totaled $24.5 million or 1.9% of loans outstanding at March 31, 2009. There were $39.0 million in net charge-offs in the first quarter of 2010, compared to $11.8 million in
the first quarter of 2009, resulting in net charge-offs to average loans of 15.18%. The primary factor impacting the amount of these charge-offs is the continued decline in property values across our Florida markets. Subsequent to March 31, 2010, we
adjusted our provision due to further evaluation of our collateral values which we deemed material.
There were $171.0 million
in nonperforming loans (90+ days past due and non-accruals) at March 31, 2010 compared to $115.0 million at March 31, 2009. The increase was primarily caused by the downturn in the residential real estate market which negatively impacted
the liquidity of a number of borrowers. Loans thirty to eighty-nine days delinquent increased to $67.2 million at March 31, 2010 from $36.5 million at March 31, 2009.
Income Taxes
Income tax expense for the first quarter of 2010 was $1.2 million, as compared with a benefit of $2.6 million for the same period in
2009, representing effective tax rates of 2.5% and 37.2%, respectively. The effective tax rate was lower than the statutory tax rate in the current year primarily due to the valuation allowance established on the deferred tax asset.
35
ALLOWANCE FOR LOAN LOSSES
The Board of Directors of each Bank is responsible for overseeing the establishment of an appropriate level of the Allowance for Loan and
Lease Losses in compliance with generally accepted accounting principles. An evaluation of the level of allowance for loan losses is performed on a recurring basis, and at least quarterly.
Homogenous Loan Pools
The Banks established general reserve allocations as a percentage of loans for homogeneous pools of loans where each category
demonstrates similar risk characteristics. The reserve metrics are monitored and adjusted for adequacy on a quarterly basis. The following table sets forth, as of March 31, 2010, our reserves as a percentage of loans for each loan category:
|
|
|
|
|
|
|
|
|
|
Homogeneous Loan Pool
|
|
2010
BOF-Southwest
|
|
|
2010
BOF-Southeast
|
|
|
2010
BOF-Tampa Bay
|
|
Residential Land & Construction
|
|
15.80
|
%
|
|
10.05
|
%
|
|
40.35
|
%
|
Land & Construction
|
|
7.05
|
%
|
|
5.15
|
%
|
|
5.40
|
%
|
Home Equity Loans (Lines on 1-4 Family)
|
|
5.05
|
%
|
|
2.45
|
%
|
|
0.80
|
%
|
1-4 Family Non Revolving
1
st
Lien
|
|
2.85
|
%
|
|
2.25
|
%
|
|
3.75
|
%
|
1-4 Family Non-Revolving Jr Lien
|
|
8.65
|
%
|
|
1.35
|
%
|
|
0.75
|
%
|
Multifamily
|
|
2.40
|
%
|
|
0.55
|
%
|
|
0.50
|
%
|
Commercial Real Estate Owner Occupied
|
|
2.05
|
%
|
|
1.20
|
%
|
|
1.10
|
%
|
Commercial Real Estate Non-Owner Occupied
|
|
3.70
|
%
|
|
2.10
|
%
|
|
2.55
|
%
|
Commercial Non Real Estate Secured
|
|
3.95
|
%
|
|
2.10
|
%
|
|
1.35
|
%
|
Consumer and Other Loans
|
|
2.85
|
%
|
|
2.60
|
%
|
|
4.80
|
%
|
The total loan
reserve allocations resulted in reserves of $24.6 million for the Southwest market, $12.3 million for the Southeast market, and $9.2 million for the Tampa market to total approximately $46.1 million on a consolidated basis.
Management has derived loss rates to each loan category to determine the appropriate level of allocation for that loan segment based on a
2 year loan loss history. Qualitative and environmental factors are used to adjust the historical loss rates which range between 10 and 75 basis points and include the following:
|
|
|
Levels of and trends in delinquencies, non-accruals, and impaired loans;
|
|
|
|
Levels of and trends in charge-offs and recoveries;
|
|
|
|
Trends in volume and terms of loans;
|
|
|
|
Effects of changes in risk selection and underwriting standards, and other changes in lending policies, procedures, and practices;
|
|
|
|
Experience, ability, and depth of lending management, loan review, and other relevant staff;
|
|
|
|
National and local economic trends and conditions;
|
|
|
|
Industry conditions; and
|
|
|
|
Effects of changes in credit concentrations.
|
The factors are supported by the Banks history as well as economic reports and data. The trend of credit losses and delinquencies
in the loan portfolio has increased dramatically since late 2008 and has begun to shift from the residential sector to commercial real estate. As criticized loans migrate to a non-performing status, the specific loan is measured individually for
impairment. If the loan impairment is determined to be other than temporary, the loan is charged down to its fair market value. Management is of the opinion that the allowance for loan losses are supported and appropriate based on the following
economic factors.
Delinquency and Non-Accrual Loans
Historically the delinquency experience and non-accrual loans have been low in comparison to our UBPR peers up until 2008 according to
information available from the Federal Financial Institutions Examination
36
Councils (FFIEC) Uniform Bank Performance Report (UBPR) summarized below. The recent economic downturn within the Banks footprint has caused each Bank to exceed its peers for the
years ending 2008 and 2009 in all markets. The following chart shows the delinquency experience, including nonaccruals, of the individual banks against the UBPR peer group.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
BOFL - SW
|
|
UBPR PEER
|
|
BOFL - SE
|
|
UBPR PEER
|
|
BOFL - TB
|
|
UBPR PEER
|
2009
|
|
17.91%
|
|
4.73%
|
|
18.47%
|
|
4.73%
|
|
21.81%
|
|
5.60%
|
2008
|
|
9.26%
|
|
3.62%
|
|
5.80%
|
|
3.62%
|
|
5.53%
|
|
3.70%
|
2007
|
|
2.67%
|
|
2.23%
|
|
0.31%
|
|
2.23%
|
|
0.20%
|
|
1.55%
|
2006
|
|
0.07%
|
|
1.42%
|
|
0.26%
|
|
0.95%
|
|
1.29%
|
|
0.73%
|
Uniform Bank Performance Report -
% Total P/D LN & LS including Nonaccrual
Changes in Charge-Offs and Recoveries
The historical loss experience for the Banks has been very minimal and below peers, prior to 2008. The recent economic downturn within the
Banks footprint has caused each Bank to exceed their peers in 2009. Net charge-offs during the first quarter 2010 were $39.0 million, compared to $27.2 million in the fourth quarter 2009. The increase in net charge-offs was primarily related to
valuation adjustments on commercial real estate projects.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
BOFL - SW
|
|
UBPR PEER
|
|
BOFL - SE
|
|
UBPR PEER
|
|
BOFL - TB
|
|
UBPR PEER
|
2009
|
|
5.56%
|
|
1.09%
|
|
3.64%
|
|
1.09%
|
|
5.11%
|
|
1.18%
|
2008
|
|
1.32%
|
|
0.53%
|
|
0.30%
|
|
0.53%
|
|
0.15%
|
|
0.49%
|
2007
|
|
0.07%
|
|
0.18%
|
|
0.00%
|
|
0.18%
|
|
0.00%
|
|
0.14%
|
2006
|
|
0.05%
|
|
0.11%
|
|
0.08%
|
|
0.14%
|
|
0.00%
|
|
0.04%
|
Uniform Bank Performance Report -
Net Loss to Average Total LN & LS
Florida Outlook
The following table exemplifies the substantial increase in unemployment rates within the Banks footprint as of December 31,
2009 dating back to 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
National
|
|
9.70
|
%
|
|
7.10
|
%
|
|
4.80
|
%
|
|
4.30
|
%
|
Florida
|
|
11.80
|
%
|
|
7.80
|
%
|
|
4.40
|
%
|
|
3.50
|
%
|
Collier County
|
|
12.00
|
%
|
|
8.00
|
%
|
|
4.80
|
%
|
|
2.70
|
%
|
Lee County
|
|
13.40
|
%
|
|
9.80
|
%
|
|
5.90
|
%
|
|
2.90
|
%
|
Broward County
|
|
10.20
|
%
|
|
6.70
|
%
|
|
3.90
|
%
|
|
2.80
|
%
|
Dade County
|
|
11.50
|
%
|
|
8.50
|
%
|
|
5.20
|
%
|
|
3.90
|
%
|
Palm Beach County
|
|
11.70
|
%
|
|
7.90
|
%
|
|
4.70
|
%
|
|
3.30
|
%
|
Hillsborough County
|
|
12.10
|
%
|
|
7.90
|
%
|
|
4.60
|
%
|
|
3.20
|
%
|
Pinellas County
|
|
12.00
|
%
|
|
8.30
|
%
|
|
4.70
|
%
|
|
3.10
|
%
|
As illustrated
in the table above, Bank of Florida operates in many of the hardest hit counties as it relates to high unemployment rates. The high unemployment rates are due to the heavy reliance on real estate activity for employment and lack of industry as
compared to Floridas larger markets.
The general investment outlook for Florida real estate, though still mixed,
remained unchanged according to the University of Florida Bergstrom Center for Real Estate Studies. While low prices and interest rates will continue to have a positive effect on absorption the continued negative trend in employment along with the
nearing expiration of government incentives has curbed future expectations. The expectation for prices declined slightly this quarter as many continue to believe that prices will increase slower than inflation. The investment outlook for single
family development also declined for the second consecutive quarter.
37
Industrial
The outlook for industrial occupancy is mixed this quarter with the expectations that there will be little to no change in occupancy. The
outlook for investment in industrial remained slightly positive overall, however, the outlook in Warehouse declined from the previous quarter while the outlook improved in Flex space for the third consecutive quarter. Cap rates for industrial
properties continued to move upward, suggesting increased investor uncertainty and expectations for future cap rates increased in both segments.
Office
The
outlook for office occupancy increased in Class A for the second consecutive quarter while the outlook for Class B space declined slightly. The outlook for office rental rates is mixed with an improving trend in Class B and a negative move in
Class A. In both property classes, however, it is expected for rates to lag inflation. The outlook for office investment remained mixed but improved slightly in both segments. Cap rates continued to creep upward for both segments at or above 9%. The
expectation for future cap rates remained stable expecting a slight increase.
Retail
Surprisingly, according to the University of Florida Bergstrom Center for Real Estate Studies the expectations for
occupancy increased for every sector but unanchored Strip Centers this quarter with the largest increase in Free Standing Retail, which indicates no change over the next quarter. The outlook for rental rate growth also improved in all but thet
unanchored Strip Center segment, however all continue to expect stable rental rates. Actual cap rates declined slightly in Strip Survey of Emerging Market Conditions January
2010
©
2008-9 University of Florida Bergstrom Center for Real Estate Studies Centers and Free Standing Retail
and increased in the remaining sectors. The investment outlook in Retail remains mixed for all segments.
Land Investment
The outlook for investment in land remains mixed and largely unchanged for every property type this quarter. Numerous
factors continue to dampen expectations including the lack of financing for land as well as a large spread in bid-ask prices as owners have chosen not to discount as deeply as the market believes is necessary. Additionally, it is expected that banks
will continue to take a slow approach to recognizing and acting on distressed properties.
Recent Performance
Floridas economy has yet to transition from recession to recovery. Signs of improvement have been uneven, but there have been some
positive developments. Early-stage mortgage delinquencies are moderating, initial claims for unemployment insurance are subsiding, and consumer confidence is improving. Also, federal incentives have successfully invigorated home sales and industrial
production. A number of hurdles remain, as foreclosure sales continue to increase and the unemployment rate is a percentage point above the national average. The unemployment rate may be painting an optimistic picture, as the labor force has been
declining since late 2008.
The pace and extent of job losses have moderated significantly since the beginning of the year.
Nonetheless, businesses still lack the confidence to hire. The jobless rate will rise until initial claims moderate to a level consistent with labor market stability. A pace of 15,000 initial claims per week would be consistent with labor market
stability, while 10,000 per week would be consistent with sturdy employment growth.
Exports
Floridas exports are struggling even as the Latin American economy is attempting recovery. Exports decreased to a five-year low in
the third quarter of 2009. The decline in exports can be attributed to the states manufacturing specialization in pro-cyclical durable goods, including concrete and cement. Latin American demand for Floridas concrete and cement has
slowed even as the depreciating dollar has made the states manufactured goods and services more competitive. It will likely take a number of years for exports to fully recover, which will be a hindrance on industrial production.
38
Tourism
Tourism is expected to recover over the next year as the national labor market begins to improve. Due to the weak dollar, areas with
international appeal such as Orlando and Miami are fairing better than their domestically orientated counterparts, including Jacksonville and West Palm Beach. Those markets reliant on domestic tourism should improve over the next year as consumer
confidence rises, the national labor market stabilizes, and wage growth returns.
Stimulus
The federal stimulus will likely deliver its maximum boost next spring, helping the state emerge from recession. Whereas the stimulus is
working faster nationally, Florida is last with infrastructure projects underway. The lack of infrastructure projects is hurting construction employment, which resumed declining in the second half of the year. Nevertheless, the states large
project pipeline should assist in job creation for 2010. One upside risk is if the state wins federal funding to create a commuter rail service from Jacksonville to Miami. Florida would also benefit if it receives federal funding to aid in the
construction of a high-speed rail system linking Tampa to Orlando.
Recovery
Floridas recovery is expected to be lackluster because of its reliance on in-migration and its fractured housing market. Immigration
has an important affect on the Florida economy, as an average of 240,000 residents per year have relocated to the state since the beginning of the decade. However, net migration decreased 40% to 68,000 in 2008, the smallest in recent memory. The
decline in migration is mostly attributed to the severe housing correction. Falling housing prices and wealth nationally have delayed some individuals from retiring. Also, an increasing number of residents are migrating out of the state, because of
Floridas severe recession.
The delayed stabilization in house prices will also delay Floridas recovery by
undermining consumer confidence and household wealth. Florida home prices will not stabilize until after they do nationally. The state continues to lead the nation in foreclosure sales, which are expected to remain elevated in 2010 and will put
downward pressure on home prices.
Florida economy is expected to emerge from recession by the second quarter of 2010 as job
losses subside and consumer confidence improves. The unemployment rate is expected to peak near 13% in 2010, compared to 10.7% nationally. Furthermore, it is expected that the state will not recover the jobs lost during the recession until late 2012
or early 2013. In the long term, Floridas strong demographic and economic fundamentals will enable it to grow at a fast pace.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity Management
Liquidity management involves monitoring sources and uses of funds in order to meet day-to-day cash flow requirements while maximizing
profits. Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Asset liquidity is provided by cash and assets which are readily
marketable, which can be pledged, or which will mature in the near future.
In addition to deposits within its geographic
market place, the sources of funds available to the Banks for lending and other business purposes include loan repayments, sales of loans and securities, borrowings from the Federal Home Loan Bank (FHLB), other correspondent bank borrowings,
national market funding sources, and contributions from the holding company. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are influenced significantly by competition, general
interest rates and money market conditions. Borrowings may be used on a short-term basis to compensate for reductions in other sources, such as deposits at less than projected levels, and may be used to fund the origination of mortgage loans
designated to be sold in the secondary market.
The Company has approved extensions of credit available from correspondent
banks amounting to $79.2 million, sources for loan sales, and primarily short-term investments that could be liquidated if necessary. In addition, the Companys banking subsidiaries are members of the Federal Home Loan Bank, but do not
currently have any further borrowing capacity at this time. At March 31, 2010, the Company had $118.5 million in outstanding borrowings from the FHLB of its present $118.5 million line, and there was $79.2 million in other available lines from
correspondents.
39
Management regularly reviews the Banks liquidity position and has implemented internal
policies that establish guidelines for sources of asset-based liquidity and limit the total amount of purchased funds used to support the balance sheet and funding from non-core sources.
Asset Liability and Interest Rate Risk Management
The objective of the Companys Asset Liability and Interest Rate Risk strategies is to identify and manage the sensitivity of net
interest income to changing interest rates and to minimize the interest rate risk between interest-earning assets and interest-bearing liabilities at various maturities. This is to be done in conjunction with the need to maintain adequate liquidity
and the overall goal of maximizing net interest income.
The Company manages its exposure to fluctuations in interest rates
through policies established by the Asset/Liability Committee (ALCO) of the Bank. The ALCO meets quarterly and has the responsibility for approving asset/liability management policies, formulating and implementing strategies to improve
balance sheet positioning and/or earnings and reviewing the interest rate sensitivity of the Company. ALCO tries to minimize interest rate risk between interest-earning assets and interest-bearing liabilities by attempting to minimize wide
fluctuations in net interest income due to interest rate movements. The ability to control these fluctuations has a direct impact on the profitability of the Company. Management monitors this activity on a regular basis through analysis of its
portfolios to determine the difference between rate sensitive assets and rate sensitive liabilities.
The Companys rate
sensitive assets are those earning interest at variable rates and those with contractual maturities within one year. Rate sensitive assets therefore include both loans and available-for-sale securities. Rate sensitive liabilities include
interest-bearing checking accounts, money market deposit accounts, savings accounts, time deposits and borrowed funds. The Companys balance sheet is liability sensitive; meaning that in a given period there will be more liabilities than assets
subject to immediate re-pricing as interest rates change in the market. During periods of rising rates, this results in decreased net interest income. The opposite occurs during periods of declining rates.
The Company may enter into interest rate swaps which provide for the Company to receive payments at a fixed rate in exchange for paying a
floating rate on certain loans. Management believes that entering into the interest rate swaps may help manage the Companys exposure variabilities in cash flows due to changes in the level of interest rates. It is the Companys objective
to hedge the change in cash flows, and maintain coverage levels that are appropriate, given anticipated or existing interest rate levels and other market considerations, as well as the relationship of change in this asset to other assets of the
Company. To meet this objective, the Company may utilize interest rate swaps as an asset/liability management strategy. These interest rate swap agreements are contracts to make a series of floating rate payments in exchange for receiving a series
of fixed rate payments.
Capital
The Federal Reserve Board and other bank regulatory agencies require bank holding companies and financial institutions to maintain capital
at adequate levels based on a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 100%. Under the risk-based standard, capital is classified into two tiers. Tier 1 capital consists of common
stockholders equity, excluding the unrealized gain (loss) on available-for-sale securities, minus certain intangible assets. Tier 2 capital consists of the general allowance for credit losses subject to certain limitations. An
institutions qualifying capital base for purposes of its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2 capital. Bank holding companies and banks are also required to maintain capital at a minimum level based on total
average assets as defined by a leverage ratio.
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory
approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. The FDIC has issued to each of our three subsidiary banks a
Prompt Corrective Action Directive which required them to return to adequately capitalized status by April 17, 2010; none of the banks met this deadline.
40
At March 31, 2010, our consolidated Tier 1 leverage capital ratio was (0.66)%, our
consolidated total risk based capital ratio was (0.86)% and our consolidated Tier 1 risk based capital ratio was (0.86)%. In addition, each of our subsidiary banks is considered to be critically under capitalized as of March 31,
2010. Continued losses will cause these capital ratios to fall further. Lower capital ratios will impair our ability to compete for loans and deposits, due to regulatory restrictions and public perception.
Our failure to meet our regulatory capital requirements in the very near term will likely result in the closure of each of our three
subsidiary banks by the OFR and the placement of them into receivership with the FDIC.
Off-Balance Sheet Financial Instruments
The Company uses various financial instruments with off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments include commitments to extend credit through loans approved but not yet funded, undisbursed lines of credit and standby letters of credit. These instruments involve, to varying degrees,
elements of credit and interest-rate risk in excess of the amounts recognized in the consolidated balance sheet. The contract or notional amounts of those instruments reflect the extent of the Companys involvement in particular classes of
financial instruments.
The Companys exposure to credit loss in the event of nonperformance by the other party to the
financial instrument for commitments to extend credit and undisbursed loans in process 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.
Undisbursed lines of credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total
committed amounts do not necessarily represent future cash requirements. The Company evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Company upon extension
of credit, is based on managements credit evaluation of the counter party. Standby letters of credit are conditional lending commitments issued by the Company to guarantee the performance of a customer to a third party. Management believes
that the Company has adequate resources to fund all of its commitments.
A summary of the amounts of the Companys
financial instruments, with off-balance sheet risk at March 31, 2010, follows (in thousands):
|
|
|
|
|
|
Contract Amount
|
Standby letters of credit
|
|
$
|
3,876
|
Undisbursed lines of credit
|
|
|
80,276
|
Commitments to extend credit
|
|
|
1,686
|
41
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Interest Sensitivity
Market risk is the risk of loss due to adverse changes in market prices and interest rates. An integral component of the Companys
interest rate risk management strategy is its ability to use derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by changes in market interest rates. Examples of derivative instruments that
the Company may use as part of its interest rate risk management strategy include interest rate swaps, interest rate floors, interest rate caps, forward contracts, principal only swaps, options and swaptions. As part of the overall risk
management strategy, the Company may enter into forward contracts accounted for as free-standing derivatives to economically hedge interest rate lock commitments that are also considered freestanding derivatives. When the Company establishes
derivative contracts, they are with reputable third parties in order to economically hedge significant exposures assumed in commercial customer accommodation derivative contracts. Generally, these contracts will have similar terms in order to
protect the Company from market volatility. Credit risks may arise from the possible inability of counterparties to meet the terms of their contracts, which the Company minimizes through approvals, limits and monitoring procedures.
Our market risk arises primarily from interest rate risk inherent in lending and deposit-taking and borrowing activities. The measurement
of market risk associated with financial instruments is meaningful only when all related and offsetting on-and off-balance sheet transactions are aggregated, and the resulting net positions are identified. Disclosures about the fair value of
financial instruments as of December 31, 2009, which reflect changes in market prices and rates, can be found in note
21
to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended
December 31, 2009. We believe there have been no significant changes in our market risk exposure since December 31, 2009.
Item 4.
|
CONTROLS AND PROCEDURES
|
(a)
Evaluation of Disclosure Controls and Procedures
Bank of Florida Corporation maintains controls and procedures
designed to ensure that information required to be disclosed in the reports that Bank of Florida Corporation 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 managements evaluation of those controls and procedures performed within the 90 days preceding the filing of this Report, the Principal Executive Officer and
Principal Financial Officer of Bank of Florida Corporation concluded that, subject to the limitations noted below, Bank of Florida Corporations disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act
of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods
specified in the U.S. Securities and Exchange Commissions rules and forms.
(b) Managements Report on Internal Control over
Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Such internal controls over financial reporting were designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based upon our evaluation under the framework in
Internal Control-Integrated Framework
, our management concluded that
our internal control over financial reporting was effective as of March 31, 2010. Our managements assessment of the effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by Porter
Keadle Moore, LLP, an independent registered public accounting firm, as stated in their report included in our Form 10-K for the year ended December 31, 2009.
42
(c) Changes in Internal Controls
Bank of Florida Corporation has made no significant changes in its internal controls over financial reporting during the three months
ended March 31, 2010 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
(d) Limitations on the Effectiveness of Controls
Our management, including our Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls
and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of
a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within Bank of Florida Corporation have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures
may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
PART II. OTHER INFORMATION
ITEM 1.
|
LEGAL PROCEEDINGS
|
From
time-to-time, the Company may be involved in various legal proceedings arising in the ordinary course of business. Management believes that the ultimate aggregate liabilities arising from these proceedings, if any, will not have a material adverse
effect on our financial condition or results of operations.
Investing
in shares of our common stock is speculative and involves a high degree of risk, including the risks described below. These risks are in addition to those Risk Factors described in our Form 10-K for the year ended December 31, 2009. You should
carefully consider the following information about these risks, together with the other information contained in this Form 10-Q and the Risk Factors described in our Form 10-K for the year ended December 31, 2009. These risks could materially
affect our business, results of operations or financial condition and the trading price of our common stock. The risks that we have highlighted here and in our Form 10-K for the year ended December 31, 2009 are not the only ones that we face.
For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely could be material or could occur.
There are substantial doubts as to our ability to continue as a going concern and it is possible that our subsidiary banks may fail and be placed
into receivership with the FDIC.
In its report dated March 2, 2010, our independent registered public accounting
firm stated that our net losses raise substantial doubts about our ability to continue as a going concern. In that firms opinion, our ability to continue as a going concern is in doubt as a result of the continued deterioration of our loan
portfolio and is subject to our ability to service our existing loans in a manner that will return the Company to profitability or to identify and consummate a strategic transaction, including the potential sale of the Company. Furthermore, the
Directives to require us to return our subsidiary banks to adequately capitalized status by April 17, 2010 or arrange for the sale of them (As of March 31, 2010, each of our bank subsidiaries was critically
undercapitalized and as of April 17, 2010, none of the banks met that deadline). If we are not able to successfully accomplish such actions, it is likely that our subsidiary banks will fail and be placed into receivership with the FDIC.
Additionally, federal law also requires the FDIC to place a bank into receivership if it has remained critically undercapitalized for 90 days, unless the FDIC determines that other action is more appropriate. If a bank remains
critically undercapitalized on average during the quarter beginning 270 days after the bank first became critically undercapitalized, the FDIC must place the bank into receivership. Bank of Florida Southwest became
critically undercapitalized on
43
December 31, 2009. Therefore, the FDIC may place it into receivership at any time. If one of our subsidiary banks fails and is placed into receivership, it is highly likely the FDIC will
exercise its cross guarantee rights and close the other subsidiary banks in order to reduce any loss or cost to the FDIC.
Our board of directors is actively considering strategic alternatives, including the offering. We can give no assurance that we will
identify an alternative that allows our stockholders to realize an increase in the value of the Companys common stock. We also can give no assurance that a transaction or other strategic alternative, once identified, evaluated and consummated,
will provide greater value to our stockholders than that reflected in the current stock price. In addition, a transaction, which would involve equity financing, would result in substantial dilution to our current stockholders and could adversely
affect the price of our common stock. If we are unable to return to profitability and if we are unable to identify and execute a viable strategic alternative, we may be unable to continue as a going concern.
If any one of our subsidiary banks fails and is placed into receivership with the FDIC, it is highly likely that the FDIC will exercise its
cross guarantee rights and take our other subsidiary banks into receivership.
Under Federal law, each of
our subsidiary banks provides a cross guarantee to the FDIC for the other subsidiary banks. This means, that if the failure or closure of one subsidiary bank causes a loss to the FDIC, the FDIC may demand that the other subsidiary bank
or banks indemnify the FDIC for such a loss. Due to the capital position of each of our subsidiary banks, it would be impossible for any of them to provide any such required indemnification payments to the FDIC. In such instance, the FDIC has the
right to close such banks and take them into receivership. Therefore, it is highly likely that the failure of any of our subsidiary banks will result in the failure of all of our subsidiary banks. In such case, the Company would lose its status as a
regulated bank holding company and its only operations would be that of our trust company subsidiary, which cannot be expected to provide returns or income similar to what could be expected from a multi-bank holding company.
The capital raised in our offering may not be sufficient to absorb future losses, stabilize the Companys capital position or permit future
growth.
We believe the $71.8 million size of our current offering will provide sufficient capital to return each of
our bank subsidiaries to adequately capitalized status through the end of 2010, meet the immediate requirements of the Directives and stabilize the Companys capital position. Each Directive will remain in place until the respective
subsidiary bank remains adequately capitalized for four consecutive quarters. Therefore, if we experience future losses, due to continued degradation of asset quality or otherwise, the capital raised in our offering may not be sufficient
to stabilize the Company and may result in further regulatory action, including the possible issuance of new Directives or the failure of our subsidiary banks and the placement of them into receivership with the FDIC. If one of our subsidiary banks
fails and is placed into receivership, it is highly likely the FDIC will exercise its cross guarantee rights and close the other subsidiary banks in order to reduce any loss or cost to the FDIC. Even if our subsidiary banks and the
Company do continue to operate, the amount of capital we are raising in our offering may not be sufficient to permit us to resume our previous growth strategy. We expect to raise additional capital for our subsidiary banks through a subsequent
offering within the next year. We are also considering borrowing funds to contribute as capital to our banks, attempting to redeem our subsidiary banks subordinated debentures at a discount (which would increase Tier 1 capital, but decrease
total capital), consolidating our bank subsidiaries, or selling of one or more of our subsidiaries. There can be no assurance that any of these actions will be successful.
We are required to maintain capital to meet regulatory requirements, and if we fail to maintain sufficient capital, our financial condition,
liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.
Each of our subsidiary banks is subject to a Directive to return itself to adequately capitalized status by April 17,
2010; none of the banks met this deadline. Each Directive will remain in effect until the respective subsidiary bank remains adequately capitalized for four consecutive quarters. Furthermore, the board of directors of each of our
subsidiary banks has adopted Corrective Resolutions, which commit the respective subsidiary banks to remain well capitalized at all times and to reach by December 31, 2009 (and thereafter maintain), a Tier 1 leverage capital ratio
of at least 8% and a total risk-based capital ratio of at least 11% and to reach, by June 30, 2010 (and thereafter maintain), a total risk-based capital ratio of at least 12%. As of March 31, 2010, however, none of our subsidiary banks
were adequately capitalized or well capitalized, rather each bank was critically undercapitalized. Any further enforcement action taken by our regulators, whether pursuant to the Directives, FDIC Orders or
otherwise, could require our subsidiary banks and/or the Company to maintain higher levels of capital.
44
Our ability to achieve these goals depends on conditions in the capital markets, economic
conditions and a number of other factors, including investor perceptions regarding the banking industry and market conditions and governmental activities, many of which are outside our control, and on our financial condition and performance.
Accordingly, we cannot assure you that we will be able to raise additional capital if needed or on terms acceptable to us. If we fail to satisfy these capital ratios and other regulatory requirements, our financial condition, liquidity and results
of operations would be materially and adversely affected.
Our failure to meet our regulatory capital requirements could
result in further formal enforcement actions against us or our subsidiary banks, the possible failure of the subsidiary banks, and could further affect customer confidence, our ability to grow, our costs of funds and FDIC insurance costs, our
ability to pay dividends, our ability to make acquisitions, and our business, results of operations and financial condition.
The following
exhibits are filed with the Securities and Exchange Commission and are incorporated by reference into this Form 10-K. The exhibits which are denominated by an (a.) were previously filed as a part of Form 10-K filed with the SEC on March 9,
2009. The exhibits which are denominated by a (b.) were previously filed as a part of Amendment No. 1 to Form SB-2, filed with the SEC on May 7, 1999. The exhibits which are denominated by a (c.) were previously filed as a part of Form
10-KSB filed with the SEC on March 30, 2000. The exhibits which are denominated by a (d.) were previously filed as a part of Form S-4 filed with the SEC on October 3, 2006. The exhibits which are denominated by a (e.) were previously filed
as a part of Form 10-Q filed with the SEC on November 5, 2008. The exhibits which are denominated by a (f.) were previously filed as part of Form 10-QSB/A filed on September 10, 2002. The exhibits which are denominated by a (g.) were
previously filed as part of Form 8-K filed on July 2, 2009. The exhibits which are denominated by a (h.) were previously filed as part of Form 10-Q filed on November 9, 2007. The exhibits which are denominated by a (i.) were
previously filed as part of a Registration Statement on Form SB-2 filed with the SEC on September 24, 2004, File No. 333-116833. The exhibits that are denominated by a (j.) were previously filed as part of Form 10-Q filed with the SEC on
August 4, 2005. The exhibits that are denominated by a (k.) were previously filed as part of Form 10-Q filed with the SEC on November 3, 2005. The exhibits that are denominated by a (l.) were previously filed as part of Form 10-K filed
with the SEC on March 5, 2008. The exhibits that are denominated by a (m.) were previously filed as part of Schedule DEF 14A filed with the SEC on April 21, 2006. The exhibits that are denominated by a (n.) were previously filed as part of
Form 10-K filed with the SEC on March 8, 2007. The exhibits that are denominated by a (o.) were previously filed as part of Form 10-Q filed with the SEC on August 7, 2008. The exhibits that are denominated by a (p.) were previously filed
as part of Form S-8 filed with the Securities and Exchange Commission on October 30, 2009. The exhibits that are denominated by a (q) were previously filed as part of Form 8-K filed on October 19, 2009. The exhibits that are
denominated by a (t) were previously filed as part of Form 8-K filed on March 24, 2010. The exhibit numbers correspond to the exhibit numbers in the referenced document.
|
|
|
Exhibit
Number
|
|
Description of Exhibit
|
|
|
j.3.1
|
|
Amended and Restated Articles of Incorporation
|
|
|
o.3.2
|
|
Third Amended and Restated Bylaws dated April 24, 2008
|
|
|
n.3.3
|
|
Article of Amendment to Restated Articles of Incorporation dated December 20, 2006
|
|
|
g.3.4
|
|
Articles of Amendment to Articles of Incorporation dated June 26, 2009
|
|
|
q.3.5
|
|
Articles of Amendment to Restated Articles of Incorporation dated August 27, 2009
|
|
|
b.4.1
|
|
Specimen Common Stock Certificate
|
|
|
m.4.2
|
|
2006 Stock Compensation Plan
|
|
|
g.4.4
|
|
Specimen Series B Preferred Stock Certificate
|
|
|
g.4.7
|
|
Form of Warrant 2009 Offering
|
|
|
k.10.1
|
|
Amended and Restated Employment Agreement of Michael L. McMullan dated February 1, 2005
|
|
|
a.10.2
|
|
Change in Control Agreement of Roy N. Hellwege effective January 1, 2009
|
|
|
a.10.3
|
|
Change in Control Agreement of Charles K. Cross effective January 1, 2009
|
|
|
c.10.4
|
|
1999 Stock Option Plan
|
45
|
|
|
|
|
|
|
c.10.5
|
|
Form of Incentive Stock Option Agreement
|
|
|
a.10.6
|
|
Deferred Compensation Plan of Bank of Florida dated November 19, 2008
|
|
|
a.10.7
|
|
Change in Control Agreement of Julie W. Husler effective January 1, 2009
|
|
|
a.10.9
|
|
Change in Control Agreement of Christopher Willman effective January 1, 2009
|
|
|
a.10.10
|
|
Change in Control Agreement of John B. James effective January 1, 2009
|
|
|
e.10.12
|
|
Change in Control Agreement of John Klumpp dated August 1, 2008
|
|
|
e.10.13
|
|
Change in Control Agreement of Wayne Gilmore dated August 1, 2008
|
|
|
a.10.14
|
|
Change in Control Agreement of Roberto Pelaez effective January 1, 2009
|
|
|
e.10.15
|
|
Change in Control Agreement of Charles Tipton dated August 1, 2008
|
|
|
a.10.17
|
|
Amendment to Amended and Restated Employment Agreement of Michael L. McMullan dated December 15, 2008
|
|
|
a.10.18
|
|
Deferred Compensation Agreement of Tracy L. Keegan dated December 21, 2008
|
|
|
a.10.19
|
|
Deferred Compensation Agreement of John S. Chaperon dated December 21, 2008
|
|
|
a.10.20
|
|
Deferred Compensation Agreement of Roy N. Hellwege dated December 21, 2008
|
|
|
p.10.21
|
|
401(k) Plan
|
|
|
h.14.1
|
|
Code of Ethical Conduct (for Principal Executive and Financial Officer) approved on September 20, 2007
|
|
|
h.14.2
|
|
Code of Ethics approved on September 20, 2007
|
|
|
o.21.1
|
|
Subsidiaries of the Registrant
|
|
|
31.1
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Principal Executive Officer
|
|
|
31.2
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Principal Financial Officer
|
|
|
32.1
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Principal Executive Officer
|
|
|
32.2
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Principal Financial Officer
|
|
|
t.99.10
|
|
Supervisory Prompt Corrective Action Directive for Bank of FloridaSoutheast
|
|
|
t.99.11
|
|
Supervisory Prompt Corrective Action Directive for Bank of FloridaSouthwest
|
|
|
t.99.12
|
|
Supervisory Prompt Corrective Action Directive for Bank of FloridaTampa
|
46
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|
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BANK OF FLORIDA CORPORATION
|
|
|
|
Dated: May 17, 2010
|
|
By:
|
|
/s/ Michael L. Mcmullan
|
|
|
|
|
Michael L. McMullan
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
|
Dated: May 17, 2010
|
|
By:
|
|
/s/ Tracy L.
Keegan
|
|
|
|
|
Tracy L. Keegan
|
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
47
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