-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B44RuidSdKvRdkXrijL7UoQQsaMg5qSw1wVDafC8qBnljPwfsI/vPO79sGk/mM6O PtrE3tM88tJ4S15BOuepew== 0000950144-97-005041.txt : 19970505 0000950144-97-005041.hdr.sgml : 19970505 ACCESSION NUMBER: 0000950144-97-005041 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970502 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIB FINANCIAL CORP CENTRAL INDEX KEY: 0001013796 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 650655973 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-24101 FILM NUMBER: 97594693 BUSINESS ADDRESS: STREET 1: 99451 OVERSEAS HIGHWAY CITY: KEY LARGO STATE: FL ZIP: 33037 BUSINESS PHONE: 3054514660 MAIL ADDRESS: STREET 1: 99451 OVERSEAS HIGHWAY CITY: KEY LARGO STATE: FL ZIP: 33037 S-1/A 1 TIB FINANCIAL CORP FORM S-1/A 1 As filed with the Securities and Exchange Commission on May 2, 1997 Registration No. 333-24101 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 TIB FINANCIAL CORP. (Name of Small Business Issuer in Its Charter) Florida 6711 65-0655973 --------------------------- ---------------------------- ---------------------- (State of Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Code Number) Identification No.)
99451 Overseas Highway Key Largo, FL 33037-7808 (305) 451-4660 (Address and Telephone Number of Principal Executive Offices) Edward V. Lett With a copy to: President and Chief Executive Officer Stanley H. Pollock, Esq. TIB Financial Corp. V. Richard Hoyt, Esq. 99451 Overseas Highway Holland & Knight LLP Key Largo, FL 33037-7808 Suite 2000, One Atlantic Center (305) 451-4660 1201 West Peachtree Street (Name, address and telephone number of agent for service) Atlanta, Georgia 30309-3400 (404) 817-8500
------------------------------------------- Approximate date of proposed sale to the public: As soon as practicable following effectiveness of this Registration Statement. If the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [__] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [__] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [__] -------------------------------------------
CALCULATION OF REGISTRATION FEE =========================================================================================================================== Proposed Maximum Proposed Maximum Title of Class of Amount Offering Price Aggregate Amount of Securities To Be Registered To Be Registered Per Share(1) Offering Price(1) Registration Fee(2) - --------------------------------------------------------------------------------------------------------------------------- Common Stock 1,178,124 $5.35 $6,302,963 $1,910 ===========================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee on the basis of the book value of $5.35 per share of common stock on February 28, 1997. (2) File Fee Previously Paid. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. 2 CROSS REFERENCE TABLE LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY PART I OF FORM S-1
ITEM NUMBER AND CAPTION LOCATION OR HEADING IN PROSPECTUS ----------------------- --------------------------------- 1. Forepart of the Registration Statement and Forepart of the Registration Statement Outside Front Outside Front Cover Page of Prospectus . . . . Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus . . . . . . . . . . . . . . . . . . Inside Front and Outside Back Cover Pages of Prospectus 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges . . . . . . . . . . Prospectus Summary; Risk Factors 4. Use of Proceeds . . . . . . . . . . . . . . . Use of Proceeds 5. Determination of Offering Price . . . . . . . Plan of Distribution 6. Dilution . . . . . . . . . . . . . . . . . . . Not Applicable 7. Selling Security Holders . . . . . . . . . . . Selling Shareholders 8. Plan of Distribution . . . . . . . . . . . . . Plan of Distribution 9. Description of Securities to be Registered . . Description of Capital Stock 10. Interests of Named Experts and Counsel . . . . Legal Matters; Experts 11. Information with Respect to the Registrant . . Prospectus Summary; Risk Factors; The Company; Capitalization; Market Information and Dividends; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management and Principal Shareholders; Supervision and Regulation; Description of Capital Stock; Legal Matters; Financial and Statistical Information; Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities Management and Principal Shareholders
3 PROSPECTUS TIB FINANCIAL CORP. UP TO 1,178,124 SHARES OF COMMON STOCK OFFERED BY SELLING SHAREHOLDERS This Prospectus relates to 1,178,124 shares (the "Shares") of the $0.10 par value common stock ("Common Stock") of TIB Financial Corp. (the "Company") that may be offered for sale from time to time by certain shareholders of the Company. See "Selling Shareholders." The Shares are either presently outstanding shares of Common Stock owned by Company directors (the "Selling Shareholders") or shares of Common Stock subject to options held by them. No period of time has been fixed during which the Shares must be sold, and each Selling Shareholder may determine to sell all, none or any number of the Shares specified as available for sale by him pursuant to this offering. INVESTMENT IN THE SHARES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE ___ OF THIS PROSPECTUS. Prospective purchasers should recognize that an investment in Shares involves certain risks. In particular, there is no established public trading market or market maker for the Common Stock, the Company's financial performance is dependent on the performance of the tourism industry in the Florida Keys, regulatory and other restrictions limit the dividends payable by the Company's wholly owned subsidiary, TIB Bank of the Keys (the "Bank") to the Company and by the Company to shareholders, and the high level of competition in the financial institutions industry. The Selling Shareholders have advised the Company that they (or their successors-in-interest) may sell their respective Shares from time to time at negotiated prices in individually negotiated transactions, through securities broker-dealers at market prices prevailing at the time of the sale if a market for the Common Stock develops, in a future underwritten public offering or otherwise. Sales may be made pursuant to this Prospectus to or through broker-dealers who may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders or the purchasers of Common Stock for whom such broker-dealers may act as agent or to whom they may sell as principal or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). One or more supplemental prospectuses will be filed pursuant to Rule 424 under the Securities Act of 1933, as amended (the "Securities Act"), to describe any material arrangements for the sales of the Shares when such arrangements are entered into by any of the Selling Shareholders and any broker-dealers that participate in the sale of the Shares. Any broker-dealers or other persons acting on behalf of the Selling Shareholders in connection with the sale of the Shares may be deemed to be "underwriters" within the meaning of the Securities Act, and any commissions received by them and any profit realized by them on the resale of the Shares as principals may be deemed to be underwriting commissions under the Securities Act. As of the date hereof, there are no special selling arrangements between any broker-dealer or other person and any Selling Shareholder. The Company will not receive any part of the proceeds of any sales of Shares pursuant to this Prospectus. The Selling Shareholders will bear any commissions or underwriting discounts incurred in connection with any sales of Shares through broker-dealers or in any underwritten public offering. The Company has agreed to pay the expenses of this offering, estimated to be $136,485, and has indicated that it will keep the Registration Statement covering the Shares effective until the Shares are sold. No other public offering of Shares is currently contemplated. See "Plan of Distribution." THESE SECURITIES ARE NOT SAVINGS DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is _________________, 1997 4 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT ANY INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITIES OTHER THAN THE SHARES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR WOULD BE UNLAWFUL. ADDITIONAL INFORMATION The Company has filed a Registration Statement under the Securities Act of 1933, as amended, with respect to the securities offered hereby with the Securities and Exchange Commission (the "Commission"). As permitted by the Rules and Regulations of the Commission, this Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits filed therewith and reference is made to the Registration Statement and the exhibits filed therewith for further information concerning the Company and the securities offered hereby. Copies of such material, as well as periodic reports and information filed by the Company, can be obtained upon payment of the fees prescribed by the Commission, or may be examined at the offices of the Commission without charge, at (i) the public reference facilities in Washington, D.C. at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, (ii) the Northeast Regional Office in New York at 7 World Trade Center, Suite 1300, New York, New York 10048, and (iii) the Midwest Regional Office in Chicago, Illinois at 500 West Madison Street, Suite 1400, Chicago, Illinois 66661-2511. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission (the address of such site is http://www.sec.gov). The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, upon the written or oral request of such person, a copy of any or all of the exhibits which are incorporated by reference herein or filed herewith. Such requests should be directed to the Company at its principal executive offices at 99451 Overseas Highway, Key Largo, Florida 33037-7808, Attention: Edward V. Lett, President and Chief Executive Officer, telephone number (305) 451-4660. The Company may not be required to deliver an annual report to shareholders pursuant to Section 14 of the Securities Exchange Act of 1934, as amended. However, the Company intends to furnish its shareholders with annual reports that include audited financial statements in any event. The Company currently plans to apply to list the Company's common stock on the National Market System of the NASDAQ Stock Market by the end of the second calendar quarter. 5 PROSPECTUS SUMMARY THE FOLLOWING SELECTED INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS, AND SHOULD BE READ TOGETHER THEREWITH. PROSPECTIVE PURCHASERS SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE MAKING AN INVESTMENT DECISION. THE COMPANY TIB Financial Corp. is a Florida corporation that serves as the holding company for TIB Bank of the Keys (the "Bank"), a Florida state-chartered commercial bank engaged in a general commercial banking business with nine banking offices located throughout the Florida Keys. The Company is registered as a bank holding company with the Board of Governors of the Federal Reserve System ("Federal Reserve") under the federal Bank Holding Company Act of 1956, as amended ("BHC Act"). The Company was incorporated in February 1996 to facilitate a reorganization (the "Reorganization") pursuant to which the Company became the parent holding company for the Bank. The Reorganization was completed on August 31, 1996. Through the Bank, the Company provides a broad range of banking and financial services in Monroe County, Florida. See "The Company" and "Business." The Bank, which is currently the Company's only subsidiary, is a member of the Federal Deposit Insurance Corporation ("FDIC") and its deposits are insured by the Bank Insurance Fund (the "BIF") of the FDIC. The Company maintains its principal executive offices at 99451 Overseas Highway, Key Largo, Florida 33037-7808, and its telephone number is (305) 451-4660. BUSINESS STRATEGY The Company currently intends to expand and diversify its operations by entering into new lines of business through the Bank and, potentially, other Company subsidiaries, and by acquiring other financial institutions. Management believes that this strategy, combined with continued growth of its existing business, will result in more efficient operations and increase the likelihood of sustained profitability. However, there can be no assurance that the Company will be successful in implementing this strategy, attaining anticipated efficiencies or sustaining profitable operations. See "The Company -- Business Strategy." THE OFFERING Securities offered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Up to 1,178,124 Shares Common Stock outstanding before and after sale of Shares . . . . . . . . . . . . . . . . . . . . . . . 4,334,364 Shares
See "Plan of Distribution" and "Selling Shareholders." RISK FACTORS Prospective purchasers should recognize that an investment in Shares involves certain risks. In particular, there is no established public trading market or market maker for the Common Stock, the Company's financial performance is dependent on the performance of the tourism industry in the Florida Keys, regulatory and other restrictions limit the dividends payable by the Bank to the Company and by the Company to shareholders, and the high level of competition in the financial institutions industry. See "The Company;" "Risk Factors;" "Determination of Offering Price;" "Business -- Competition;" and "Supervision and Regulation." 6 RISK FACTORS The purchase of Shares involves various risks. Prospective purchasers should consider the following factors, among others, before making a decision to purchase Shares. LACK OF ESTABLISHED TRADING MARKET FOR SHARES. There is no established public trading market or market maker for the Common Stock, and trading of Common Stock has been limited. There can be no assurance that an active trading market for Common Stock will develop or be maintained in the future. As a result, a purchaser of Shares may experience difficulty in selling purchased Shares in a timely manner and may be required to sell their Shares at a discount to the price that would be established in an active trading market. See "Market Information and Dividends." However, the Company currently plans to apply to list the Company's common stock on the National Market System of the Nasdaq Stock Market by the end of the second calendar quarter. REGIONAL ECONOMIC FACTORS. All of the Bank's offices are located in Monroe County in the Florida Keys. As a result, the Company's financial performance is substantially dependent on the strength of the economy in the Florida Keys, which is directly and indirectly dependent on the tourism industry. A downturn in the tourism industry could negatively impact the value of collateral securing loans held in the Bank's portfolio, the ability of borrowers to repay such loans in accordance with original terms and demand for the Bank's loans, deposits and other products. GENERAL ECONOMIC CONDITIONS. Economic conditions beyond the Company's control may have a significant impact on the Company's operations, including such matters as changes in net interest income from one period to another. Examples of such conditions include: (i) the strength of credit demand by customers; (ii) the percentage of deposits that must be held in the form of non-earning cash reserves; (iii) the introduction and growth of new investment instruments and transaction accounts by non-bank financial competitors; and (iv) changes in the general levels of interest rates, including changes resulting from Federal Reserve monetary activities. RESTRICTIONS ON DIVIDENDS. Cash dividends will be payable on Shares only when, as and if declared by the Company's Board of Directors from funds available therefor. The principal potential source of the funds for any cash dividend payments by the Company is currently any cash dividend that may be paid in the future by the Bank. Both the Company and the Bank are subject to statutory and regulatory restrictions on the payment of dividends and must maintain adequate capital, which reduces the amount available for dividends. See "Market Information and Dividends" and "Supervision and Regulation." COMPETITION. The Company operates in highly competitive markets with other banks, mortgage companies and other financial institutions, many of which have greater financial and other resources than available to the Company. The Company competes with institutions affiliated with much larger institutions operating on a statewide, regional or national basis. The Company's long term success will depend on its ability to compete successfully in its service areas. See "Business -- Competition." MONETARY POLICY. Like all regulated financial institutions, the Company will be affected by monetary policies implemented by the Federal Reserve and other federal instrumentalities. A primary instrument of monetary policy employed by the Federal Reserve is the restriction or expansion of the money supply through open market operations and changes in reserve requirements and the discount rate. These operations sometimes cause wide fluctuations in interest rates and can have direct, adverse effects on the operating results of financial institutions. Future changes in fiscal and monetary policy may also alter the competitive environment for financial services. The possibility and nature of such changes cannot be assessed at this time. See "Supervision and Regulation -- Monetary and Fiscal Policies." GOVERNMENTAL REGULATION. The business of the Company and the Bank is subject to extensive regulation. Various aspects of existing laws and regulations, as well as laws enacted and regulations promulgated in the future, may have adverse effects on the Company's profitability. See "Supervision and Regulation." CERTAIN ANTI-TAKEOVER PROVISIONS. The Company's articles of incorporation, bylaws and Florida law contain provisions that might have the effect of delaying, deferring or preventing a non-negotiated merger or other business combination involving the Company. These provisions are intended to encourage any person interested in acquiring the Company to negotiate with, and obtain the approval of, its Board of Directors in connection with the transaction. Certain of these provisions may, however, discourage a future acquisition of the Company not approved by the Board of Directors in which shareholders might receive an attractive value for their shares whether or not a substantial number or even a majority of the Company's shareholders might believe it to be in their best interests. As a result, shareholders who desire to participate in such a transaction may not have the opportunity to do so. In addition, the federal regulatory regime applicable to bank holding companies imposes certain constraints on changes in control of such enterprises, which also might have the effect of delaying, deferring or preventing a business combination involving the Company. See "DESCRIPTION OF CAPITAL STOCK - CLASSIFIED BOARD; - CERTAIN PROVISIONS OF FLORIDA LAW" AND "SUPERVISION AND REGULATION - SUPERVISION AND REGULATION OF THE COMPANY". 7 THE COMPANY GENERAL The Company is a Florida corporation that is registered as a bank holding company with the Federal Reserve under the BHC Act. The Company was incorporated in February 1996 to facilitate the Reorganization pursuant to which the Company became the parent holding company of the Bank effective on August 31, 1996. Through the Bank, the Company provides a broad range of commercial banking and financial services through nine banking offices located throughout the Florida Keys in Monroe County, Florida. The Company currently engages in no significant operations other than the ownership of the Bank. The Bank was incorporated under the laws of the State of Florida on December 28, 1973, and began banking business on February 1, 1974. As of December 31, 1996, the Company had total assets of approximately $241.0 million, total deposits of approximately $204.9 million and total shareholders' equity of approximately $22.6 million. The Company's principal executive offices are located at 99451 Overseas Highway, Key Largo, Florida 33037-7808. The Company's mailing address is P.O. Box 2808, Key Largo, Florida, 33037-7808. Its telephone number is (305) 451-4660. THE REORGANIZATION The Company became the parent holding company for the Bank as a result of a corporate reorganization (the "Reorganization") on August 31, 1996. Pursuant to the Reorganization, each of the 1,426,488 shares of the Bank's common stock outstanding on that date was converted into the right to receive one share of Common Stock. In addition, each outstanding Bank employee and director stock option was replaced with a Company stock option with substantially equivalent terms, except that such options apply on a one-for-one basis to shares of Common Stock rather than shares of the common stock of the Bank. BUSINESS STRATEGY The Company currently intends to expand and diversify its operations by entering into new lines of business through the Bank and, potentially, other Company subsidiaries, and by acquiring other financial institutions located in Florida. Management believes that this strategy, combined with continued growth of its existing business, will result in more efficient operations and increase the likelihood of sustained profitability. See "Business". However, there can be no assurance that the Company will be successful in implementing this strategy or attaining anticipated efficiencies or profitability. SELLING SHAREHOLDERS With respect to each Selling Shareholder, the following table sets forth the Selling Shareholder's name, positions with the Company, the number of shares of Common Stock owned beneficially as of the date of this Prospectus, the maximum number of Shares that may be offered for sale by that Selling Shareholder pursuant to this offering, and the number of shares of Common Stock that such Selling Shareholder will own after this offering if all of the Shares are sold. See also "Plan of Distribution" and "Management and Principal Shareholders."
SHARES MAXIMUM SHARES COMMON STOCK POSITION WITH BENEFICIALLY OFFERED OWNED AFTER NAME THE COMPANY OWNED (1) OFFERING* ---- W. Kenneth Meeks (2) Director 896,802 896,802 0 Joseph H. Roth, Jr. Director 281,322 281,322 0
(1) Does not include 106,476 shares of which Messrs. Meeks and Roth are deemed to be the beneficial owners as Trustees of the 401(K) and Employee Stock Ownership Plan. Such shares are not included in the Shares that may be offered for sale hereunder. (2) Includes 30,000 shares covered by unexercised options. * Assumes the sale of all Shares eligible to be sold by the respective Selling Shareholder, who may determine not to sell any Shares. The Shares offered hereby will be sold by the Selling Shareholders. The Company will not receive any of the proceeds from the sale of the Shares by the Selling Shareholders. Included in the shares beneficially owned by Mr. Meeks are 30,000 shares covered by his unexercised stock options. If the options are exercised and the shares are sold hereunder, the Company will receive proceeds upon the exercise of the options which proceeds would be used for general corporate purposes. 8 PLAN OF DISTRIBUTION The 1,178,124 Shares covered by this Prospectus are either presently issued and outstanding shares of Common Stock which are owned by the Selling Shareholders, or are Shares of Common Stock subject to options held by the Selling Shareholders. Each Selling Shareholder will determine the number of Shares, if any, that he will sell from time to time pursuant to this offering. The maximum number of Shares that each Selling Shareholder may sell pursuant to this offering is set forth opposite the respective Selling Shareholder's name in the table in the "Selling Shareholders" section of this Prospectus above. The Shares represent approximately 27.1% of the issued and outstanding shares of the Company's common stock. This Prospectus does not restrict the availability of any exemption under the securities laws or the regulations under those laws pursuant to which the Selling Shareholders may sell or otherwise dispose of the Shares, including Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"). The Selling Shareholders have advised the Company that they (or their pledgees, donees, transferees or other successors in interest) may sell their respective Shares from time to time at negotiated prices in individually negotiated transactions, through securities broker-dealers at market prices prevailing at the time of the sale if a market for the Common Stock develops, in a future underwritten public offering or otherwise. The Shares may be sold through broker-dealers by one or more of the following methods: (a) a block trade in which the broker or dealer so engaged will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus; (c) ordinary unsolicited brokerage transactions; or (d) transactions in which the broker solicits purchasers. Sales may be made pursuant to this Prospectus to or through broker-dealers who may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders or the purchasers of Common Stock for whom such broker-dealer may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). One or more supplemental prospectuses will be filed pursuant to Rule 424 under the Securities Act to describe any material arrangements for the sales of the Shares when such arrangements are entered into by any of the Selling Shareholders and any other broker-dealers that participate in the sale of the Shares. Any broker-dealers or other persons acting on behalf of the Selling Shareholders in connection with the sale of the Shares may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, and any commissions received by them and any profit realized by them on the resale of the Shares as principals may be deemed to be underwriting commissions under the Securities Act. As of the date hereof, there are no special selling arrangements between any broker-dealer or other person and any Selling Shareholder. In order to comply with the securities laws of certain states, if applicable, the Shares may be required to be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the Shares may not be sold unless exempt or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available. The Selling Shareholders will bear any commissions or underwriting discounts incurred in connection with any sales of Shares through broker-dealers or in any underwritten public offering. The Company has agreed to pay the expenses of this offering, estimated to be $136,485 and has indicated that it will keep the Registration Statement covering the Shares effective until the Shares are sold. In addition, certain Selling Shareholders have agreed to indemnify the Company, its directors, officers, agents and control persons against certain liabilities incurred as a result of information provided by the Selling Shareholders for use in this Prospectus. Insofar as indemnification for liabilities arising under the Securities Act may be permitted pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. USE OF PROCEEDS The Shares offered hereby will be sold by the Selling Shareholders. The Company will not receive any of the proceeds from the sale of the Shares by the Selling Shareholders. See "Selling Shareholders." 9 BUSINESS As of the date of this Prospectus, the Company had not conducted any business except its ownership of the Bank. The Bank has conducted commercial banking operations in Florida since opening for business in 1974. COMMERCIAL BANKING OPERATIONS The Bank is a state-chartered commercial bank headquartered in Key Largo, Florida. The Bank's deposits are insured by the FDIC. The primary business of the Bank is attracting deposits from the public and using such deposits to make real estate, business and consumer loans. As of December 31, 1996, the Bank had total assets of approximately $241.0 million, total deposits of approximately $204.9 million and total shareholders' equity of approximately $22.6 million. The Bank's primary service area consists of Monroe County, Florida. BANKING OFFICES The Bank's business is conducted at its main banking office at 99451 Overseas Highway, Key largo, Florida, where the Company's principal executive offices are also located. The Bank maintains eight additional branches located at: 10330 Overseas Highway, Key Largo, Florida; 91980 Overseas Highway, Tavernier, Florida; 80900 Overseas Highway, Islamorada, Florida; 11401 Overseas Highway, Marathon Shores, Florida; 2315 Overseas Highway, Marathon, Florida; Mile Marker 30.4, Big Pine Key, Florida; 330 Whitehead Street, Key West, Florida; and 3322 N. Roosevelt Boulevard, Key West, Florida. BANKING SERVICES The Bank offers a full range of commercial banking services to individual, professional and business customers in its primary service area. These services include savings accounts, money market checking accounts and NOW accounts, certificates of deposit and other time deposits, commercial, real estate and installment loans, and safe deposit facilities. Customer deposits are insured to the maximum extent provided by law through the BIF. The Bank pays interest on its accounts and certificates competitive with other financial institutions in its primary service area. The Bank seeks to attract deposits from the public and uses such deposits, together with borrowings and other sources of funds, to make real estate, business and consumer loans. The Bank seeks to concentrate its deposits and loan efforts primarily within its primary service competition in attracting deposits and in making real estate, business and consumer loans in its primary service area. The primary factors in competing for deposits are interest rates, the range of financial services offered, convenience of office locations and flexible office hours. Direct competition for such deposits comes from other commercial banks, savings institutions, credit unions, brokerage firms and money market funds. The primary factors in competing for loans are interest rates, loan origination fees and the range of lending services offered. Competition for origination of loans normally comes from other commercial banks, savings institutions, credit unions and mortgage banking firms. Such entities may have competitive advantages as a result of greater resources and higher lending limits (by virtue of their greater capitalization). However, the Bank seeks to attract customers in its primary service area with its products and services which are tailored to the needs of the customers. Management seeks to emphasize a high degree of personalized client service in order to be able to better meet the banking needs of its customers. EMPLOYEES At December 31, 1996, the Bank had 159 full-time and 14 part-time employees. The Bank considers its relationship with its employees to be good. PROPERTIES The Bank conducts its commercial banking business through the principal executive office of the Company and the Bank located on an approximately 1.3 acre site at 99451 Overseas Highway, Key Largo, Monroe County, Florida. The main offices of the Bank are housed in a two-story building, owned by the Bank and containing approximately 13,275 square feet of finished space used for offices and operations and seven teller windows in the Bank lobby. The building also has two drive-up teller windows and an automated teller machine with 24-hour a day access. The Bank's eight branches are located in Key Largo, Tavernier, Islamorada, Marathon Shores, Marathon, Big Pine Key and Key West, Florida. Two of the Bank's eight branch locations are leased under 10 operating leases and the main office and the remaining branch properties are owned by the Bank. The lease on the Bank's Marathon branch expires October 31, 1997 and the lease on the Key West branch located at Searstown expires on September 1, 1998. LEGAL PROCEEDINGS While the Company and the Bank are from time to time parties to various legal proceedings arising in the ordinary course of their business, management believes after consultation with legal counsel that there are no proceedings threatened or pending against the Company or the Bank that will, individually or in the aggregate, have a material adverse effect on the business or consolidated financial condition of the Company. FINANCIAL AND STATISTICAL INFORMATION SELECTED FINANCIAL DATA The following table sets forth certain selected financial data concerning the Company for the five years ended December 31, 1996. The selected financial data for, and as of the end of, each of the years in the five-year period ended December 31, 1996, has been derived from the Consolidated Financial Statements of the Company which have been audited for the years ended 1992, 1993, 1994, 1995 by KPMG Peat Marwick LLP, independent auditors and for the year ended December 31, 1996, by Bricker and Melton, P.A., independent auditors. 11 SELECTED FINANCIAL DATA The selected consolidated financial data presented below as of and for the years ended December 31, 1996, 1995, 1994, 1993, and 1992 is unaudited and has been derived from the Consolidated Financial Statements of the Company and its subsidiary, and from records of the company. During 1996, TIB Financial Corp. ("Company") was formed providing for a reorganization whereby TIB Bank of the Keys ("Bank") became a wholly-owned subsidiary of TIB Financial Corp. The transaction was accounted for on a historical cost basis similar to a pooling of interests and, accordingly, the following selected consolidated financial data was prepared as if the reorganization occurred January 1, 1992. The information presented below should be read in conjunction with the Consolidated Financial Statements and related notes, and "Management's discussion and analysis of Financial Condition and Results of Operations."
Dollars in thousands, except per share data As of December 31, - ----------------------------------------------------------------------------------------------------- Balance Sheet Data 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------- Total Assets $241,051 $219,567 $208,607 $199,529 $203,604 Investment Securities 50,878 60,961 65,347 64,641 73,071 Loans 165,151 139,061 124,199 110,363 106,162 Allowances for loan losses 1,930 1,701 1,567 1,449 1,292 Deposits 204,984 192,458 190,147 179,409 184,877 Stockholders' equity 22,621 21,063 16,888 16,837 15,465
Year ended December 31, - ----------------------------------------------------------------------------------------------------- Statement of Income Data 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------- Interest income 18,503 17,525 15,179 14,531 15,605 Interest expense 6,507 6,253 4,959 4,871 6,076 Net interest income 11,996 11,272 10,220 9,660 9,529 Provision for loan losses 240 135 120 240 816 Net interest income after provision for loan losses 11,756 11,137 10,100 9,420 8,713 Non-interest income 2,594 2,365 1,643 1,320 969 Non-interest expense 9,558 8,910 7,684 7,289 7,101 Income tax expense 1,589 1,591 1,373 1,130 838 Net Income 3,203 3,001 2,686 2,321 1,743 Per Share Data - --------------------------- Book value per share at year end 5.23 4.95 4.03 4.11 3.77 Net income (loss) per share 0.72 0.69 0.65 0.57 0.43 Weighted-average common equivalent shares outstanding 4,424,676 4,352,838 4,160,994 4,096,848 4,096,848 Dividends declared 0.39 0.25 0.21 0.23 0.21
12
Year ended December 31, - ------------------------------------------------------------------------------------ Ratios 1996 1995 1994 1993 1992 - ------------------------------------------------------ ------- ------- ------- ------ Return on average assets 1.40% 1.40% 1.31% 1.15% 0.89% Return on average equity 15.89% 17.00% 17.11% 14.37% 11.60% Average equity/average assets 8.79% 8.23% 7.67% 8.01% 7.72% Net interest margin 5.83% 5.85% 5.53% 5.43% 5.50% Dividend Payout Ratio 54.17% 36.23% 32.31% 40.35% 48.84% Non-performing assets/total loans and other real estate 0.26% 0.06% 0.31% 1.60% 5.41% Allowance for loan losses/total loans 1.17% 1.22% 1.26% 1.31% 1.22% Allowance for loan losses/nonperforming assets 448.84% 2,074.39% 405.96% 81.91% 21.30% Non-interest expense/net Interest income and non-interest income 65.51% 65.34% 64.77% 66.38% 67.64%
(1) Stock splits in 1997 and 1996 have been retroactively reflected in per share data and weighted-average common equivalent shares outstanding as if they occurred January 1, 1992. Averages are derived from daily balances. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company's results of operations and financial condition should be read in conjunction with the consolidated financial and related notes included elsewhere in this Prospectus. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION During 1996, TIB Financial Corp. ("Company") was formed providing for a reorganization whereby TIB Bank of the Keys ("Bank") became a wholly-owned subsidiary of TIB Financial Corp. The transaction was accounted for on a historical cost basis similar to a pooling of interests and, accordingly, Selected Financial Data, Management's Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements have been restated to reflect the reorganization as occurring at the beginning of the first period presented. In March 1996, TIB Bank of the Keys declared a two-for-one stock split which was distributed on May 14, 1996, to shareholders of record on May 2, 1996. On February 25, 1997, TIB Financial Corp. declared a three-for-one stock spilt distributable on March 18, 1997, to shareholders of record February 25, 1997. In the Selected Financial Data, Management's Discussion and Analysis of Financial Condition and Results of Operations, and the Consolidated Financial Statements, all per share amounts, number of shares outstanding and market prices have been restated to reflect these stock splits as if they occurred at the beginning of the first period presented. PERFORMANCE OVERVIEW FOR 1996 TIB Financial Corp. ("Company") achieved record net income of $3.2 million in 1996 representing an increase of 6.7% over the prior year. Management attributes the improvement to strong loan growth along with a 9.7% increase in non-interest income. Net income for 1995 increased 11.7% to $3.0 million as compared to $2.7 million in 1994. Reported net income per share for 1996 was $.72 compared to $.69 in 1995, an increase of 4.3%. Weighted-average common equivalent shares outstanding in 1996 were 4,424,676 compared to 4,352,838 in 1995. Earnings per share in 1995 of $.69 represented an increase of 6.2% over 1994. Net interest income in 1996 increased 6.4%, or $724,000, to $12.0 million from $11.3 million reported in 1995. The Company's interest margin declined slightly from 5.85% to 5.83%. Non-performing assets increased slightly to .26% of total loans from .06% at year-end 1995. The increase in the provision for loan losses to $240,000 is a reflection of strong 18.8% growth in outstanding loans in 1996, to $165.2 million. Non-interest income increased $229,000 to $2.6 million in 1996 led by increasing volumes of overdraft and other service charges on deposit accounts. Non-interest income rose $722,000 in 1995 from $1.6 million in 1994. This was accomplished by strong growth in merchant bankcard processing volume and the establishment of a department to originate and sell conforming fixed rate Real Estate loans. Also in 1995, there was a gain recognized of approximately $234,000 on the sale of a former branch facility. 15 The Company experienced an increase in non-interest expense of $648,000 in 1996, or 7.3% over 1995. Of this increase, $541,000, was attributable to additional personnel expenses to support business expansion experienced in 1996. In 1995 the Company became very active in the origination of conforming fixed rate residential real estate loans which are immediately sold in the secondary market. This resulted in an increase in both non-interest income and non-interest expense beginning in 1995. The Company reported 1996 year-end total assets of $241.1 million, an increase of 9.8% above 1995 year-end assets of $219.6 million. Loans increased 18.8%, absorbing all the deposit growth and resulting in total loans of $165.2 million at December 31, 1996. As loan growth substantially outpaced deposit growth, maturing investment securities were reinvested in loans causing the securities portfolio to decrease $10.1 million to $50.9 million. Total asset growth was 5.3% in 1995 as compared to 1994 total year-end assets of $208.6 million. 16 RESULTS OF OPERATIONS The following table summarizes the results of operations including selected financial performance ratios of the Company for the three years ended December 31, 1996:
DOLLARS IN THOUSAND, EXCEPT PER SHARE DATA AS OF DECEMBER 31, - ----------------------------------------------------------------------------------- Balance Sheet Data 1996 1995 1994 - ----------------------------------------------------------------------------------- Total Assets $241,051 $219,567 $208,607 Investment Securities 50,878 60,961 65,347 Loans 165,151 139,061 124,199 Allowances for loan losses 1,930 1,701 1,567 Deposits 204,984 192,458 190,147 Stockholders' equity 22,621 21,063 16,888 (AMOUNTS IN THOUSANDS) YEAR ENDED DECEMBER 31, - ----------------------------------------------------------------------------------- STATEMENT OF INCOME DATA 1996 1995 1994 - ----------------------------------------------------------------------------------- Interest income 18,503 17,525 15,179 Interest expense 6,507 6,253 4,959 Net interest income 11,996 11,272 10,220 Provision for loan losses 240 135 120 Net interest income after provision for loan losses 11,756 11,137 10,100 Non-interest income 2,594 2,365 1,643 Non-interest expense 9,558 8,910 7,684 Income tax expense 1,589 1,591 1,373 Net Income 3,203 3,001 2,686 Per Share Data - ---------------------------- Book value per share at year end 5.23 4.95 4.03 Net income (loss) per share 0.72 0.69 0.65 Weighted-average common equivalent shares outstanding 4,424,676 4,352,838 4,160,994 Dividends declared 0.39 0.25 0.21 Ratios - ---------------------------- Return on average assets 1.40% 1.40% 1.31% Return on average equity 15.89% 17.00% 17.11% Average equity/average assets 8.79% 8.23% 7.67% Net interest margin 5.83% 5.85% 5.53% Non-performing assets/total loans and other real estate 0.26% 0.06% 0.31% Allowance for loan losses/total loans 1.17% 1.22% 1.26% Non-interest expense/net interest income and non-interest income 65.51% 65.34% 64.77%
(1) Stock splits in 1997 and 1996 have been retroactively reflected in per share data and weighted-average common equivalent shares outstanding as if they occurred as of the earliest date presented Averages are derived from daily balances. 17 NET INTEREST INCOME Net interest income, the primary source of revenue for the Company, is a function of the yield earned on average interest-earning assets and the rate paid on average interest-bearing liabilities. Changes in net interest income from period to period reflect the increases or decreases in average interest-earning assets, interest-bearing liabilities and the interest rate spread which is affected by the degree of mismatch in maturity and repricing characteristics of the Company's interest-earning assets and interest-bearing liabilities. Net interest income, on a tax equivalent basis, increased 6.1% to $12.2 million in 1996, as compared to last year. Net interest margin decreased 2 basis points to 5.83%. This was attributed to prevailing loan rates becoming more competitive in the local market. Average interest-earning assets increased 6.5%, or $12.9 million. Loan volume represented the majority of this change in average earning assets increasing $21.0 million while average investment securities volumes decreased $7.5 million. Average interest-bearing liabilities increased 5.8%, or $9.2 million, over 1995. Average increase in short-term borrowings and federal funds purchased, $4.1 million, time deposits, $2.4 million, and NOW accounts, $3.5 million, accounted for the majority of this increase, with an $823,000 decrease in Money Market Accounts. As competitive pressures intensify, the spread between loan yields obtainable and the cost of interest-bearing deposits is narrowing. In 1996 the Company basically maintained its net interest margin by allowing a shift in interest-earning assets from relatively low earning securities to higher yielding loans. However, the Company ended 1996 with a loan to deposit ratio of 80.6%. This is near the maximum ratio that will be acceptable for liquidity purposes, therefore, it is expected that the net interest margin will decrease going forward. Management will attempt to minimize this decline in spread margin by continued profitable growth in both deposit and loan volumes. Net interest income, on a tax equivalent basis for 1995 increased 9.5% to $11.5 million from $10.5 million in 1994. Average earning assets increased $6.7 million from 1994 to 1995 while average interest-bearing liabilities increased only $1.7 million. A generally higher interest rate environment in 1995 was also a positive contributing factor to the increase in net interest income due to the Company's asset sensitive interest risk profile. The Company recorded a net interest margin in 1995 of 5.85%, an improvement of 32 basis points over the 5.53% interest margin for 1994. The following table sets forth information with respect to the average balances, interest income and average yield by major categories of assets; the average balances, interest expense and average rate by major categories of liabilities; the average balances of noninterest-earning assets, noninterest-bearing liabilities and stockholders' equity; and net interest income, interest rate spread, and net interest margin for the years ended December 31, 1996, 1995, and 1994. 18
AVERAGE BALANCE SHEETS 1996 1995 1994 ------- ------- -------- AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS AVERAGE INCOME/ YIELDS (Dollars in thousands) BALANCES EXPENSE RATES BALANCES EXPENSE RATES BALANCES EXPENSE RATES - ---------------------- --------- ------- ------- -------- ------- ------ --------- -------- ------ ASSETS Interest-earning assets: Loans(1) $151,212 $15,038 9.94% $130,236 $13,530 10.39% $115,486 $10,585 9.17% Investment securities - taxable 51,751 3,022 5.84% 58,376 3,468 5.94% 64,474 3,985 6.18% Investment securities - tax exempt (2) 5,354 598 11.17% 6,267 665 10.61% 7,446 806 10.82% Federal funds sold 1,334 69 5.17% 1,911 111 5.81% 2,708 106 3.91% ------------------ ----------------- ------------------- Total interest-earning assets 209,651 18,727 8.93% 196,790 17,774 9.03% 190,114 15,482 8.14% ------------------ ----------------- ------------------- Noninterest-earning assets: Cash and due from banks 8,981 7,389 7,333 Premises and equipment, net 8,441 7,289 5,816 Allowances for loan losses (1,809) (1,647) (1,505) Other assets 4,060 4,740 2,896 Total noninterest-earning assets 19,673 17,771 14,540 -------- -------- -------- Total assets 229,324 214,561 204,654 ======== ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Interest-bearing liabilities: Interest-bearing deposits: NOW accounts 30,235 473 1.56% 26,752 527 1.97% 27,722 457 1.65% Money market 13,256 335 2.53% 14,079 369 2.62% 17,747 380 2.14% Savings deposits 41,380 1,231 2.97% 41,317 1,291 3.12% 46,366 1,230 2.65% Other time deposits 75,689 4,170 5.51% 73,333 3,999 5.45% 59,742 2,775 4.64% ------------------ ----------------- ------------------- Total interest-bearing deposits 160,560 6,209 3.87% 155,481 6,186 3.98% 151,577 4,842 3.19% Other interest-bearing liabilities: Federal funds purchased 817 48 5.88% 199 11 5.53% 463 21 4.54% Short-term borrowings and obligations under capital lease 4,821 250 5.19% 1,359 55 4.05% 3,310 97 2.93% ------------------ ----------------- ------------------- Total interest-bearing liabilities 166,198 6,507 3.92% 157,039 6,252 3.98% 155,350 4,960 3.19% ------------------ ---------------- ------------------ Noninterest-bearing liabilities and stockholder' equity: Demand deposits 41,755 37,269 32,967 Other liabilities 1,214 2,596 636 Stockholders' equity 20,157 17,657 15,701 ------ ------ ------ Total noninterest-bearing liabilities and stockholders' equity 63,126 57,522 49,304 -------- -------- -------- Total liabilities and stockholders' equity 229,324 214,561 204,654 ======== ======== ======== Interest rate spread 5.01% 5.05% 4.95% ===== ===== ===== Net interest income $12,220 $11,522 $10,522 ======= ======= ======= Net interest margin (3) 5.83% 5.85% 5.53% ===== ===== =====
(1) Average loans include non-performing loans. Interest on loans includes loan fees of $27,813 in 1996 and $38,389 in 1995 and $63,823 in 1994. (2) Interest income and rates include the effects of a tax equivalent adjustment using a tax rate of 37.6%, in adjusting tax exempt interest on tax exempt investment securities to a fully taxable basis. (3) Net interest margin is net interest income divided by average total interest-earning assets. 19 CHANGES IN NET INTEREST INCOME The table below details the components of the changes in net interest income for the last two years. For each major category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes due to average volumes, changes due to rates, with the changes in both volumes and rates allocated to these two categories based on the proportionate absolute changes in each category.
1996 compared with 1995 (1) 1995 compared with 1994 (1) Due to changes In Due to changes in --------------------------------- ---------------------------------- (In thousands) Net Net Average Average Increase Average Average Increase INTEREST INCOME Volume Rate (Decrease) Volume Rate (Decrease) - --------------------------------------------------------------------------------------------------------- Loans $ 2,112 $ (604) $ 1,508 $ 1,442 $ 1,503 $ 2,945 Investment Securities (2) (481) (32) (513) (470) (188) (658) Federal funds sold (31) (11) (42) (37) 42 5 -------------------------------- --------------------------------- Total interest income 1,600 (647) 953 935 1,357 2,292 -------------------------------- --------------------------------- INTEREST EXPENSE NOW accounts 64 (118) (54) (16) 86 70 Money Market (21) (13) (34) (87) 76 (11) Savings deposits 2 (62) (60) (143) 204 61 Other time deposits 127 44 171 693 531 1,224 Federal funds purchased 36 1 37 (14) 4 (10) Short-term borrowings and obligations under capital lease 176 19 195 (70) 28 (42) -------------------------------- --------------------------------- Total interest expense 384 (129) 255 363 929 1,292 -------------------------------- --------------------------------- Change in net Interest income $ 1,216 $ (518) $ 698 $ 572 $ 428 $ 1,000 ================================ =================================
(1) The change in interest due to both rate and volume has been allocated to the volume and rate components in proportion to the relationship of the dollar amounts of the absolute change in each. (2) Interest income includes the effects of a tax equivalent adjustment using a tax rate of 37.6%, in adjusting tax exempt interest on tax exempt investment securities to a fully taxable basis. 20 NON-INTEREST INCOME The following table presents the principal components of non-interest income for the years ended December 31, 1996, 1995, and 1994.
(In thousands) 1996 1995 1994 - ------------------------------------------------------------------------------------ Credit card processing income $ 519 $ 462 $ 293 Gains on sales of mortgage loans 173 -- -- Gains on sales of SBA loans 17 97 31 Fees on mortgage loans sold at origination 360 364 41 SBA servicing income 53 37 7 Service charge income 1,336 1,093 982 Net gains on sales of investment securities 18 8 78 Gain on exchange of building 234 (Losses) Gains on sales of other real estate - net (29) 118 Other 118 99 93 --------------------------------------- Total non-interest income $2,594 $2,365 $1,643 =======================================
The Company's emphasis on non interest income continues to be a primary focus. Over a three year horizon the Company has increased non interest income from $1.6 million to $2.6 million or approximately 62.5%. This was achieved by introducing new areas of fee income generation and stimulating old areas of non-interest income. Income from all types of bank service charges led this improvement increasing $243,000 or 22.2% in 1996. This is a result of the significant increase in the Bank's number of accounts and the increased business volume the bank has established during its most recent fiscal year. Recognizing the opportunities in a tourist driven economy the company has made major inroads into merchant card processing. The Bank is currently one of the top one hundred processors in the country measured by total volume of transactions and processes credit card transactions for over five hundred local merchants at year end 1996. This activity accounted for fee income of $519,000 or a 12.3% increase from $462,000 in 1995. This represents a 77.1% increase in merchant card processing over a three year period. The Bank continues to be aggressive in soliciting new merchants and providing quality customer service with our existing customer base. The overall increase in non interest income for 1996 compared to 1995 would have been more significant except that in 1995 the Company booked a gain on the sale of a former bank facility. The Bank began a program to originate and sell conforming fixed rate residential mortgages to the secondary market in late 1994. By 1996 the Bank had become the number one originator of residential mortgages in Monroe County generating over $50 million in residential mortgages in 1996. Approximately 40% of the annual volume was conforming fixed rate residential loans that are sold immediately to the secondary market. Approximately 60% of the annual production represents conforming adjustable rate loans that are placed in the Bank's portfolio. At the end of 1994 the Bank began to originate these loans utilizing industry standards for documentation and procedures in order for them to be suitable for sale as a back-up source of liquidity. To test the assumption that these loans were readily marketable it was decided to liquidate some of them and 21 therefore during 1996 $11.5 million of the Bank's portfolio adjustable rate mortgages were sold in the secondary market generating gains of $173,000. The direct benefit of this mortgage production process is shown in the non interest income categories. Additionally, effective cross-selling of other bank products around this activity has contributed substantially to the Bank's growth in its deposit base over the same three year horizon. Non interest income increased $722,000 from 1994 to 1995 including the $234,000 gain on the sale of bank premises mentioned above. Other items accounting for this improvement were a $66,000 increase in gains on sales of SBA loans and $323,000 in increased fees on mortgage loans sold at origination. Additionally in 1995, the Company increased merchant bankcard processing income $169,000 as compared to 1994. 22 The Company has addressed the potential for the application of government guaranteed loans in the markets in which we serve. The Small Business Administration (SBA) loans, in particular, have been targeted as loans having specific applicability to the Company's market place. The decline in gain on sales of SBA loans in 1996 can be attributed to lower loan origination volume. Of those types of loans suitable for SBA financing, this category of non interest income remains a focus of the Company, and commercial loans suitable for government guarantees continue to be a source of fee income for the Bank. NON-INTEREST EXPENSES The following table represents the principal components on non-interest expenses for the years ended December 31, 1996, 1995, and 1994.
(In thousands) 1996 1995 1994 - ---------------------------------------------------------------------------- Salaries and employee benefits $ 5,536 $ 4,995 $ 4,324 Occupancy 823 794 679 Equipment 869 800 579 Accounting, legal, and other professional 398 320 257 Operations services 572 403 239 Postage, freight, and courier 231 196 149 Marketing and Community relations 225 281 300 Taxes - non building 21 43 32 Supplies 290 239 203 Director's fees 150 170 144 FDIC Insurance 48 259 444 Amortization of Intangibles 60 27 6 Other operating expenses 335 383 328 --------------------------------- Total non-interest expenses $ 9,558 $ 8,910 $7,684 =================================
The Company has over the three year reported periods of 1994, 1995, and 1996 expanded non interest expense in an effort to build an infrastructure which will position the Bank in a quality customer service mode and a growth perspective. Non interest expenses increased 7.3% in 1996 due primarily to expansion of personnel costs to support the accelerated growth in account generation and loans outstanding. With nine branch facilities spread over a geographic market 106 miles long and at times only a quarter mile wide, it is important to the company to have experienced decision making personnel in distant branch locations. This strategy has allowed for the continuing high quality asset generation and the expansion of the Bank's customer base over the reported three year period. While expanding the Bank's infrastructure several departmental functions have been outsourced to gain the experience of outside professionals while at the same time offering improved economic conditions on the Bank's operating expenses. Such outsourced areas are check processing and main frame or data processing services, as well as the Bank's internal audit function. This outsource strategy has proven to control costs and add enhanced controls and/or service levels. For example, outsourcing check processing 23 entails a cost of approximately $20,000 per month and accounts for much of the increase in operations services in 1995 and 1996. There are offsetting reductions in personnel costs and all the savings associated with not having to purchase a new check sorter and related equipment at a price of approximately $500,000. Additionally, with rapid changes in technology, outsourcing this function allows the Bank to remain competitive without expending large amounts in additional hardware and software. The Company continues to improve its long term operating efficiencies with outsourcing as a technique. This has resulted in the avoidance by the Company of a significant investment in new or state of the art hardware and software, as well as the personnel needed to support new and/or expanding functions. FDIC insurance premiums decreased $211,000 in 1996 due to a reduction of the assessment rate. As mentioned previously, at year end 1995 the Bank acquired a three story office building on Atlantic Drive in Key Largo, Florida. This office building is directly adjacent to the main operating branch of the Company and offers additional space to house expanded departmental functions such as human resources, loan processing, and support areas essential to the continuation of high quality customer service. The Bank currently occupies most of the building with the exception of one leased office to the State of Florida. Previously, the Bank had leased approximately one half of this building. Non-interest expenses increased $1.2 million in 1995 compared to 1994. This increase was substantially the result of additional personnel costs associated with the growth of overall accounts processed by the Bank along with commissions related to originations of real estate loans. FDIC insurance premiums decreased $185,000 in 1995 due to a reduction in the assessment rate. PROVISION FOR INCOME TAXES The provision for income taxes includes federal and state income taxes. For 1996, the provision was $1.6 million, a decrease of $2,000 from 1995. The decrease in the provision for income taxes is the net of an increase in taxes on higher income reduced by the benefit of a tax deduction for the exercise of stock options. For 1995, the tax provision was $1.6 million, an increase of $218,000 over 1994. Higher taxable income and lower tax-free income were responsible for the increase. LOAN PORTFOLIO The Company is located in the Florida Keys and the primary industry is tourism. Commercial loan demand therefore is significant for resort, hotel, restaurant, marina and related real estate secured property loans. The Company serves this market by offering long-term adjustable rate financing to the owners of these type of properties for acquisition and improvements thereon. These loans are often $1 million or larger and are good candidates for government guarantee programs or traditional participation agreements. The nature of government programs such as the Small Business Administration is generally geared toward long term adjustable rate financing. 24 Monroe County has the highest cost of living of any county in Florida and this is driven in large part by the scarce and expensive real estate. This also serves to maintain and enhance collateral values on loans secured by property in this market. The Company has grown in commercial loans by aggressively serving our market. The quality of the Company's credit administration along with the stable real estate values has kept loan losses at low levels. Loans are expected to produce higher yields than investment securities and other interest earning assets (assuming that credit losses are not excessive). Thus the absolute volume of loans and the volume as a percentage of total earning assets are important determinants of the net interest margin. Net loans outstanding increased to $162.6 million as compared to $136.7 million at year end 1995, an increase of 18.9%. Commercial loans secured by real estate accounted for much of this increase, growing from $85.3 million to $102.9 million at the respective year ends. Consumer loans increased from $4.3 to $7.6 million at December 31, 1996. The Company maintains a posture of originating commercial loans with rates that fluctuate with the prime lending rate and residential loans with rates that fluctuate with the one year treasury index. At December 31, 1996, 81.2% of the total loan portfolio had floating or adjustable rates.
(Dollars in thousands) 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------- Commercial, financial, and agricultural $109,372 $ 93,423 $ 94,388 $ 81,780 $ 70,381 Construction Loans 7,391 5,441 1,290 2,610 2,509 Residential real estate 40,835 35,947 27,885 25,736 32,929 Consumer loans 7,554 4,250 636 236 343 Less: unearned income (607) (691) (757) (799) (929) Less: allowance for loan loss (1,930) (1,701) (1,566) (1,449) (1,292) ---------------------------------------------------- Net loans $162,615 $136,669 $ 121,876 $108,114 $103,941 ====================================================
The maturity distribution of the Company's loan portfolio at December 31, 1996 is as follows:
Loans Maturing ----------------------------------------- Within 1 to 5 After 5 (Dollars in thousands) 1 Year Years Years Total - ---------------------------------------------------------------------------------- Commercial, financial and agricultural $ 6,976 $ 15,508 $ 86,888 $109,372 Construction Loans 7,391 - - 7,391 Residential real estate 34 2,101 38,700 40,835 Consumer loans 4,884 2,600 70 7,554 ----------------------------------------- Total Loans $ 19,285 $ 20,209 $125,658 $165,152 =========================================
Loans Maturing ---------------------------------------------------- Within 1 to 5 After 5 (Dollars in thousands) 1 Year Years Years Total - --------------------------------------------------------------------------------------------- Loans with: Predetermined interest rates 2,471 11,586 16,979 31,036 Floating or adjustable rates 16,814 8,623 108,679 134,116 ----------------------------------------- Total loans $ 19,285 $ 20,209 $125,658 $165,152 =========================================
ALLOWANCE AND PROVISION FOR LOAN LOSSES The allowance for loan losses represents a reserve for potential losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with particular emphasis on non-accruing, past due, and other loans that management believes require special attention. 25 For problem loans, management's review of the adequacy of the allowance for loan losses consists of an evaluation of the financial strengths of the borrower, the related collateral, and the effects of economic conditions. General reserves against the remaining loan portfolio are based on analysis of historical loan loss ratios, loan charge-offs, delinquency trends, and previous collection experience, along with an assessment of the effects of external economic conditions. The provision for loan losses is a charge to income in the current period to replenish the allowance and maintain it at a level that management has determined to be adequate to absorb estimated losses in the loan portfolio. The Company's provision for loan losses for 1996 was $240,000 as compared to $135,000 in 1995, reflecting the Company's strong growth in loan outstandings and negligible charge offs. The decrease in charge-offs, as seen in the following table, of commercial loans from $411,000 in 1992 to negligible amounts thereafter and the decrease in Residential Real Estate charge-offs from $92,000 in 1993 to $3,000 in 1994 reflect the resolution of a small number of individual charge-offs. Specifically, the $411,000 Commercial charge-offs was comprised of only 7 loans and the $92,000 Residential charge-offs was from only 6 loans. Therefore, the decrease in charge-offs, while large in proportion of dollar amounts, is however a small reduction in the number of discrete problem loans. These individual charge-offs were predominately from one geographic location. The Company opened a new branch in Key West in 1988 without the experienced management required and the resulting charge offs in 1992 and 1993 reflected the clean up of the loan portfolio from that location. The allowance for loan losses represented 1.17% of total loans at December 31, 1996 compared to 1.22% at year end 1995. The determination of the adequacy of the allowance for loan losses is based on management's judgment about factors affecting loan quality; collectability and assumptions about the economy. Management considers the year end allowance appropriate and adequate to cover possible losses in the loan portfolio; however, management's judgment is based upon a number of assumptions about future events, which are believed to be reasonable, but which may or may not prove valid. Thus, there can be no assurance that charge-offs in future periods will not exceed the allowance for loan losses or that additional increases in the allowance for loan losses will not be required. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company's allowance for loan losses. Such agencies may require the company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. 26 Transactions in the allowance for loan losses are summarized for the years ended December 31,
(In thousands) 1996 1995 1994 1993 1992 --------------------------------------------------------------------- Analysis of allowance for loan losses: Balance at beginning of year $ 1,701 $ 1,567 $ 1,449 $ 1,292 $ 923 Charge-offs: Commercial, Financial & Agricultural - - - - 411 Residential Real Estate - - 3 92 59 Consumer Loans 12 1 - - - --------------------------------------------------------------------- Total charge-offs 12 1 3 92 470 Recoveries: Commercial, Financial & Agricultural - - - 9 - Residential Real Estate - - 1 - 23 Consumer Loans 1 - - - - --------------------------------------------------------------------- Total recoveries 1 - 1 9 23 --------------------------------------------------------------------- Net charge-offs 11 1 2 83 447 --------------------------------------------------------------------- Provision for loan losses 240 135 120 240 816 --------------------------------------------------------------------- Allowance for loan losses at end of year $ 1,930 $ 1,701 $ 1,567 $ 1,449 $ 1,292 ===================================================================== Ratio of net charge-offs to average net loans outstanding 0.01% 0.00% 0.01% 0.09% 0.40% =====================================================================
Management considers the adequacy of the allowance for loan losses in its entirety, however, to comply with regulatory reporting requirements, management has allocated the allowance for loan losses as shown in the table below into components by loan type at each year end. Management does not intend to imply that actual future charge-offs will necessarily follow the allocations described below.
(In thousands) 1996 1995 1994 1993 1992 ---------------------------------------------------------------------------------------- Allowance % of Allowance % of Allowance % of Allowance % of Allowance % of $ Loans $ Loans $ Loans $ Loans $ Loans ---------------------------------------------------------------------------------------- Commercial, Financial & Agricultural 1,456 66.2 1,318 67.2 1,307 76.0 1,214 74.1 991 66.3 Construction Loans 0 4.5 0 3.9 0 1.0 0 2.4 0 2.4 Residential Real Estate 367 24.7 324 25.8 250 22.5 232 23.3 296 31.0 Consumer Loans 106 4.6 59 3.1 10 0.5 3 0.2 5 0.3 --------------- --------------- --------------- --------------- ---------------- 1,930 100% 1,701 100% 1,567 100% 1,449 100% 1,292 100% ================ =============== =============== =============== ===============
27 NON-PERFORMING ASSETS
(Dollars in thousands) 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------- Loans 90 days past due - - - - 45 Loans on nonaccrual 430 82 0 311 46 Other Real Estate Owned 386 1,458 5,974 ---------------------------------- Total non-performing assets 430 82 386 1,769 6,065 ---------------------------------- Percentage of total loans and other real estate 0.26% 0.06% 0.31% 1.60% 5.41%
At December 31, 1996 there were no loans for which management has serious doubts as to the borrowers ability to comply with the present loan repayment terms which are not disclosed in the table above. If the collectibility of interest on a loan appears doubtful, the accrual thereof is discontinued. Nonaccrual loans totaled $430,000 and $82,000 at December 31, 1996 and 1995, respectively. If such loans had been on a full-accrual basis, interest income would have been approximately $16,000 and $3,000 higher in 1996 and 1995, respectively. Interest income recognized on these loans totaled approximately $27,000 and $5,000, respectively. There were no restructured loans at December 31, 1996 or 1995. In 1994 there were no nonaccrual or restructured loans. However, interest lost on in-substance foreclosures and other real estate owned amounted to $30,000. No interest income was recorded on these loans in 1994 since they were also in the same status at the end of 1993. Nonaccrual loans totaled $311,000 and $46,000 at December 31, 1993 and 1992, respectively. If such loans had been on a full-accrual basis interest income would have been approximately $8,000 and $2,000 higher in 1993 and 1992 respectively. Interest income recognized on these loans totaled approximately $16,000 and $1,000 respectively. There were no material restructured loans at December 31, 1993 or 1992. The Company adopted the provisions of Statement of Financial Accounting Standards No. 114 (SFAS 114) "Accounting by Creditors for Impairment of a Loan" as amended by Statement of Financial Accounting Standards No. 118 (SFAS 118), "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosure" on January 1, 1995. During 1996 and 1995, the Company had no loans which were considered impaired under the provisions of SFAS 114. LIQUIDITY AND RATE SENSITIVITY Liquidity represents the ability to provide steady sources of funds for loan commitments and investment activities, as well as to provide sufficient funds to cover deposit withdrawals and payments of debt, off-balance sheet obligations and operating obligations. These funds can be obtained by converting assets to cash or by attracting new deposits. The Bank has a $5 million line of credit from its principal correspondent and a repurchase agreement with another financial institution which allows borrowing up to 95% of the market valuation of securities pledged for this purpose. The majority of our unpledged securities could be used as collateral for this agreement. Scheduled maturities and paydowns of loans and investment securities are a continual source of liquidity. Also, adjustable rate residential real estate loans originated since 1995, as shown with the 1996 sales, are salable in the secondary mortgage market at par or better and therefore provide a further back-up source for liquidity. 28 At December 31, 1996, the Bank's loan to deposit ratio was 80.6% compared to a ratio of 72.3% at December 31, 1995. Management monitors and assesses the adequacy of the Company's liquidity position on monthly basis to ensure that sufficient sources of liquidity are maintained and available. Under state banking law, regulatory approval will be required if the total of all dividends declared in any calendar year by the Bank exceeds the Bank's net profits to date for that year combined with its retained net profits for the preceding two years. Retained earnings of the Bank available for payment of dividends without prior regulatory approval for the year ended December 31, 1996 is approximately $6,985,000. These dividends represent the Parent Company's primary source of liquidity. The Company's interest rate sensitivity position at December 31, 1996 is presented in the table below.
3 months 4 to 6 7 to 12 1 to 5 Over 5 (Dollars in thousands) or less months months years years Total - -------------------------------------------------------------------------------------------------------------------- Interest-earning assets: Loans $75,993 $19,374 $ 12,325 $44,389 $13,070 $165,151 Investment securities-taxable 4,376 5,038 3,700 32,170 239 45,523 Investment securities-tax exempt - - 573 2,260 2,522 5,355 Federal funds sold 1,810 1,810 ------------------------------------------------------------------------ Total interest-bearing assets $82,179 $24,412 $ 16,598 $78,819 $15,831 $217,839 ------------------------------------------------------------------------ Interest-bearing liabilities: NOW accounts(A) $11,660 $ - $ - $ - $17,489 29,149 Money Market 37,192 - - - - 37,192 Savings Deposits(B) - - 16,220 - 16,220 Other time deposits 20,659 15,533 25,361 17,887 53 79,493 Federal funds purchased - - - - - - Short-term borrowings 11,091 - - - - 11,091 ------------------------------------------------------------------------ Total interest-bearing liabilities $80,602 $15,533 $ 41,581 $17,887 $17,542 $173,145 ------------------------------------------------------------------------ Interest Sensitivity gap $ 1,577 $ 8,879 $(24,983) $60,932 $(1,711) $ 44,694 ======================================================================== Cumulative interest sensitivity gap $ 1,577 $10,456 $(14,527) $46,405 $44,694 $ 44,694 ======================================================================== Cumulative sensitivity ratio 0.7% 4.8% -(6.7%) 21.3% 20.5% ===========================================================
(A) - 40% of outstanding balance considered repricable immediately and 60%. Repricable in the furthest time period. (B) Savings Deposits considered repricable in the one year time horizon. 29 The Company is cumulatively asset sensitive in the 3 months or less, 4 to 6 months, 1 to 5 years and over 5 years time frame and cumulatively liability sensitive in the 7 to 12 month timeframe. Certain liabilities such as NOW and passbook savings accounts, while technically subject to immediate repricing in response to changing market rates, historically do not reprice as quickly nor to the extent as other interest sensitive accounts. Therefore, to include the entire balance of these liabilities accounts in the earliest repricing period would be unrealistic. To compensates for the fact that changes in general market interest rates will not be fully reflected in changes in NOW rates, we include only 40% of NOW balances as immediately rate sensitive based on our own along with industry repricing experience. Also, passbook savings will not reprice as quickly as market rates and therefore the repricing of savings deposits is included in the 7 to 12 month repricing period, based on our repricing experience. This accounts for the majority of the amount by which interest bearing liabilities exceed interest bearing assets in the 7 to 12 month period and also for the cumulative negative sensitivity gap in that time period. This accounts for the majority of the amount by which interest bearing liabilities exceed interest bearing assets in the 7 to 12 month period and also for the cumulative negative sensitivity gap in that time period. Because of non-interest bearing liabilities, total interest-earning assets are substantially greater than the total interest-bearing liabilities and therefore over time the effects on net interest income from changes in asset yield will be greater than the change in expense from liability cost. In other words, if market interest rates should decrease, the net interest margin should decrease. Conversely, if rates increase the net interest margin would increase. Interest-earning assets and other time deposits are presented based on their contractual terms. It is anticipated that run off in any deposit category will be approximately offset by new deposit generation. Since the Company has experienced moderate but steady growth in deposits, no net run off in any deposit category is assumed in the interest rate sensitivity table. It is the Company's policy to maintain its cumulative one year gap ratio in the - -.15 to +.15 range. INVESTMENT PORTFOLIO Maturities of Investment securities at December 31, 1996 (Amortized Cost)
After 1 Year After 5 Years Mortgaged Within 1 Year Within 5 Years Within 10 Years After 10 Years Backed (Dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Securities Held to Maturity: U.S. Treasury Securities $2,000 5.81% $ 5,965 5.89% U.S. Gov't Sponsored Agencies 992 7.39% States and municipals (A) 574 10.54% 2,260 11.67% 1,446 8.43% 1,075 10.02% Other 75 (B) ------------------------------------------------------------------------------------------- Total held to maturity 2,574 7.02% 9,217 8.31% 1,446 8.43% 1,150 10.02% ------------------------------------------------------------------------------------------- Securities Available for sale: U.S. Treasury Securities 7,038 5.93% 14,182 5.48% - Mortgaged Backed Securities 15,076 Other 449 9.89% ------------------------------------------------------------------------------------------- Total Available for Sale 7,038 5.93% 14,631 5.85% 0 15,076 ------------------------------------------------------------------------------------------- Total $ 9,612 6.50% $23,848 6.34% $1,446 8.43% $ 1,150 10.02% $15,076 ===========================================================================================
(Dollars in thousands) Yield Totals Securities Held to Maturity: U.S. Treasury Securities $ 7,965 U.S. Gov't Sponsored Agencies 992 States and municipals (A) 5,355 Other 75 --------------- Total held to maturity 14,387 --------------- Securities Available for sale: U.S. Treasury Securities 21,220 Mortgaged Backed Securities 6.13% 15,076 Other 449 --------------- Total Available for Sale 6.13% 36,745 --------------- Total 6.13% $51,132 ===============
(A) Weighted average yields on tax-exempt obligations have been computed by grossing up actual tax-exempt income to a fully taxable equivalent basis using a tax rate of 37.6%. (B) Represents investment in common stock of Independent Bankers Bank stock which pays no dividends. The following table presents the amortized cost, market value, unrealized gains, and unrealized losses for the major categories of the Company's investment portfolio for each reported period:
1996 Held to Maturity Amortized Unrealized Unrealized Market Cost Gains Losses Value ---- ----- ------ ----- U.S. Treasury securities $ 7,965 $ 1 $ 7 $ 7,959 States and Potilical Subdivisions 5,355 303 1 5,657 U.S. Government agenices and Corporations 992 9 1,001 Other Investments 75 - 75 ------------------------------------------ $14,387 $ 313 $ 8 $14,692 ========================================== Available for Sale Amortized Unrealized Unrealized Market Cost Gains Losses Value ---- ----- ------ ----- U.S. Treasury securities $21,220 $ 22 $ 130 $21,112 Mortgage-backed securities 15,076 26 208 14,894 Other debt securities 449 35 - 484 ------------------------------------------ $36,745 $ 83 $ 338 $36,490 ========================================== 1995 Held to Maturity Amortized Unrealized Unrealized Market Cost Gains Losses Value ---- ----- ------ ----- U.S. Treasury securities $ 2,009 $ 12 $ - $ 2,021 States and political subsidivisions 6,050 453 - 6,503 U.S. Government agenices and corporations 1,982 38 - 2,020 Other Investments 75 - - 75 ------------------------------------------ $10,116 $ 503 $ - $10,619 ========================================== Available for Sale Amortized Unrealized Unrealized Market Cost Gains Losses Value ---- ----- ------ ----- U.S. Treasury securities $31,422 $ 218 $ 30 $31,610 Mortgage-backed securities 18,689 93 51 18,731 Other debt securities 449 55 504 ------------------------------------------ $50,560 $ 366 $ 81 $50,845 ========================================== 1994 Held to Maturity Amortized Unrealized Unrealized Market Cost Gains Losses Value ---- ----- ------ ----- U.S. Treasury securities $ 2,017 $ - $ 71 $ 1,946 States and political subsidivisions 7,222 253 165 7,310 U.S. Government agenices and corporations 2,977 45 117 2,905 Other Investments 75 - - 75 ------------------------------------------ $12,291 $ 298 $ 353 $12,236 ========================================== Available for Sale Amortized Unrealized Unrealized Market Cost Gains Losses Value ---- ----- ------ ----- U.S. Treasury securities $34,620 $ 12 $ 1,790 $32,842 Mortgage-backed securities 21,149 9 1,412 19,746 Other debt securities 449 19 - 468 ------------------------------------------ $56,218 $ 40 $ 3,202 $53,056 ==========================================
30 DEPOSITS The following table presents the average amount outstanding and the average rate paid on deposits by the Company for the years ended December 31, 1996, 1995, and 1994.
1996 1995 1994 Average Average Average Average Average Average (Dollars in thousands) Amount Rate Amount Rate Amount Rate - ----------------------------------------------------------------------------------------- Noninterest-bearing deposits $ 41,755 $ 37,269 $ 32,967 Interest-bearing deposits NOW Accounts 30,235 1.56% 26,752 1.97% 27,722 1.65% Money market 13,256 2.53% 14,079 2.62% 17,747 2.14% Savings deposit 41,380 2.97% 41,317 3.12% 46,366 2.65% Other time deposits 76,689 5.51% 73,333 5.45% 59,742 4.64% -------------------------------------------------------- Total $203,315 3.05% $192,750 3.21% $184,544 2.62% ========================================================
The following table presents the maturity of the Company's time deposits at December 31, 1996. Deposits Deposits $100,000 Less than (Dollars in thousands) and Greater $100,000 Total - ---------------------------------------------------------------- Months to maturity: 3 or less $ 7,344 $ 13,315 $ 20,659 3 to 6 4,705 10,828 15,533 6 through 12 5,588 19,773 25,361 Over 12 5,703 12,237 17,940 ---------------------------------------- Total $ 23,340 $ 56,153 $ 79,493 ========================================
CAPITAL ADEQUACY There are various primary measures of capital adequacy for banks and bank holding companies such as risk based capital guidelines and the leverage capital ratio. See "Business-Supervision and Regulation - Capital Regulations." As of December 31, 1996, the Bank exceeded its required levels of capital for a Bank categorized by the FDIC as well capitalized under the regulatory framework for prompt corrective action. The Bank's risk-based capital ratio of Tier 1 capital to risk-weighted assets was 13.5%, its risk-based ratio of total capital to risk-weighted assets was 14.7%; and its leverage ratio was 9.7%. See Note K to Consolidated Financial Statements. 31 INFLATION Inflation has an important impact on the growth of total assets in the banking industry and causes a need to increase equity capital higher than normal rates in order to maintain an appropriate equity to assets ratio. The Company has been able to maintain an adequate level of equity, as previously mentioned and copes with the effects of inflation by managing its interest rate sensitivity gap position through its asset/liability management program, and by periodically adjusting its pricing of services and banking products to take into consideration current costs. 32 MARKET INFORMATION AND DIVIDENDS Potential purchasers of the Shares should consider the following information with respect to the Common Stock. NO ESTABLISHED PUBLIC TRADING MARKET There is no established public trading market or market maker for the Common Stock, and trading of Common Stock has been limited. There can be no assurance that an active trading market for Common Stock will develop or be maintained in the future. As a result, a purchaser of Shares may experience difficulty in selling purchased Shares in a timely manner and may be required to sell their Shares at a discount to the price that would be established in an active trading market. However, the Company currently plans to apply to list the Company's common stock on the National Market System of the Nasdaq Stock Market by the end of the second calendar quarter. MARKET PRICES Based on limited information available to the Company's management, the last known selling prices of Common Stock (and, prior to the Reorganization, the common stock of the Bank) in what the Company's management believes were arm's- length transactions were between $7.83 and $9.00 per share pursuant to 178 transactions with respect to an aggregate of 429,945 shares from January 1, 1996 through March 1, 1997. DIVIDENDS The Company is permitted to pay dividends on its outstanding capital stock at such time and in such amounts as the Board of Directors deems advisable, subject only to restrictions contained in the Florida Business Corporation Act. The ability of the Company to pay cash dividends to its shareholders is directly dependent upon the Bank's ability to pay cash dividends to the Company. The Board of Directors of the Bank, however, is limited due to regulatory constraints in its ability to pay cash dividends on the outstanding capital stock of the Bank. In general, the Bank may not declare a dividend without the approval of the Florida Department of Banking and Finance of the total of the dividends declared by the Bank in a calendar year exceeds the total of its net profits for that year combined with its retained profits of the preceding two years. These restrictions on the ability of the Bank to pay dividends to the Company may, in turn, serve as a limitation on the ability of the Company to pay dividends to its shareholders. The Company and the Bank declared the following cash dividends on the Common Stock (or Bank common stock prior to the Reorganization on August 31, 1996) during 1995 and 1996: $.25 per share declared in 1995 and $.39 per share declared in 1996. In addition, the Bank paid stock dividends of 10,158 shares of common stock to its shareholders in 1995 and 7,878 shares of common stock to its shareholders in 1996. OPTIONS TO PURCHASE SHARES There were outstanding as of March 1, 1997 options to purchase from the Company 612,300 shares of Common Stock. SHARES ELIGIBLE FOR SALE Substantially all of the outstanding shares of the Common Stock are freely transferable. MANAGEMENT AND PRINCIPAL SHAREHOLDERS INFORMATION ABOUT THE BOARD OF DIRECTORS AND THEIR COMMITTEES The Bank's Board of Directors maintains Asset/Liability, Audit, Executive Loan, Investment, and Salary Review Committees. The Company's Board of Directors, which has no standing committees, now performs the functions of a Nominating Committee. 33 The Bank's Asset/Liability Committee provides management with guidelines for the generation and deployment of funds that will assist in the attainment of the objective of maximizing net interest income within the constraints of optimum earning asset mix, capital adequacy and liability. The Asset/Liability Committee is currently composed of Messrs. Lett, Marr, Martin-Vegue and Roth. The Bank's Audit Committee reviews the Bank's financial statements and internal accounting policies and controls; recommends independent accountants and reviews with them the scope of their engagement and all material matters relating to financial reporting and accounting procedures of the Bank; reviews loan portfolio audits, with particular attention given to classified loans, loans past due, non-performing loans and trends regarding the same; and reviews reports of examination by regulatory authorities. The Audit Committee is currently composed of Messrs. Marr, Lawson and Meeks. The Bank's Board of Directors reviews lending policies and procedures and reports relating to the Bank's loan- portfolio, with particular attention given to such matters as categories of borrowers and concentrations in particular types of loans. The Bank's Executive Loan Committee considers loan requests in excess of $500,000 and reviews reports relating to and considers all loans or extensions of credit proposed for any of the Bank's directors or executive officers. The Loan Committee is currently composed of all directors on a rotating basis and several Bank senior loan officers. The Bank's Investment Committee reviews the Bank's investment policies, the composition of the Bank's investment portfolio, information relating to the investment activities and portfolio of the Bank and the consistency of the portfolio with the Bank's asset/liability and liquidity policies, with particular attention given to such matters as categories of investments and concentrations, and investment portfolio audit reports, and comments on current investments. The Investment Committee is currently composed of Messrs. Lett, Marr, Martin-Vegue and Roth. The Salary Review Committee reviews the performance of the Bank's President and Chief Executive Officer and his review of Senior officers. The Salary Review Committee makes recommendations to the Board of Directors on compensation levels for Bank officers. The Salary Review Committee is composed of Messrs. Carter, Henriquez, Lawson, Lett and Roth. The following table sets forth certain information with respect to the directors of the Company and the Bank as of March 31, 1997:
POSITION WITH POSITION WITH NAME AGE THE COMPANY THE BANK ---- --- ----------- -------- BG Carter 54 Director Director Dr. Armando J. 62 Director Director Henriquez James R. Lawson, III 62 Director and Chairman Director and Chairman Edward V. Lett 51 Director, President and CEO Director, President and CEO Scott A. Marr 42 Director Director Derek D. Martin-Vegue 51 Director Director W. Kenneth Meeks 69 Director Director Joseph H. Roth, Jr. 50 Director Director Marvin F. Schindler 54 Director Director Richard J. Williams 76 Director Director
The members of the Board of Directors of the Company are elected by the shareholders. The directorships of the Company are divided into three classes, with the members of each class serving three-year terms and the shareholders electing one class annually. The directors of the Company were first elected to the Board in 1996 (except Mr. Schindler who was appointed in February 1997 to fill a vacancy) and serve initial staggered terms of 34 one, two and three years. The terms of the current directors expire as follows: the terms of directors Meeks, Schindler and Williams expire in 1997; the terms of directors Carter, Henriquez and Lawson expire in 1998; and the terms of directors Lett, Marr, Martin-Vegue and Roth expire in 1999. The members of the Board of Directors of the Bank will be elected annually by the Company as the sole shareholder of the Bank. The principal business experience for at least the last five years of each of the directors and executive officers of the Company and the Bank is set forth below. BG CARTER is the Managing Director of the Independent Companies which is engaged in the mortgage brokerage businesses. Mr. Carter is also the owner of Westwinds, a guest house in Key West. DR. ARMANDO J. HENRIQUEZ has served as Vice President of Client Relations of Fringe Benefits Management Company since September of 1993. Dr. Henriquez served as a consultant to the Florida Association of School Superintendents from January of 1993 until joining Fringe Benefits Management Company. Dr. Henriquez served as Superintendent of Schools of Monroe County, Florida, from January, 1969 to December, 1992. JAMES R. LAWSON is now retired. He has been the Chairman of the Company and the Bank since April 1997. He was the owner of the Key Largo Shopper, a grocery store in Key Largo, prior to its sale in 1994. EDWARD V. LETT has been the President and Chief Executive Officer of the Bank since January 6, 1996, and has served as a director since 1992. Prior to becoming President, Mr. Lett served as Executive Vice President and Chief Operating Officer of the Bank since joining the Bank in November, 1991. Prior to joining the Bank, Mr. Lett had served as Executive Vice President and Chief Operating Officer of American National Bank of Florida. Mr. Lett has been the President and Chief Executive Officer of the Company since its inception. SCOTT A. MARR has been the General Manager and a Partner of Marina-Del Mar Resorts, which consists of two hotels in Key Largo, Florida, for more than five years. DEREK D. MARTIN-VEGUE has been the President of Keys Insurance Agency of Monroe County, Inc. for more than five years. W. KENNETH MEEKS served as the Chairman of the Bank since 1976 and the Chairman of the Company since its inception until his retirement from both positions in April 1997. He currently serves as a director of the Company and the Bank. Mr. Meeks retired as Chief Executive Officer of the Bank in 1996, and served as the Bank's acting Chief Executive Officer from September 1995 through January 5, 1996. JOSEPH H. ROTH, JR. has been Managing Owner of Holiday Isle Resorts and Marina and the General Partner of Little Palm Island Resorts for more than five years. MARVIN F. SCHINDLER is the owner and operator of Marathon Glass Company in Marathon, Florida and Florida Keys Truss Company. Mr. Schindler is retired from the U.S. Army. RICHARD J. WILLIAMS has been a professional fishing guide for over 50 years, and has also owned and operated the Coral Cove Resort on Islamorada. 35 OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following tables set forth certain information regarding the shares of the common stock of the Company owned as of the record date (i) by each person who beneficially owns more than 5% of the shares of the common stock of the Company, (ii) by each of the Company's directors, and (iii) by all directors and executive officers as a group.
BENEFICIAL OWNERSHIP (1) NAME NUMBER OF SHARES PERCENTAGE OWNERSHIP(2) 5% Shareholders: --------------- W. Kenneth Meeks(3)(4) 1,003,278 23.14% Joseph H. Roth, Jr.(3)(5) 376,998 8.25% Directors: ---------- BG Carter(6) 6,030 * Dr. Armando J. Henriquez (7) 40,506 * James R. Lawson (3)(8) 200,532 4.62% Edward V. Lett (3)(9) 188,856 4.35% Scott A. Marr(10) 30,042 * Derek D. Martin-Vegue(11) 36,000 * W. Kenneth Meeks(3)(4) 992,478 21.73% Joseph H. Roth, Jr.(3)(5) 387,798 8.94% Marvin F. Schindler 0 0% Richard J. Williams(12) 41,280 * All directors and executive officers as a group (14 persons) 1,906,434 41.75%
_________________________________________ * Percent share ownership is less than 1% of total shares outstanding. (1) Except as otherwise indicated, the persons named in the above table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Information relating to beneficial ownership of the shares is based upon "beneficial ownership" concepts set forth in the rules promulgated under the Securities and Exchange Act of 1934, as amended. Under such rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares "voting power" with respect to such security. A person may be deemed to be the "beneficial owner" of a security if that person has the right to acquire beneficial ownership of such security within 60 days. The information as to beneficial ownership has been furnished by the respective persons listed in the above table. (2) Based on 4,334,364 shares outstanding as of March 1, 1997 plus 232,050 shares not outstanding but which are subject to options granting the holders thereof the right to acquire shares within 60 days through the exercise of options. (3) Includes 106,476 shares of common stock of the Company over which Messrs. Lawson, Lett, Roth and Meeks exercise voting rights as co-trustees under the Bank's 401(K) Savings and Employee Stock Ownership Plan. (4) Includes (a) 74,016 shares which are held of record by Mr. Meeks' spouse, and (b) 30,000 shares representing unexercised options. 36 (5) Includes (a) 47,424 shares held as custodian for Mr. Roth's minor children, (b) 8,100 shares held jointly with Mr. Roth's spouse and (c) 906 shares held of record by Mr. Roth's spouse. (6) Includes (a) 6,000 shares representing unexercised options and (b) 30 shares held by Independent Mortgage and Finance Co. (7) Includes (a) 10,410 shares as to which Mr. Henriquez shares beneficial ownership with his spouse, and (b) 26,400 shares representing unexercised options. (8) Includes (a) 51,114 shares as to which Mr. Lawson shares beneficial ownership with his spouse, and (b) 18,000 shares representing unexercised options. (9) Includes (a) 75 shares held jointly with Sally D. Howard, and (b) 16,200 shares representing unexercised options. (10) Includes 26,400 shares representing unexercised options. (11) Includes 30,000 shares representing unexercised options. (12) Includes 27,000 shares representing unexercised options. EXECUTIVE OFFICERS The following lists the executive officers of the Company and certain officers of the Bank, all positions held by them with the Company and the Bank and the periods during which such positions have been held, a brief account of their business experience during the past five years and certain other information including their ages. All officers of both the Company and the Bank are appointed annually at the meetings of the respective Board of Directors following their election to serve until the annual meeting in the subsequent year and until successors are chosen. Information concerning directorships, committee assignments, minor positions and peripheral business interests has not been included. No family relationships exist between any the officers.
NAME INFORMATION ABOUT EXECUTIVE OFFICERS - ---- ------------------------------------ Edward V. Lett See the table above under "Directors." Gregory S. Bills Mr. Bills, age 45, is a Senior Vice President of the Bank. He joined the Bank in November 1994. Mr. Bills was Senior Vice President/ Chief Lending Officer at Republic Security Bank, West Palm Beach, Florida from 1985 until he joined the Bank. David P. Johnson Mr. Johnson, age 41, is a Vice President and Controller of the Bank. Mr. Johnson has been an officer of the Bank since 1987. Daniel W. Taylor Mr. Taylor, age 50, is an Executive Vice President of the Bank. Mr. Taylor has been employed by the Bank since March 1995. From 1993 until joining the Bank, Mr. Taylor was self employed as a bank consultant. From 1969 to 1993, Mr.Taylor served in several capacities at First Florida Bank, Tampa, Florida. Millard J. Younkers, Jr. Mr. Younkers, age 53, is an Executive Vice President of the Bank. Mr. Younkers has been employed by the Bank since September 1996. From 1993 until joining the Bank, he was an officer of Northern Trust Bank of Florida, Naples, Florida.
37 EXECUTIVE COMPENSATION The Company does not compensate any of its directors or executive officers separately from the compensation they receive from the Bank. The following sets forth certain information concerning the compensation during the fiscal years 1996, 1995, 1994 of the Bank's executive officers whose annual compensation was in excess of $100,000 during 1996 or who served as Chief Executive Officer of the Bank during 1996. SUMMARY COMPENSATION TABLE
Long Term Compensation ---------------------- Annual Compensation Awards Payouts ------------------- ------ ------- Other Annual Securities All Other Name and Principal Fiscal Compensation Underlying Compensation Position Year Salary ($) Bonus ($) ($)(1) Options (#) ($)(2) -------- ---- ---------- --------- ------ ----------- ------ Edward V. Lett 1996 $137,706 $57,453 $13,600 12,000 $1,365 President and Chief 1995 123,627 14,216 16,600 0 1,545 Executive Officer(3) 1994 117,087 8,747 10,167 81,000 583 W. Kenneth Meeks Former 1996 $12,500 0 $16,600 0 0 Chairman of the Board; 1995 12,500 0 16,600 0 0 Former Interim CEO(4) 1994 0 0 15,500 30,000 0 Gregory S. Bills 1996 $108,487 $12,500 $4,800 6,000 $875 Senior Vice President 1995 106,000 11,667 0 0 0 1994 16,667 0 0 24,000 0 Daniel W. Taylor 1996 $117,433 $32,000 0 30,000 $811 Executive Vice President 1995 83,367 4,000 0 18,000 0 John R. Weachter 1996 $87,393 $14,344 0 12,000 $865 Executive Vice President 1995 80,359 9,180 0 0 837 1994 79,900 5,625 0 30,000 125
(1) Includes (i) quarterly retainer and fees for attending Board of Directors meetings paid to all directors including Messrs. Lett and Meeks, and (ii) amounts paid to Mr. Bills as a car allowance. Perquisites and other personal benefits which may be derived from business-related expenditures in the aggregate do not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported for such person. (2) The reported amount consists of matching contributions to the Bank's 401(k) and Employee Stock Ownership Plan. (3) Mr. Lett became the Bank's President and Chief Executive Officer on January 6, 1996, and served as the Bank's Executive Vice President and Chief Operating Officer during 1995. (4) Mr. Meeks served as the Bank's interim Chief Executive Officer from September 26, 1995 through January 5, 1996 and received a salary at an annualized rate equal to $50,000 during that period. The following table sets forth information with respect to the above named executives concerning unexercised options held as of December 31, 1996. AGGREGATE OPTION EXERCISES IN 1996 AND DECEMBER 31, 1996 OPTION VALUES
SHARES NUMBER OF SECURITIES VALUE OF ACQUIRED UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY ON OPTIONS AT 12/31/96 OPTIONS AT 12/31/96(1) ------------------- ----------------------- VALUE NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- -------- -------- ----------- ------------- ----------- ------------- Edward V. Lett 0 0 16,200 76,800 $ 56,835 $235,340 W. Kenneth Meeks 0 0 30,000 0 105,250 0 Gregory S. Bills 0 0 4,800 25,200 16,840 71,360 Daniel W. Taylor 3,000 0 4,950 40,050 17,325 55,175 John R. Weachter 0 0 6,000 36,000 21,050 93,200
(1) Based on a fair market value of $9.00 per share and exercise prices per share of $5.49167 and $8.3333. The number of shares, options and per share amounts have been restated to reflect a three-for-one stock split distributed on March 18, 1997, to shareholders of record on February 25, 1997. 38 EMPLOYMENT AGREEMENTS The Bank and Edward V. Lett, the President and Chief Executive Officer of the Company and the Bank, are parties to an "Executive Employment Agreement" (the "Agreement"). Under the Agreement, Mr. Lett receives a base salary of $140,000 per year. The Bank may increase Mr. Lett's salary annually based on Mr. Lett's performance. The agreement provides that Mr. Lett will be employed by the Bank on an "at-will" basis, unless and until there is a change of ownership control of the Bank. The Agreement provides that in the event there is a change of ownership control of the Bank, Mr. Lett will no longer be an at-will employee and the agreement will become an employment agreement for a term of 24 months on the effective date of the change in ownership control. Under the Agreement, change of ownership control means the acquisition by a person or other legal entity (or person acting as a group within the meaning of Section 13(d) of the Securities Exchange Act of 1934) of 51% or more of the voting securities of the Bank or any lesser percentage if the Board of Directors of the Bank, the Federal Deposit Insurance Corporation or the Federal Reserve System makes a determination that such acquisition constitutes or will constitute control of the Bank. Mr. Lett's salary cannot be reduced for any reason during this 24 month term, unless the agreement is terminated due to death or incapacity of Mr. Lett or for "cause". The agreement further provides that Mr. Lett will be entitled to a credit for all years of service with the Bank (i.e., all years prior to the change in ownership control, plus the greater of 24 months or the actual period of employment after the change in ownership control) in determining eligibility for and benefits from any and all retirement, disability, profit-sharing and other employee benefit programs offered by the Bank. Two other employees of the Bank, Daniel W. Taylor and Millard J. Younkers, Jr. are parties to employment agreements with the Bank. The terms, conditions and benefits under these agreements are the same as described above except that Mr. Taylor's base salary per year is $110,000 and Mr. Younkers' base salary per year is $95,000. COMPENSATION TO DIRECTORS All of the members of the Board of Directors of the Bank who are not Bank employees receive a quarterly retainer of $2,500 and $600 for attending each of 11 regular board meetings, for a total of up to $16,600 annually. Directors who are executive officers of the Bank receive the quarterly retainer only. No additional fees are currently paid for services as directors of the Company. Each member of the Board of Directors has also received a grant of an option to purchase 30,000 shares of the Bank's common stock at an exercise price of $5.49 per share, except for a more recent grant to Mr. Martin-Vegue with an exercise price of $6.23 per share and a grant to Mr. Schindler with an option to purchase up to 5,000 shares of the Bank's common stock at an exercise price of $9.00 per share. Board meetings of the Company, when called, are held in conjunction with Board meetings of the Bank. No additional compensation will be paid to the directors of the Company. LIMITATION ON DIRECTORS' LIABILITY The Company's Articles of Incorporation contain a provision which eliminates or limits the personal liability of directors to the Company or its shareholders for monetary damages for certain breaches of their duty of care or other duty. This provision provides that a director of the Company shall not be personally liable for monetary damages for a breach of his duty of care or other duty as a director, except for liabilities for (i) any appropriation, in violation of the director's duties, of any business opportunity of the Company, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) authorization of improper dividends or redemptions, or (iv) any transaction from which the director derived an improper personal benefit. Liability for monetary damages remains unaffected by such provision if liability is based on any of these grounds. Liability for monetary damages for violations of federal securities laws would also remain unaffected. The provision does not eliminate a director's fiduciary duty, nor does it preclude a shareholder from pursuing injunctive or other equitable remedies. The Board of Directors believes this provision in the Company's Articles of Incorporation is essential to maintain and improve the ability of the Company to attract and retain competent directors. 39 INDEMNIFICATION The Company's Articles of Incorporation provide for the indemnification of the directors, officers, employees and agents of the Company against certain liabilities and expenses that may be incurred by them to the fullest extent permitted by Florida corporate law. The Company's Articles of Incorporation provide for indemnification of expenses reasonably incurred by them in connection with any civil, criminal, administrative or investigative action, suit or proceeding in which they may become involved by reason of being a director or officer of the Company. Indemnification is permitted if the director or officer acted in a manner he believed in good faith to be in or not opposed to the best interests of the Company and, with respect to in criminal actions, if he had no reasonable cause to believe his conduct to be unlawful; provided that the Company may not indemnify any director (i) in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation or (ii) in connection with any other proceeding in which he was adjudged liable on the basis that personal profit was improperly received by him. Article 8 of the Company's Articles of Incorporation contains a provision by providing for the indemnification of officers and directors and advancement of expenses to the fullest extent authorized by the Florida Business Corporation Act. The Company may seek to purchase and maintain directors and officers liability insurance which insures against liabilities that directors and officers of the Company may incur in such capacities. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. CERTAIN TRANSACTIONS Certain of the executive officers, directors and principal shareholders of the Bank and affiliates of such persons have, from time to time, engaged in banking transactions with the Bank and are expected to continue such relationships in the future. All loans or other extensions of credit made by the Bank to such individuals were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated third parties and did not involve more than the normal risk of collectibility or present other unfavorable features. As of March 4, 1997, loans and other extensions of credit to executive officers and directors of the Bank, including affiliates of such persons, amounted to $6,256,470.20 in the aggregate. 40 DESCRIPTION OF CAPITAL STOCK THE FOLLOWING INFORMATION CONCERNING THE COMPANY'S CAPITAL STOCK SUMMARIZES CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS AND CERTAIN STATUTES REGULATING THE RIGHTS OF HOLDERS OF COMPANY CAPITAL STOCK. COMMON STOCK GENERALLY. The Company's Articles of Incorporation, as amended, authorize the Company's Board of Directors to issue a maximum of 7,500,000 shares of $0.10 par value common stock. As of the date of this Prospectus, 4,334,364 shares Common Stock were issued and outstanding and held by 489 shareholders of record. In addition, 448,500 shares were subject to outstanding employee stock options and 163,800 shares were subject to outstanding stock options granted to the Company's non-employee directors. See "Management and Principal Shareholders -- Company Stock Option Plans" and "-- Compensation to Directors." VOTING RIGHTS. The holders of Common Stock are entitled to one vote for each share of Common Stock held. The holders of the Common Stock are not entitled to cumulative voting rights in the election of directors, which means that the holders of more than 50% of the shares of the Common Stock voting in the election of directors (subject to the voting rights of any preferred shares then outstanding) can elect all of the directors then standing for election if they choose to do so and, in such event, the holders of the remaining less than 50% of the shares voting for the election of directors are not able to elect any person or persons to the Board. CLASSIFIED BOARD. The Company's Board of Directors is divided into three classes with as nearly equal a number of directors in each class as possible. After initial terms ended or ending at the Company's annual meetings of shareholders in 1997, 1998 and 1999, directors elected by the shareholders to each class are serving or will serve three-year terms of office. DIVIDEND RIGHTS. Subject to any preferences of preferred shares then outstanding, each share of Common Stock is entitled to participate equally in dividends as and when declared by the Board of Directors out of funds legally available therefor. The only current source of funds which the Company could use to pay dividends would be from amounts received as dividends from the Bank. For information concerning legal limitations on the ability of the Company to pay dividends, see "Market Information and Dividends -- Dividends." PREEMPTIVE RIGHTS. The holders of Common Stock do not have any preemptive or preferential right to purchase or to subscribe for any additional shares of Common Stock or any other securities that may be issued by the Company. ASSESSMENT AND REDEMPTION. The shares of Common Stock presently outstanding are fully paid and nonassessable. There is no provision for redemption or conversion of Common Stock. CERTAIN PROVISIONS OF FLORIDA LAW. The Company is subject to several anti-takeover provisions under the Florida Business Corporation Act ("FBCA") that apply to a public corporation organized under Florida law, unless the corporation has elected to opt out of those provisions in its articles of incorporation or bylaws. The Company has not elected to opt out of those provisions. The FBCA prohibits the voting of shares in a publicly-held Florida corporation that are acquired in a "control share acquisition" unless the holders of a majority of the corporation's voting shares (exclusive of shares held by officers of the corporation, inside directors or the acquiring party) approve the granting of voting rights as to the shares acquired in the control share acquisition. A "control share acquisition" is defined as an acquisition that immediately thereafter entitles the acquiring party to vote in the election of directors within each of the following ranges of voting power: (i) one-fifth or more but less than one-third of such voting power, (ii) one-third or more but less than a majority of such voting power, and (iii) more than a majority of such voting power. The FBCA also contains an "affiliated transaction" provision that prohibits a publicly-held Florida corporation from engaging in a broad range of business combinations or other extraordinary corporate transactions with an "interested shareholder" unless (i) the transaction is approved by a majority of disinterested directors before the person becomes an interested shareholder, (ii) the interested shareholder has owned at least 80% of the corporation's outstanding voting shares for at least five years, or (iii) the transaction is approved by the holders of two-thirds of the corporation's voting shares other than those owned by the interested shareholder. An "interested shareholder" is defined as a person who together with affiliates and associates beneficially owns more than 10% of the corporation's outstanding voting shares. AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS. The Articles of Incorporation of the Company provide that certain articles (Article 3, Capital Stock; Article 6, Director Liability; Article 7, Shareholders' Meetings; Article 8, Indemnification; Article 9, Bylaws; and Article 10, Amendment of Articles of Incorporation) may be amended by the vote of holders of at least 67% of the voting power of the outstanding shares of capital stock; provided, however, that such 67% of the voting requirement shall not be applicable if the board of directors of the Company shall approve such action by resolution adopted by at least 67% of the directors then in office, in which case the affirmative vote of holders of a majority of the then outstanding shares of capital stock of the Company is required to approve such action. Other provisions of the Articles of Incorporation require approval by a majority of the outstanding voting stock of the Company for any amendment thereof. The Company's Articles of Incorporation provide that the Board of Directors is authorized to amend or repeal the Bylaws of the Company by a majority of the directors then in office, subject to the power of the holders of the capital stock of the Company to amend or repeal the Bylaws upon the affirmative vote of holders of at least 67% of the voting power of the outstanding shares of capital stock. SUPERVISION AND REGULATION The Company and the Bank are subject to substantial regulation. The following summaries of statues and regulations affecting bank holding companies and banks do not purport to be complete. Such summaries are qualified in their entirety by reference to such statutes and regulations. The supervision and regulation of the Company and the Bank by the bank regulatory agencies is intended primarily for the protection of depositors rather than the shareholders of the Company. SUPERVISION AND REGULATION OF THE COMPANY The Company is a bank holding company within the meaning of the federal Bank Holding Company Act (the "Act"). As a bank holding company, the Company is required to file with the Board of Governors of the Federal Reserve System (the "Board") an annual report and such additional information as the Board may require 41 pursuant to the Act. Bank holding companies are required by the Act to obtain approval from the Board prior to acquiring, directly or nondirectly, ownership or control of more than 5% of the voting shares of a bank. The Act also prohibits bank holding companies, with certain exceptions, from acquiring more than 5% of the voting shares of any company that is not a bank, and from engaging in any nonbanking business (other than a business closely related to banking as determined by the Board) or from managing and controlling banks and other subsidiaries authorized by the Act without the prior approval of the Board. The Board's Regulation Y lists those nonbanking activities which are regarded as closely related to banking or managing or controlling banks, and therefore, permissible activities for bank holding companies to engage in subject to appropriate notice to the Board. The Board may differentiate between activities that are initiated de novo by a bank holding company or a subsidiary and activities commenced by acquisition of a going concern. As a bank holding company, the Company is subject to capital adequacy guidelines-based capital guidelines for bank holding companies effective March 15, 1989. Beginning on December 31, 1992, the minimum required ratio for total capital to risk weighted assets became 8 percent (of which at least 4 percent must consist of Tier 1 capital). Tier 1 capital (as defined in regulations for the Board) consists of common shareholders equity and qualifying preferred stock and minority interests in equity accounts of consolidated subsidiaries, less goodwill and other intangible assets required to be deducted under the Board's guidelines. The Board's guidelines apply on a consolidated basis to bank holding companies (such as the Company) with total consolidated assets of $150 million or more. The Board has stated that risk-based capital guidelines establish minimum standards and that bank holding companies generally are expected to operate will above the minimum standards. At December 31, 1996, the Company exceeded the Board's minimum risk-based capital guidelines. At December 31, 1996, the Company had Tier 1 capital and total capital equal to approximately 13.7% and 14.8%, representing risk-weighted assets. The table which follows sets forth certain capital information for the Company on a consolidated basis, as of December 31, 1996.
CAPITAL ADEQUACY (Dollars in thousands) December 31, 1996 ----------------- Leverage Ratio Amount Percent -------------- ------ ------- Actual $22,621 9.4% Minimum Required (1) $ 7,232 3.0% Risk-Based Capital: Tier 1 Capital Actual $22,621 13.7% Minimum Required $ 6,621 4.0% Total Capital Actual $24,551 14.8% Minimum Required $13,242 8.0%
(1) Represents the highest regular minimum requirement. Institution that are contemplating acquisitions or anticipating or experiencing significant growth may be required to maintain a substantially higher leverage ratio. See also "FDICIA" below regarding the consequences of failing to meet specified capital standards. Banking regulators continue to indicate their desire to raise capital requirements applicable to banking organizations, including a proposal to add an interest rate risk component to risk-based capital requirements. Bank holding companies may be compelled by bank regulatory authorities to invest additional capital into a subsidiary bank in the event the subsidiary bank experiences either significant loan losses or rapid growth of loans or deposits. In addition, the Company may be required to provide additional capital to any additional banks it 42 acquires as a condition to obtaining the approvals and consents of regulatory authorities in connection with such acquisitions. The Company is an "affiliate" of the Bank within the meaning of the Federal Reserve Act, which imposes restrictions on loans to the Company by the Bank, investments by the Bank in securities of the Company and on the use of such securities as collateral security for loans by the Bank to any borrower. The Federal Reserve Act will limit the transfer of funds by the Bank to the Company and its nonbanking subsidiaries, whether in the form of loans, extensions of credit, investments or asset purchases. Such transfers by the Bank to the Company or any nonbanking Company subsidiary are limited in an amount to 10% of the Bank's capital and surplus and, with respect to the Company and all such nonbanking subsidiaries, to an aggregate of 20% of the Bank's capital and surplus. Furthermore, such loans and extensions of credit are required to be secured in the specified amounts. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act"), subject to certain restrictions, allows adequately capitalized and managed bank holding companies to acquire existing banks across state lines, regardless of state statutes that would prohibit acquisitions by out-of-state institutions. Further, effective June 1, 1997, a bank holding company may consolidate interstate bank subsidiaries into branches and a bank may merge with an unaffiliated bank across state lines to the extent that the applicable states have not "opted out" of interstate branching prior to such effective date. Some states may elect to permit interstate mergers prior to June 1, 1997. The Interstate Banking Act generally prohibits an interstate acquisition (other than the initial entry into a state by a bank holding company) that would result in either the control of more than (i) 10% of the total amount of insured deposits in the United States, or (ii) 30% of the total insured deposits in the home state of the target bank, unless such 30% limitation is waived by the home state on a basis which does not discriminate against out-of-state institutions. As a result of this legislation, the Company may become a candidate for acquisition by, or may itself seek to acquire, banking organizations located in other states. However, the acquisition of a significant amount (at minimum thresholds ranging from 5 to 25 percent of the outstanding voting shares depending upon the type of the purchaser) of the shares of a bank holding company (such as the Company) by an individual (or a group of individuals acting in concert), another company or another bank holding company requires prior review and approval of the Board under the Change In Bank Control Act of 1978 or the Bank Holding Company Act of 1956, as amended. The timing requirements of the regulatory review and approval process could serve to deter a possible purchaser from making an offer to acquire control of the Company. The Riegle Community Development and Regulatory Improvement Act of 1994 (the "Improvement Act") provides for the creation of a community development financial institutions' fund to promote economic revitalization in community development. Banks and thrift institutions are allowed to participate in such community development banks. The Improvement Act also contains (i) provisions designed to enhance small business capital formation and to enhance disclosure with regard to high cost mortgages for the protection of consumers, and (ii) more than 50 regulatory relief provisions that apply to banks and thrift institutions, including the coordination of examinations by various federal agencies, coordination of frequency and types of reports financial institutions are required to file and reduction of examinations for well capitalized institutions. SUPERVISION AND REGULATION OF THE BANK The Bank is a state-chartered commercial bank organized under the laws of the State of Florida. The operations of the Bank are subject to state and federal statutes applicable to state chartered banks whose deposits are insured by the Federal Deposit Insurance Corporation ("FDIC") and the regulations of the Florida Department of Banking and Finance (the "DBF") and the FDIC. Such statutes and regulations relate to, among other things, required reserves, permissible investments, lending limitations and procedures, mergers and consolidations, issuances of securities, payment of dividends, establishment of branches and other aspects of the Bank's operations. The Bank is subject to regulatory scheduled examinations by the DBF and FDIC. In addition, and as discussed above under "Supervision and Regulation of the Company," the Federal Reserve Act restricts extensions of credit by the Bank to affiliates, such as the Company or, with certain exceptions, other affiliates, and on the taking of such stock or securities as collateral on loans to any borrower. The Bank is prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or the providing of any property or service. CAPITAL REQUIREMENTS The FDIC has adopted final risk-based capital guidelines for all FDIC insured state chartered banks that are not members of the Federal Reserve System. Beginning on December 31, 1992, all banks were required to maintain a minimum ratio of total capital to risk weighted assets of 8 percent (of which at least 4 percent must consist of Tier 1 capital). Tier 1 capital of state chartered banks (as defined in regulations) generally consists of (i) common stockholders equity; (ii) noncumulative perpetual preferred stock and related surplus; and (iii) minority interests in the equity accounts of consolidated subsidiaries. 43 In addition, the FDIC adopted a minimum ratio of Tier 1 capital to total assets of banks. This capital measure is generally referred to as the leverage capital ratio. The FDIC has established a minimum leverage capital ratio of 3 percent if the FDIC determines that the institution is not anticipating or experiencing significant growth and has well- diversified risk, including no undue interest rate exposure, excellent asset quality, high liquidity, good earnings and, in general, is considered a strong banking organization, rated Composite 1 under the Uniform Financial Institutions Rating System. Other financial institutions are expected to maintain leverage capital at least 100 to 200 basis points above the minimum level. At December 31,1 996, the Bank exceeded the minimum Tier 1, risk-based and leverage capital ratios. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991 The Federal Deposit Insurance Corporation Improvement Act of 1991, enacted in December 1991 ("FDICIA"), specifies, among other things, the following five capital standard categories for depository institutions: (i) well capitalized, (ii) adequately capitalized, (iii) undercapitalized, (iv) significantly undercapitalized and (v) critically undercapitalized. FDICIA imposes progressively more restrictive constraints on operations, management and capital distributions depending on the category in which an institution is classified. Each of the federal banking agencies has issued final uniform regulations that became effective December 19, 1992, which, among other things, define the capital levels described above. Under the final regulations, a bank is considered "well capitalized" if it (i) has a total risk-based capital ratio of 10% or greater, (ii) has a Tier 1 risk-based capital ratio of 6% or greater, (iii) has a leverage ratio of 5% or greater, and (iv) is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure. An "adequately capitalized" bank is defined as one that has (i) a total risk-based capital ratio for 8% or greater, (ii) a Tier 1 risk-based capital ratio of 4% or greater (or 3% or greater in the case of a bank with a composite CAMEL rating of 1). A bank is "undercapitalized" if it has (i) a total risk-based capital ratio of less 8%, (ii) a Tier 1 risk-based capital ratio of less than 4% and (iii) a leverage ratio of 4% or greater, or (iii) a leverage ratio of less than 3%, and "critically undercapitalized" if the bank has a ratio of tangible equity to total assets equal to or less than 2%. The applicable federal regulatory agency for a bank that is "well capitalized" may reclassify it as "adequately capitalized" or "undercapitalized" institution to the supervisory actions applicable to the next lower capital category, if it determines that the Bank is in an unsafe or unsound condition or deems the bank to be engaged in an unsafe or unsound practice and not to have corrected the deficiency. As of December 31, 1996, the Bank met the definition of a "well capitalized" institution. "Undercapitalized" depository institutions, among other things, are subject to growth limitations, are prohibited, with certain exceptions, from making capital distributions, are limited in their ability to obtain funding from a Federal Reserve Bank and are required to submit a capital restoration plan. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. In addition, for a capital restoration plan to be acceptable, the depository institution's parent holding company must guarantee that the institution will comply with such capital restoration plan and provide appropriate assurances of performance. If a depository institution fails to submit an acceptable plan, including if the holding company refuses or is unable to make the guarantee described in the previous sentence, it is treated as if it is "significantly undercapitalized". Failure to submit or implement an acceptable capital plan also is grounds for the appointment of a conservator or a receiver. "Significantly undercapitalized" depository institutions may be subject to a number of additional requirements and restrictions, inclucient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. "Critically undercapitalized" institutions, among other things, are prohibited from making any payments of principal and interest on subordinated debt, and are subject to the appointment of a receiver or conservator. Under FDICIA, the FDIC is permitted to provide financial assistance to an insured bank before appointment of a conservator or receiver only if (i) such assistance would be the least costly method of meeting the FDIC's insurance obligations, (ii) grounds for appointment of a conservator or a receiver exist or are likely to exist, (iii) it is unlikely that the bank can meet all capital standards without assistance and (iv) the bank's management has been competent, has complied with applicable laws, regulations, rules and supervisory directives and has not engaged in any insider dealing, speculative practice or other abusive activity. FDIC INSURANCE ASSESSMENTS The Bank will be subject to FDIC deposit insurance assessments for the Bank Insurance Fund ("BIF"). The FDIC has implemented a risk-based assessment system whereby banks are assessed on a sliding scale depending 44 on their placement in nine separate supervisory categories. Recent legislation provides that BIF insured institutions, such as the Bank, will share the Financial Corporation ("FICO") bond service obligation. Previously, only Savings Association Insurance Fund ("SAIF") insured institutions were obligated to contribute to the FICO bond service. The BIF deposit insurance premium will be less than $.02 per $100 of BIF insured deposits for the highest-rated institutions. COMMUNITY REINVESTMENT ACT AND FAIR LENDING On April 19, 1995, the federal bank regulatory agencies adopted uniform revisions to the regulations promulgated pursuant to the Community Reinvestment Act (the "CRA"), which are intended to set standards for financial institutions. The revised regulation contains three evaluation tests: (a) a lending test which will compare the institution's market share of loans in low and moderate income areas to its market share of loans in its entire service area and the percentage of a bank's outstanding loans to low and moderate income areas or individuals, (b) a services test which will evaluate the provision of services that promote the availability of credit to low and moderate income areas, and (c) an investment test, which will evaluate an institution's record of investments in organizations designed to foster community development,s mall and minority owned businesses and affordable housing lending, including state and local government housing or revenue bonds. The regulation is designed to reduce the paperwork requirements of the current regulations and provide regulatory agencies, institutions, and community groups with a more objective and predictable manner with which to evaluate the CRA performance of financial institutions. The rule became effective on January 1, 1996 when evaluation under streamlined procedures began for institutions with total assets of less than $250 million that are owned by a holding company with total assets of less than $1 billion. Congress and various federal agencies (including, in addition to the bank regulatory agencies, the Department of Housing and Urban Development, the Federal Trade Commission and the Department of Justice (collectively, the "Federal Agencies") responsible for implementing the nation's fair lending laws have been increasingly concerned that the prospective home buyers and other borrowers are experiencing discrimination in their efforts to obtain loans. Justice has filed suit against financial institutions which it determined had discriminated, seeking fines and restitution for borrowers who allegedly suffered from discriminatory practices. Most, if not all, of these suites have been settled (some for substantial sums) without a full adjudication on the merits. On March 8, 1994, the Federal Agencies, in an effort to clarify what constitutes discrimination in lending and to specify the factors the agencies will consider in determining if lending discrimination exists, announced a joint policy statement detailing specific discriminatory practices prohibited under the Equal Credit Opportunity Act and the Fair Housing Act. In the policy statement, three methods of establishing discrimination in lending were identified: (a) overt evidence of discrimination, when a lender blatantly discriminates on a prohibited basis, or (b) where there is no showing that the treatment was motivated by intent to discriminate against a person, and (c) evidence of disparate impact, when a lender applies a practice uniformly to all applicants, but the practice has a discriminatory effect on a protected class, even where such practices are neutral on their face and are applied equally, unless the practice can be justified on the basis of business necessity. FURTHER CHANGES IN REGULATORY REQUIREMENTS The United States Congress and the Florida legislature have periodically considered and adopted legislation that has resulted in deregulation of, among other matters, banks and other financial institutions, or adversely affected the profitability of the banking industry. Future legislation could further modify or eliminate geographic restrictions on banks and bank holding companies and current prohibitions with other financial institutions, including mutual funds, securities brokerage firms, insurance companies, banks from other states and investment banking firms. The effect of any such legislation on the business of the Company or the Bank cannot be accurately predicted. The Company also cannot predict what legislation might be enacted or what other implementing regulations might be adopted, and if enacted or adopted, the effect thereof. MONETARY AND FISCAL POLICIES Banking is a business which depends on interest rate differentials. In general, the difference between interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitutes the major portion of a bank's earnings. Thus, the earnings and growth of the 45 Company will be subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The Federal Reserve regulates the supply of money through various means, including open market dealings in United States Government securities, the discount rate at which banks may borrow from the Federal Reserve and the reserve requirements on deposits. The nature and timing of any changes in such policies and their impact on the Company cannot be predicted. CERTAIN AFFILIATE RESTRICTIONS The Company and the Bank are subject to the Federal Reserve Act, Section 23A, which limits a bank's "covered transactions" (generally, any extension of credit) with any single affiliate to no more than 10% of a bank's capital and surplus. Covered transactions with all affiliates combined are limited to no more than 20% of a bank's capital and surplus. All covered and exempt transactions between a bank and its affiliates must be on terms and conditions consistent with safe and sound banking practices, and a bank and its subsidiaries are prohibited from purchasing low quality assets from the bank's affiliates. Finally, Section 23A requires that all of a bank's extensions of credit to an affiliate be appropriately secured by collateral. The Company and the Bank are also subject to Section 23B of the Federal Reserve Act, which further limits transactions among affiliates. Sections 22(g) and 22(h) of the Federal Reserve Act and implementing regulations also prohibit extensions of credit by a state non-member bank (such as the Bank) to its directors, officers and controlling shareholders on terms which are more favorable than those afforded other borrowers, and impose limits on the amounts of loans to individual affiliates and all affiliates as a group. LEGAL MATTERS Certain legal matters in connection with the Shares offered hereby will be passed upon for the Company by Holland & Knight LLP Atlanta, Georgia. EXPERTS The consolidated financial statements of the Company as of December 31, 1996 and for the year then ended, have been audited by Bricker & Melton, P.A., independent auditors, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of the Company as of December 31, 1995, and for each of the years in the two-year period ended December 31, 1995, have been included herein and in the Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 46 INDEX TO TIB FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS
Page ---- AUDITED FINANCIAL STATEMENTS Independent Auditors Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Bricker & Melton, P.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 KPMG Peat Marwick, LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3 Consolidated Balance Sheets at December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4 Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11
Page F-1 47 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders TIB Financial Corp. and Subsidiary Key Largo, Florida We have audited the accompanying consolidated balance sheet of TIB Financial Corp. and subsidiary as of December 31, 1996, and the related consolidated statements of income, changes in stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of TIB Financial Corp.'s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of TIB Financial Corp. and subsidiary as of December 31, 1996, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. As discussed in Note A to the consolidated financial statements, in 1996 TIB Financial Corp. and subsidiary changed its method of disclosure for stock-based compensation. Bricker and Melton P.A. February 21, 1997, except for Note O, as to which the date is February 25, 1997 Duluth, Georgia Page F-2 48 INDEPENDENT AUDITORS' REPORT The Board of Directors TIB Financial Corp. Key Largo, Florida We have audited the accompanying consolidated statement of condition of TIB Financial Corp. and subsidiary as of December 31, 1995, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the two-year period then ended. These financial statements are the responsibility of TIB Financial Corp.'s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted out audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examing, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of TIB Financial Corp. and subsidiary as of December 31, 1995 and the results of their operations and their cash flows for each of the years in the two-year period then ended in conformity with generally accepted accounting principles. February 2, 1996 KPMG PEAT MARWICK, LLP Miami, Florida F-3 49 TIB FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, ----------------------------------- 1996 1995 --------------- --------------- ASSETS Cash and due from banks (Note B) $ 12,109,935 $ 8,542,945 Federal funds sold 1,810,000 587,000 Investment securities held to maturity (market value of $14,691,930 and $10,618,626, respectively) (Note C) 14,387,276 10,115,909 Investment securities available for sale (Note C) 36,490,481 50,844,979 Loans, net of deferred loan fees (Notes D and J) 164,544,622 138,369,991 Less: Allowance for loan losses (Note D) 1,929,719 1,700,823 --------------- --------------- Loans, net 162,614,903 136,669,168 Premises and equipment, net (Note E) 8,221,676 8,570,271 Accrued interest receivable 1,680,743 1,709,057 Intangible assets, net 343,796 262,487 Other assets (Note H) 3,391,743 2,264,839 --------------- --------------- TOTAL ASSETS $ 241,050,553 $ 219,566,655 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits (Note F): Noninterest-bearing demand $ 42,929,774 $ 34,247,739 Interest-bearing demand and money market 66,340,839 67,172,506 Savings 16,220,162 17,545,775 Time deposits of $100,000 or more 23,340,142 22,329,989 Other time deposits 56,152,663 51,161,580 --------------- --------------- Total Deposits 204,983,580 192,457,589 Short-term borrowings (Note G) 11,091,426 4,184,051 Accrued interest payable 1,743,654 1,432,716 Other liabilities (Note H) 610,976 429,153 --------------- --------------- TOTAL LIABILITIES 218,429,636 198,503,509 --------------- ---------------
(Continued) The accompanying notes are an integral part of these consolidated financial statements. Page F-4 50 TIB FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS, (continued)
December 31, ----------------------------------- 1996 1995 --------------- --------------- STOCKHOLDERS' EQUITY (Note K) Common stock - $.10 par value: 5,000,000 shares authorized, 4,322,364 and 4,258,464 shares issued and outstanding (Note O) 432,236 70,975 Surplus 6,140,199 6,150,518 Retained earnings 16,207,233 14,663,648 Market valuation reserve on investment securities available for sale (Note C) (158,751) 178,005 --------------- --------------- TOTAL STOCKHOLDERS' EQUITY 22,620,917 21,063,146 --------------- --------------- Commitments and contingent liabilities (Note L) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 241,050,553 $ 219,566,655 =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. Page F-5 51 TIB FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, ------------------------------------------------------- 1996 1995 1994 --------------- --------------- --------------- INTEREST INCOME Loans, including fees $ 15,037,810 $ 13,530,024 $ 10,584,641 Investment securities: U.S. Treasury securities 1,883,460 2,014,771 2,337,752 U.S. Government agencies and corporations 1,094,824 1,409,393 1,538,318 States and political subdivisions 373,110 415,248 503,019 Other investments 44,125 44,125 108,769 Federal funds sold 69,420 111,043 106,083 --------------- --------------- --------------- TOTAL INTEREST INCOME 18,502,749 17,524,604 15,178,582 --------------- --------------- --------------- INTEREST EXPENSE Interest-bearing demand and money market 808,402 896,078 836,894 Savings 1,230,686 1,291,489 1,229,532 Time deposits of $100,000 or more 1,426,049 1,397,538 1,047,000 Other time deposits 2,743,791 2,601,797 1,727,801 Short-term borrowings 297,832 65,664 117,777 --------------- --------------- --------------- TOTAL INTEREST EXPENSE 6,506,760 6,252,566 4,959,004 --------------- --------------- --------------- NET INTEREST INCOME 11,995,989 11,272,038 10,219,578 PROVISION FOR LOAN LOSSES (Note D) 240,000 135,000 120,000 --------------- --------------- --------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 11,755,989 11,137,038 10,099,578 --------------- --------------- --------------- OTHER INCOME Service charges on deposit accounts 1,336,306 1,093,453 982,374 Investment securities gains, net (Note C) 18,478 8,174 78,241 Merchant bank card processing income 519,203 461,742 292,935 Gains (losses) on other real estate owned, net -- (29,200) 117,552 Gain on exchange of bank premises -- 233,895 -- Gain on sale of SBA loans 17,314 97,258 30,794 Gain on sale of mortgage loans 173,468 -- -- Fees on mortgage loans sold at origination 359,562 364,040 41,470 Other income 169,681 135,073 99,235 --------------- --------------- --------------- TOTAL OTHER INCOME 2,594,012 2,364,435 1,642,601 --------------- --------------- ---------------
(Continued) The accompanying notes are an integral part of these consolidated financial statements. Page F-6 52 TIB FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME, (continued)
For the years ended December 31, ------------------------------------------------------- 1996 1995 1994 --------------- --------------- --------------- OTHER EXPENSE Salaries and employee benefits (Note I) 5,535,872 4,995,289 4,323,570 Net occupancy expense 1,691,870 1,593,709 1,258,292 Other real estate owned expenses, net -- 14,725 57,441 Other expense (Note M) 2,330,292 2,305,807 2,044,254 --------------- --------------- --------------- TOTAL OTHER EXPENSE 9,558,034 8,909,530 7,683,557 --------------- --------------- --------------- INCOME BEFORE INCOME TAX EXPENSE 4,791,967 4,591,943 4,058,622 INCOME TAX EXPENSE (Note H) 1,589,000 1,591,000 1,373,000 --------------- --------------- --------------- NET INCOME $ 3,202,967 $ 3,000,943 $ 2,685,622 =============== =============== =============== EARNINGS PER SHARE (Notes A and O) $ .72 $ .69 $ .65 =============== =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. Page F-7 53 TIB FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended December 31, 1996, 1995 and 1994 ------------------------------------------------------------------------- Market Common Retained Valuation Stock Surplus Earnings Reserve Total ---------- ------------ ------------ ------------ ------------- BALANCE AT DECEMBER 31, 1993 $ 853,510 $ 4,379,097 $ 11,604,151 $ -- $ 16,836,758 Effect of reorganization with TIB Bank of the Keys (785,229) 785,229 -- -- -- Net income -- -- 2,685,622 -- 2,685,622 Cash dividends declared, $.21 per share -- -- (873,114) -- (873,114) Stock dividends declared, $5.50 per share 1,016 334,198 (335,214) -- -- Exercise of stock options 640 210,240 -- -- 210,880 Market valuation adjustment -- -- -- (1,972,000) (1,972,000) ---------- ------------ ------------ ------------ ------------- BALANCE AT DECEMBER 31, 1994 69,937 5,708,764 13,081,445 (1,972,000) 16,888,146 Net income -- -- 3,000,943 -- 3,000,943 Cash dividends declared, $.25 per share -- -- (1,058,321) -- (1,058,321) Stock dividends declared, $7.63 per share 788 359,631 (360,419) -- -- Exercise of stock options 250 82,123 -- -- 82,373 Market valuation adjustment -- -- -- 2,150,005 2,150,005 ---------- ------------ ------------ ------------ ------------- BALANCE AT DECEMBER 31, 1995 70,975 6,150,518 14,663,648 178,005 21,063,146 Net income -- -- 3,202,967 -- 3,202,967 Two-for-one stock split 70,974 (70,974) -- -- -- Cash dividends declared, $.39 per share -- -- (1,659,382) -- (1,659,382) Exercise of stock options 2,130 348,812 -- -- 350,942 Market valuation adjustment -- -- -- (336,756) (336,756) ---------- ------------ ------------ ------------ ------------- BALANCE AT DECEMBER 31, 1996 144,079 6,428,356 16,207,233 (158,751) 22,620,917 Three-for-one stock split subsequent to December 31, 1996 (Note O) 288,157 (288,157) -- -- -- ---------- ------------ ------------ ------------ ------------- BALANCE AT DECEMBER 31, 1996, AFTER RETROACTIVE RESTATEMENT FOR STOCK SPLIT $ 432,236 $ 6,140,199 $ 16,207,233 $ (158,751) $ 22,620,917 ========== ============ ============ ============ =============
The accompanying notes are an integral part of these consolidated financial statements. Page F-8 54 TIB FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, ------------------------------------------------------- 1996 1995 1994 --------------- --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,202,967 $ 3,000,943 $ 2,685,622 Adjustments to reconcile net income to net cash provided by operating activities: Net amortization of investments 201,344 223,148 239,329 Amortization of intangible assets 59,967 27,142 5,703 Depreciation of premises and equipment 761,001 640,877 426,147 Provision for loan losses 240,000 135,000 120,000 Deferred income tax provision (benefit) (87,000) 52,000 31,500 Deferred net loan fees (84,807) (65,443) (42,809) Investment securities (gains), net (18,478) (8,174) (78,241) Net loss (gains) on sales of other real estate owned, net -- 29,200 (117,552) Gain on exchange of building premises -- (233,895) -- Gain on sales of premises and equipment (1,166) (4,320) (2,110) Gains on sales of SBA loans (17,314) (97,258) (30,794) Gains on sales of mortgage loans (173,648) -- -- (Increase) decrease in interest receivable 28,314 (183,611) (98,359) Increase in interest payable 310,938 636,096 212,380 (Increase) in intangible assets (141,276) -- -- (Increase) in other assets (944,246) (1,243,866) (356,435) Increase (decrease) in other liabilities (143,172) 14,692 99,545 --------------- --------------- --------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,193,424 2,922,531 3,093,926 --------------- --------------- ---------------
(Continued) The accompanying notes are an integral part of these consolidated financial statements. Page F-9 55 TIB FINANCIAL CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS, (continued)
For the years ended December 31, -------------------------------------------- 1996 1995 1994 -------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities held to maturity $ (5,951,250) $ -- $ (5,774,119) Purchases of investment securities available for sale -- -- (17,117,969) Sales of investment securities available for sale 8,013,906 -- 10,077,188 Repayments of principal and maturities of investment securities available for sale 5,591,954 5,433,994 7,815,907 Maturities of investment securities held to maturity 1,706,000 2,184,500 970,000 Proceeds from sales of SBA loans 1,075,630 2,010,750 1,150,310 Proceeds from sales of mortgage loans 11,564,515 -- -- Loans originated or acquired, net of principal repayments (38,550,111) (16,776,495) (14,710,631) Proceeds from sales of other real estate owned, net -- 357,011 941,741 Purchases of premises and equipment (415,670) (2,731,781) (999,212) Sales of premises and equipment 4,430 18,052 18,632 NET CASH USED BY INVESTING ACTIVITIES --------------- --------------- --------------- 16,960,596 (9,503,969) (17,628,153) --------------- --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase 6,907,375 3,051,088 (1,755,496) Net increase (decrease) in demand, money market and savings accounts 6,524,755 (1,414,558) (2,250,183) Time deposits accepted, net of repayments 6,001,236 4,387,694 12,987,452 Proceeds from exercise of stock options and warrants 350,942 82,373 210,880 Cash dividends paid (1,227,146) (1,055,493) (1,140,297) NET CASH PROVIDED BY FINANCING ACTIVITIES --------------- --------------- --------------- 18,557,162 5,051,104 8,052,356 --------------- --------------- --------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,789,990 (1,530,334) (6,481,871) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,129,945 10,660,279 17,142,150 --------------- --------------- --------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 13,919,935 $ 9,129,945 $ 10,660,279 =============== =============== =============== SUPPLEMENTAL DISCLOSURES OF CASH PAID: Interest $ 6,159,810 $ 5,616,470 $ 4,746,624 =============== =============== =============== Income taxes $ 1,656,000 $ 1,510,000 $ 1,215,000 =============== =============== ===============
Page F-10 56 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES TIB Financial Corp. and subsidiary provide full-service commercial banking services in Monroe County, Florida. The accounting and reporting policies of TIB Financial Corp. and subsidiary conform to generally accepted accounting principles and to general practices within the banking industry. The following is a summary of the more significant of these policies. The financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the market valuation reserve on investment securities available for sale and the allowance for loan losses. Management believes that the allowance for loan losses is adequate and the decline in market value of investment securities available for sale is temporary. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses. Such agencies may require additions to the allowance for loan losses based on their judgments about information available to them at the time of their examination. CORPORATE REORGANIZATION During 1996, TIB Financial Corp. ("Company") was formed providing for a reorganization whereby TIB Bank of the Keys ("Bank") became a wholly-owned subsidiary of TIB Financial Corp. The transaction was approved unanimously by the Bank's shareholders and accounted for on a historical cost basis similar to a pooling of interests and, accordingly, the accompanying consolidated financial statements are prepared as if the reorganization occurred January 1, 1994. BASIS OF PRESENTATION The consolidated financial statements include the accounts of TIB Financial Corp. (Parent Company) and its wholly-owned subsidiary, TIB Bank of the Keys (Bank), collectively known as the Company. All significant intercompany accounts and transactions have been eliminated in consolidation. INVESTMENT SECURITIES Investment securities which management has the ability and intent to hold to maturity are reported at cost, adjusted for amortization of premium and accretion of discount. Investment securities available for sale are reported at fair value, with unrealized gains and losses reported as a separate component of stockholders' equity, net of the related tax effect. Other investments are reported at cost and, accordingly, earnings are reported when interest is accrued or when dividends are received. Page F-11 57 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued) Premium and discount on all investment securities are amortized (deducted) and accreted (added), respectively, to interest income on the effective-yield method over the period to the maturity of the related securities. Premium and discount on mortgage-backed securities are amortized (deducted) and accreted (added), respectively, to interest income on the effective interest method over the period to maturity of the related securities taking into consideration assumed prepayment patterns. Gains or losses on disposition are computed by the specific identification method for all securities. LOANS Loans are reported at the gross amount outstanding, reduced by net deferred loan fees and a valuation allowance for loan losses. Interest income on loans is recognized over the terms of the loans based on the unpaid daily principal amount outstanding. If the collectibility of interest appears doubtful, the accrual thereof is discontinued. Loan origination fees, net of direct loan origination costs, are deferred and recognized as income over the life of the related loan on a level-yield basis. Gains on sales of SBA loans are recognized as income when the sale occurs. The Bank adopted the provisions of Statement of Financial Accounting Standards No. 114 (SFAS 114), "Accounting by Creditors for Impairment of a Loan," as amended by Statement of Financial Accounting Standards No. 118 (SFAS 118), "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosure," on January 1, 1995. As provided under SFAS 114, as amended by SFAS 118, the Company does not apply the provisions of SFAS 114 to large groups of homogeneous loans, such as consumer and residential real estate mortage loans, which are collectively evaluated for impairment based on factors such as delinquencies, nonaccruals, charge-off histories and economic conditions for these groups of loans. The provisions of SFAS 114, as amended by SFAS 118, are applied to commercial loans and commercial real estate loans. Management, considering current information and events regarding the borrowers' ability to repay their obligations, considers a loan to be impaired when it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan. A loan is not classified as impaired during a period of delay in payment if the ultimate collectibility of all amounts due is expected. When a loan is considered to be impaired, the amount of the impairment is measured based on the present value of expected future cash flows discounted at the note's effective interest rate, at the loan's observable market price, or the fair value of the collateral if the loan is collateral dependent. Impairment losses are included in the allowance for loan losses through a charge to the provision and impaired loans are charged off at foreclosure, reposession, or when the loans are classified as doubtful or loss. Cash receipts on impaired loans are applied to reduce the principal amount of such loans until the principal has been recovered and are recognized as interest income, thereafter. Prior periods were not restated. There was no significant impact on the financial condition or results of operations of the Company upon adoption. Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 122 (SFAS 122), "Accounting for Mortgage Servicing Rights," an amendment of Statement of Financial Accounting Standards No. 65, "Accounting for Certain Mortgage Banking Activities." The provisions of SFAS 122 denote the accounting distinction between rights to service mortgage loans that are acquired through loan origination and those acquired through purchase. The adoption of SFAS 122 did not have a significant impact on the financial condition or results of operations of the Company. Fixed rate mortgage loans are originated by the Bank and sold to a third party immediately without recourse. All fees are recognized as income at the time of the sale. Page F-12 58 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued) ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is established through a provision for loan losses charged to expense. The allowance represents an amount which, in management's judgment, will be adequate to absorb probable losses on impaired loans and on other existing loans that may become uncollectible. Management's judgment in determining the adequacy of the allowance is based on evaluations of the collectibility of loans and takes into consideration such factors as changes in the nature and volume of the loan portfolio, current economic conditions that may affect the borrower's ability to pay, overall portfolio quality and review of specific problem loans. Periodic revisions are made to the allowance when circumstances which necessitate such revisions become known. Recognized losses on loans are charged to the allowance for loan losses, while subsequent recoveries are added to the allowance. PREMISES AND EQUIPMENT Premises and equipment are reported at cost less accumulated depreciation. For financial reporting purposes, depreciation is computed using primarily the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to operations as incurred, while major renewals and betterments are capitalized. When property is disposed of, any gain or loss is reflected in income. For Federal tax reporting purposes, depreciation is computed using primarily accelerated methods. OTHER REAL ESTATE Other real estate represents property acquired through in-substance foreclosure, foreclosure, or in settlement of loans and is reported at the lower of cost or fair value less estimated selling expenses. Losses incurred in the acquisition of foreclosed properties are charged against the allowance for loan losses at the time of foreclosure. Subsequent write-downs of other real estate are charged against the current period's operations. MERCHANT BANK CARD PROCESSING INCOME The Bank participates in merchant credit card processing for a number of businesses in the local area. The Bank receives a percentage of each transaction which it processes. INTANGIBLE ASSETS Intangible assets include amounts for excess servicing fees on SBA loans and organizational expenses. Excess servicing rights are being amortized over the expected life of the related loan. Holding company organizational expenses are being amortized over five years using the straight-line method. INCOME TAXES The tax effect of transactions is recorded at current tax rates in the periods the transactions are reported for financial statement purposes. Deferred income taxes are established for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The Company will file its 1996 income tax returns on a consolidated basis. Page F-13 59 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued) COMMON STOCK SPLITS On March 26, 1996, the Board of Directors declared a two-for-one common stock split distributable on May 14, 1996, to shareholders of record at the close of business on May 2, 1996, resulting in 709,740 additional shares of common stock being issued. On February 25, 1997, the Board of Directors declared a three-for-one common split distributable on March 18, 1997, to shareholders of record on February 25, 1997. In the consolidated financial statements, all per share amounts, number of shares outstanding and market prices have been restated to reflect these stock splits. An amount equal to the $.10 par value of the additional shares outstanding after the stock splits has been transferred from surplus to common stock. EARNINGS PER SHARE Earnings per share has been computed based on the weighted average number of common shares outstanding during the period, which totaled 4,424,676, 4,352,838 and 4,160,994 shares in 1996, 1995 and 1994, respectively. Stock options and warrants, as described in Note K, are considered to be common stock equivalents for purposes of calculating earnings per share. The common stock splits have been treated retroactively as occurring on January 1, 1994, for earnings per share computation purposes. STOCK-BASED COMPENSATION The Company accounts for stock options under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). Under APB 25, because the exercise price of the Company's stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Effective January 1, 1996, the Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." As provided by SFAS 123, the Company has elected to continue applying the provisions of APB 25 in determining its net income relative to stock-based compensation. The Company has adopted the SFAS 123 requirement that a company disclose the pro forma net income and pro forma earnings per share for the years ending December 31, 1996 and 1995, as if the alternative fair-value-based accounting method in SFAS 123 had been used in determining net income. The adoption of SFAS 123 did not have a significant impact on the financial condition or results of operations of the Company. FINANCIAL INSTRUMENTS In the ordinary course of business, the Bank has entered into off-balance-sheet financial instruments consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received. Page F-14 60 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued) FAIR VALUES OF FINANCIAL INSTRUMENTS The Company uses the following methods and assumptions in estimating fair values of financial instruments (see Note N): Cash and cash equivalents-The carrying amount of cash and cash equivalents approximates fair value. Investment securities-The fair value of investment securities held to maturity and available for sale is estimated based on bid quotations received from independent pricing services. The carrying amount of other investments approximates fair value. Loans-For variable rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. For all other loans, fair values are calculated by discounting the contractual cash flows using estimated market discount rates which reflect the credit and interest rate risk inherent in the loan, or by using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Deposits-The fair value of deposits with no stated maturity, such as demand, NOW and money market, and savings accounts, is equal to the amount payable on demand at year-end. The fair value of certificates of deposit is based on the discounted value of contractual cash flows using the rates currently offered for deposits of similar remaining maturities. Short-term borrowings-The carrying amount of federal funds purchased and other short-term borrowings maturing within 30 days approximates fair value. Accrued interest-The carrying amount of accrued interest receivable and payable approximates fair value. Off-balance-sheet instruments-Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the borrower's credit standing. CASH AND CASH EQUIVALENTS For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. LONG-LIVED ASSETS Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The provisions of SFAS 121 require the Company to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The adoption of SFAS 121 did not have a significant impact on the financial condition or results of operations of the Company. Page F-15 61 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued) RECLASSIFICATIONS Certain reclassifications have been made in the 1995 and 1994 financial statements to conform with the 1996 presentation. PENDING ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 125 (SFAS 125), "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS 125 is effective for such transactions entered into subsequent to December 31, 1996, and for certain excess servicing rights recorded at December 31, 1996. Under SFAS 125, a company recognizes the financial and servicing assets it controls and the liabilities it has incurred and derecognizes financial assets when control has been surrendered and liabilities when extinguished. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 127 (SFAS 127), "Deferral of the Effective Date of FASB Statement No. 125," which delays the effective date of certain provisions of SFAS 125 until 1998. The adoption of SFAS 125 and SFAS 127 is not expected to have a significant impact on the financial condition or results of operations of the Company. NOTE B-CASH AND DUE FROM BANKS A bank is required to maintain average reserve balances with the Federal Reserve Bank, on deposit with national banks or in cash. The Bank's average reserve requirement as of December 31, 1996 was approximately $2,348,000. The Bank maintained cash balances which were adequate to meet this requirement. NOTE C-INVESTMENT SECURITIES The amortized cost and estimated market value of investment securities held to maturity are as follows at December 31:
1996 --------------------------------------------------------------------- Amortized Unrealized Unrealized Market Cost Gains Losses Value -------------- ----------- ----------- -------------- U.S. Treasury securities $ 7,964,622 $ 1,017 $ 6,579 $ 7,959,060 States and political subdivisions 5,354,837 303,029 776 5,657,090 U.S. Government agencies and corporations 992,817 7,963 -- 1,000,780 Other investments 75,000 -- -- 75,000 -------------- ----------- ----------- -------------- $ 14,387,276 $ 312,009 $ 7,355 $ 14,691,930 ============== =========== =========== ==============
Page F-16 62 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE C-INVESTMENT SECURITIES, (Continued)
1995 --------------------------------------------------------------------- Amortized Unrealized Unrealized Market Cost Gains Losses Value -------------- ----------- ----------- -------------- U.S. Treasury securities $ 2,008,965 $ 11,655 $ -- $ 2,020,620 States and political subdivisions 6,049,446 453,250 -- 6,502,696 U.S. Government agencies and corporations 1,982,498 37,812 -- 2,020,310 Other investments 75,000 -- -- 75,000 -------------- ----------- ----------- -------------- $ 10,115,909 $ 502,717 $ -- $ 10,618,626 ============== =========== =========== ==============
The amortized cost and estimated market value of investment securities available for sale are as follows at December 31:
1996 --------------------------------------------------------------------- Amortized Unrealized Unrealized Market Cost Gains Losses Value -------------- ----------- ----------- -------------- U.S. Treasury securities $ 21,219,561 $ 22,458 $ 129,679 $ 21,112,340 Mortgage-backed securities 15,075,896 25,846 207,688 14,894,054 Other debt securities 449,433 34,654 -- 484,087 -------------- ----------- ----------- -------------- $ 36,744,890 $ 82,958 $ 337,367 $ 36,490,481 ============== =========== =========== ==============
1995 --------------------------------------------------------------------- Amortized Unrealized Unrealized Market Cost Gains Losses Value -------------- ----------- ----------- -------------- U.S. Treasury securities $ 31,421,475 $ 218,235 $ 30,000 $ 31,609,710 Mortgage-backed securities 18,689,057 93,348 51,000 18,731,405 Other debt securities 449,201 54,663 -- 503,864 -------------- ----------- ----------- -------------- $ 50,559,733 $ 366,246 $ 81,000 $ 50,844,979 ============== =========== =========== ==============
Other investments at December 31, 1996 and 1995, consists of stock in the Independent Bankers Bank of Florida. Other debt securities at December 31, 1996 and 1995 consists of corporate debt securities. The net unrealized (loss) and gain on available for sale securities at December 31, 1996 and 1995, net of the related deferred taxes of $(95,658) and $107,241, is $(158,751) and $178,005, respectively, and is included as a separate component of stockholders' equity. Page F-17 63 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE C INVESTMENT SECURITIES, (Continued) The amortized cost and estimated market value of investment securities held to maturity and available for sale at December 31, 1996, by contractual maturity, are shown below. Expected maturities differ from contractual maturities because borrowers may have the right to call or repay obligations without call or prepayment penalties.
Investment Securities Investment Securities Held to Maturity Available for Sale -------------------------------- -------------------------------- Amortized Market Amortized Market Cost Value Cost Value -------------- -------------- -------------- -------------- Due in one year or less $ 2,573,805 $ 2,585,256 $ 7,038,028 $ 7,057,660 Due after one year through five years 9,217,008 9,399,313 14,630,966 14,538,767 Due after five years through ten years 1,445,841 1,497,939 -- -- Due after ten years 1,150,622 1,209,422 -- -- Mortgage-backed securities -- -- 15,075,896 14,894,054 -------------- -------------- -------------- -------------- $ 14,387,276 $ 14,691,930 $ 36,744,890 $ 36,490,481 ============== ============== ============== ==============
Proceeds from sales of investment securities available for sale during 1996 were $8,013,906 with gross gains of $3,706 and no gross losses. There were no sales of investment securities in 1995. Proceeds from sales of investment securities available for sale during 1994 were $10,077,188, with gross gains of $128,326 and gross losses of $50,085 realized on those sales. Maturities and principal repayments of investment securities available for sale during 1996, 1995 and 1994 were $5,591,954, $5,433,994 and $7,815,907, respectively, with gross gains of $14,772, $8,174 and $0 and no gross losses realized on those transactions. Investment securities having carrying values of approximately $21,652,000 and $18,318,000 at December 31, 1996 and 1995, respectively, were pledged to secure public funds on deposit, securities sold under agreements to repurchase, and other purposes as required by law. At December 31, 1996, the Bank has no outstanding off-balance-sheet derivative financial instruments such as swaps, options, futures or forward contracts. Page F-18 64 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE D-LOANS Major classifications of loans are as follows at December 31:
1996 1995 --------------- --------------- Commercial, financial and agricultural $ 6,423,961 $ 7,939,397 Real estate-commercial 102,854,287 85,353,686 Real estate-construction 7,391,050 5,441,850 Real estate-individual 40,834,718 35,946,521 Installment and simple interest individual 7,553,799 4,250,134 Other 93,322 129,725 --------------- --------------- Total loans 165,151,137 139,061,313 Net deferred loan fees 606,515 691,322 --------------- --------------- Loans, net of deferred loan fees $ 164,544,622 $ 138,369,991 =============== ===============
Substantially all loans are made to borrowers in the Bank's primary market area of Monroe County in which the primary industry is tourism. Therefore, a substantial portion of the Bank's loan customers and outstanding loans are related to the tourism industry. At December 31, 1996 and 1995, the Bank had approximately $151,080,000 and $126,742,000, respectively, of its portfolio secured by real estate. Nonaccrual and restructured loans totaled $430,000 and $82,000 at December 31, 1996 and 1995, respectively. If such loans had been on a full-accrual basis, interest income would have been approximately $16,000 and $3,000 higher in 1996 and 1995, respectively. Interest income recognized on these loans totaled approximately $27,000 and $5,000, respectively. At December 31, 1996 and 1995, the Bank has no loans which are impaired under SFAS 114. The following is a summary of transactions in the allowance for loan losses for the years ended December 31:
1996 1995 1994 ------------- ------------- ------------- Balance, beginning of year $ 1,700,823 $ 1,566,626 $ 1,448,795 Provision charged to expense 240,000 135,000 120,000 Loans charged off (11,734) (803) (3,169) Recoveries of loans previously charged off 630 -- 1,000 ------------- ------------- ------------- Balance, end of year $ 1,929,719 $ 1,700,823 $ 1,566,626 ============= ============= =============
Page F-19 65 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE E-PREMISES AND EQUIPMENT Premises and equipment are comprised of the following at December 31:
1996 1995 -------------- -------------- Land $ 2,579,977 $ 2,386,487 Buildings 5,472,086 5,429,766 Furniture, fixtures and equipment 4,505,827 4,181,842 Other 7,000 201,790 -------------- -------------- 12,564,890 12,199,885 Less: Accumulated depreciation (4,343,214) (3,629,614) -------------- -------------- Premises and equipment, net $ 8,221,676 $ 8,570,271 ============== ==============
The charge to operating expense for depreciation totaled $761,001, $640,877 and $426,147 in 1996, 1995 and 1994, respectively. The Bank is obligated under operating leases for office space. The leases expire in periods varying from one to two years, and some have renewal options for subsequent periods. Future minimum lease payments are as follows at December 31, 1996: Years ending December 31, 1997 $ 51,128 1998 36,916 1999 39,667 2000 42,428 2001 47,196 -------------- $ 217,335 ==============
Rental expense for the years ended December 31, 1996, 1995, and 1994 was approximately $40,000, $67,000 and $47,000, respectively. During 1995, the Bank entered into a contract with a related party to exchange existing Bank premises for an office building. Included in earnings for the year ended December 31, 1995, is a gain of $233,895 related to this exchange. Page F-20 66 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE F-TIME DEPOSITS At December 31, 1996, the scheduled maturities of time deposits are as follows: Years ended December 31: 1997 $ 61,551,539 1998 9,774,778 1999 4,025,526 2000 and thereafter 4,140,962 -------------- $ 79,492,805 ==============
NOTE G-SHORT-TERM BORROWINGS Short-term borrowings include federal funds purchased, wholesale and retail securities sold under agreements to repurchase, and a Treasury, Tax and Loan note option. The Bank utilizes these short-term borrowings, which generally represent overnight borrowing transactions, for liquidity purposes. The Bank has unsecured lines of credit for federal funds purchased from other banks totaling $5,000,000 at December 31, 1996. Securities sold under agreements to repurchase (wholesale) represent a wholesale agreement with a correspondent bank which is collateralized by a U.S. Treasury note. The Bank also has several securities sold under repurchase agreements (retail) with commercial account holders whereby the Bank sweeps to the customer's accounts on a daily basis and pays interest on the same. These agreements are collateralized by investment securities chosen by the Bank. (See Note C.) The Bank accepts Treasury, Tax and Loan deposits from certain commercial depositors and remits these deposits to the appropriate government authorities. The Bank can hold up to $1,700,000 of these deposits more than a day under a note option agreement with its regional federal reserve bank and pay interest on those funds held. The Bank pledges certain investment securities against this account. (See Note C.) Page F-21 67 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE G-SHORT-TERM BORROWINGS, (Continued) The following table reflects the average daily outstanding, year-end outstanding, maximum month-end outstanding and weighted average rate paid for the year ended for each of the four categories of short-term borrowings as of and for the years ended December 31:
1996 1995 ------------- ------------- FEDERAL FUNDS PURCHASED: Balance: Average daily outstanding $ 840,748 $ 198,679 Year-end outstanding -- -- Maximum month-end outstanding 5,000,000 977,000 Rate: Weighted average 5.8% 5.9% SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (WHOLESALE): Balance: Average daily outstanding $ 3,362,637 $ 131,507 Year-end outstanding 9,000,000 3,000,000 Maximum month-end outstanding 9,000,000 3,000,000 Rate: Weighted average 5.7% 5.9% SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (RETAIL): Balance: Average daily outstanding $ 790,296 $ 587,317 Year-end outstanding 908,206 521,806 Maximum month-end outstanding 1,238,650 885,210 Rate: Weighted average 3.1% 1.7% TREASURY, TAX AND LOAN NOTE OPTION: Balance: Average daily outstanding $ 690,509 $ 770,770 Year-end outstanding 1,183,220 662,245 Maximum month-end outstanding 1,546,956 2,427,726 Rate: Weighted average 4.5% 4.7%
Page F-22 68 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE H-INCOME TAXES The following are the components of income tax expense as provided for the years ended December 31:
1996 1995 1994 ------------- ------------- ------------- Current income tax provision Federal $ 1,440,000 $ 1,294,000 $ 1,121,000 State 236,000 245,000 220,500 ------------- ------------- ------------- 1,676,000 1,539,000 1,341,500 Deferred income tax provision (benefit) (87,000) 52,000 31,500 ------------- ------------- ------------- $ 1,589,000 $ 1,591,000 $ 1,373,000 ============= ============= =============
A reconciliation of income tax computed at the Federal statutory income tax rate to total income taxes is as follows for the years ended December 31:
1996 1995 1994 ------------- ------------- ------------- Pretax income $ 4,791,967 $ 4,591,943 $ 4,058,622 ============= ============= ============= Income taxes computed at Federal statutory tax rate $ 1,629,300 $ 1,561,000 $ 1,380,000 Increase (decrease) resulting from: Tax-exempt interest income (120,250) (130,000) (160,000) Exercise of stock options (65,900) -- -- State income taxes 155,800 161,700 145,500 Other, net (9,950) (1,700) 7,500 ------------- ------------- ------------- $ 1,589,000 $ 1,591,000 $ 1,373,000 ============= ============= =============
The following summarizes the tax effects of temporary differences which comprise the net deferred tax assets (liabilities) at December 31:
1996 1995 ------------- ------------- Reserve for loan losses $ 581,321 $ 495,200 Unrealized losses on securities available for sale 95,658 -- Accrual for severance -- 39,800 ------------- ------------- Total gross deferred tax assets 676,979 535,000 ------------- ------------- Accumulated depreciation (276,429) (252,165) Deferred loan fees (42,092) (104,835) Gain on building swap (85,800) (88,000) Unrealized gains on securities available for sale -- (107,000) ------------- ------------- Total gross deferred tax liabilities (404,321) (552,000) ------------- ------------- $ 272,658 $ (17,000) ============= =============
Page F-23 69 TIB FINANCIAL CORP AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE I-EMPLOYEE BENEFIT PLAN Effective January 1, 1994, the Bank established an Employee Stock Ownership Plan containing Internal Revenue Code Section 401(k) Provisions. The plan is a complete amendment, restatement, and consolidation of the TIB Bank of the Keys 401(k) Plan, originally effective January 1, 1990, and the Employee Profit Sharing Trust, originally effective January 1, 1978. Three types of contributions can be made to the Plan by the Bank and participants: basic voluntary contributions which are discretionary contributions made by all participants; a matching contribution, whereby the Bank will match 25 percent of salary reduction contributions up to 4 percent of compensation, not to exceed a maximum contribution of $1,000 per employee; and an additional discretionary contribution made by the Bank allocated to the accounts of participants on the basis of total relative compensation. The Bank contributed to the plan $168,000 in 1996, $156,000 in 1995, and $144,000 in 1994. NOTE J-RELATED PARTY TRANSACTIONS As of December 31, 1996 and 1995, the Bank had direct and indirect loans outstanding to certain of its officers, directors and their related business interests which aggregated $8,579,820 and $7,461,155, respectively. During 1996, $6,115,462 of such loans were made and repayments totaled $4,996,797. These loans were made in the ordinary course of business in conformity with normal credit terms, including interest rates and collateral requirements prevailing at the time for comparable transactions with other borrowers. These individuals and their related interests also maintain customary demand and time deposit accounts with the Bank. NOTE K-STOCKHOLDERS' EQUITY The Bank is subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. The regulations require the Bank to meet specific capital adequacy guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital classification is also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy requires the Bank to maintain minimum amounts and ratios (set forth in the table below) of Tier 1 capital (as defined in the regulations) to total average assets (as defined), and minimum ratios of Tier 1 and total capital (as defined) to risk weighted assets (as defined). As of December 31, 1996, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes has changed the Bank's category. To be considered well capitalized and adequately capitalized (as defined) under the regulatory framework for prompt corrective action, the Bank must maintain minimum Tier 1 leverage, Tier 1 risk-based, and total risk-based ratios as set forth in the table. The Bank's actual capital amounts and ratios are also presented in the table. Page F-24 70 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE K-STOCKHOLDERS' EQUITY, (Continued)
1996 ---------------------------------------------------------------------------- Adequately Well Capitalized Capitalized Requirement Requirement Actual Amount (Ratio) Amount (Ratio) Amount (Ratio) ----------------------- ----------------------- ----------------------- Tier 1 Capital (to Average Assets) $>11,603,374 > 5.0% $ 6,962,024 3.0% $ 22,419,000 9.7% - - Tier 1 Capital (to Risk Weighted $> 9,945,000 > 6.0% $ 6,630,000 4.0% $ 22,419,000 13.5% Assets) - - Total Capital (to Risk Weighted Assets) $>16,576,000 > 10.0% $ 13,261,000 8.0% $ 24,349,000 14.7% - -
1995 ---------------------------------------------------------------------------- Adequately Well Capitalized Capitalized Requirement Requirement Actual Amount (Ratio) Amount (Ratio) Amount (Ratio) ----------------------- ----------------------- ----------------------- Tier 1 Capital (to Average Assets) $>10,736,000 > 5.0% $ 6,442,000 3.0% $ 20,635,000 9.6% - - Tier 1 Capital (to Risk Weighted Assets) $> 8,527,000 > 6.0% $ 5,685,000 4.0% $ 20,635,000 14.5% - - Total Capital (to Risk Weighted Assets) $>14,212,000 > 10.0% $ 11,370,000 8.0% $ 22,335,000 15.7% - -
Management believes, as of December 31, 1996, that the Bank meets all capital requirements to which it is subject. Under state banking law, regulatory approval will be required if the total of all dividends declared in any calendar year by the Bank exceeds the Bank's net profits to date for that year combined with its retained net profits for the preceding two years. Retained earnings of the Bank available for payment of dividends without prior regulatory approval for the year ended December 31, 1996 is approximately $6,985,000. STOCK OPTION PLAN Under the Bank's 1994 Incentive Stock Option and Nonstatutory Stock Option Plan ("the Plan"), the Company may grant stock options to persons who are now or who during the term of the Plan become directors, officers, or key executives as defined by the Plan. Stock options granted under the Plan may either be incentive stock options or nonqualified stock options for federal income tax purposes. The Board of Directors of the Company may grant nonqualified stock options to any director, and incentive stock options or nonqualified stock options to any officer, key executive, administrative, or other employee including an employee who is a director of the Company. Subject to the provisions of the Plan, the maximum number of shares of common stock of the Company that may be optioned or sold is 978,000 shares. Such shares may be treasury, or authorized, but unissued, shares of common stock of the Company. Page F-25 71 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE K-STOCKHOLDERS' EQUITY, (Continued) The exercise price for common stock under each nonqualified stock option must equal 100 percent of the fair market value of the stock at the time the option is granted, or, if greater, the par value of the stock on the date of the grant. The exercise price for stock under each incentive stock option shall not be less than the greater of 100 percent of the fair market value of the stock at the time the option is granted or the par value of the stock on the date of the grant. The exercise price under an incentive stock option granted to a person owning stock representing more than 10 percent of the common stock must equal at least 110 percent of the fair market value at the date of the grant and such option is not exercisable after five years from the date the incentive stock option was granted. The Board of Directors may, at its discretion, provide that an option not be exercised in whole or in part for any period or periods of time as specified in the option agreements. No option may be exercised after the expiration of ten years from the date it is granted. The Company applies APB 25 and related Interpretations in accounting for its stock-based compensation plan. Accordingly, no compensation cost has been recognized. Had compensation cost for the Company's stock-based compensation plan been determined based on the fair value at the grant dates for awards under the plan consistent with the method of SFAS 123, the Company's net income and earnings per share would have been the pro forma amounts indicated below:
For the years ended December 31, ------------------------------- 1996 1995 ------------- ------------ Net income As reported $ 3,202,967 $ 3,000,943 Pro forma 3,194,108 2,986,604 Primary earnings per share As reported $ .72 $ .69 Pro forma .72 .69
The fair value of each option is estimated as of the date of grant using the Black-Scholes Option Pricing Model and the following weighted average assumptions for options granted in 1996 and 1995:
1996 1995 ----------- ------------ Dividend yield 4.8% 4.1% Risk-free interest rate 6.4% to 6.7% 6.7% to 7.9% Expected lives 9 years 5 to 9 years Volatility 0 0
Page F-26 72 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE K-STOCKHOLDERS' EQUITY, (Continued) A summary of the status of the Company's fixed stock option plan as of and for the three years ended December 31, 1996, and changes during that period after the effect of the three-for-one stock split in 1997 is presented below:
Exercise Price Weighted Average Shares Range Exercise Price ----------- -------------- ----------------- Balance at December 31, 1993 -- $ -- $-- Granted 714,000 5.49 5.49 Exercised (38,400) 5.49 5.49 ---------- -------------- ------ Balance at December 31, 1994 675,600 5.49 5.49 Granted 84,000 5.50-6.23 5.76 Exercised (15,000) 5.49 5.49 Expired (132,000) 5.49 5.49 ---------- -------------- ------ Balance at December 31, 1995 612,600 5.49-6.23 5.53 Granted 120,000 8.33-9.00 8.45 Exercised (64,500) 5.49-5.50 5.49 Expired (61,800) 5.49-5.50 5.49 ---------- -------------- ------ Balance at December 31, 1996 606,300 $ 5.49-9.00 $6.11 ========== ============== ====== Options exercisable at December 31, 1996 229,800 ========== Options exercisable at December 31, 1995 250,500 ========== Weighted average fair value of options granted during 1996 $ .74 ========== Weighted average fair value of options granted during 1995 $ .76 ==========
Page F-27 73 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE K-STOCKHOLDERS' EQUITY, (Continued) The following table summarizes information about fixed stock options outstanding at December 31, 1996, after the effect of the three-for-one stock split in 1997:
Options Outstanding Options Exercisable -------------------------------------------------------------------------- --------------------------------- Weighted Average Weighted Weighted Range of Number Remaining Average Number Average Exercise Outstanding at Contractual Exercise Exercisable at Exercise Price December 31, 1996 Life Price December 31,1996 Price -------------- ----------------- ----------- ---------- ----------------- --------- $ 5.49-5.50 456,300 7.9 $ 5.49 199,800 $ 5.49 6.23 30,000 8.4 6.23 30,000 6.23 8.33-9.00 120,000 9.3 8.45 -- -- ------- ----- ------- ------- --------- 606,300 8.2 $ 6.11 229,800 $ 5.59 ======= ===== ======= ======= =========
NOTE L-COMMITMENTS AND CONTINGENCIES The Bank is party to 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 and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of these instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The Bank's exposure to credit loss in the event of nonperformance by the customer on the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. Commitments to extend 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 the payment of a fee. At December 31, 1996 and 1995, total commitments to extend credit were approximately $23,568,000 and $22,941,000, respectively, in unfunded loan commitments. The Bank's experience has been that approximately 60 percent of loan commitments are drawn upon by customers. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Since most of the letters of credit are expected to expire without being drawn upon, they do not necessarily represent future cash requirements. At December 31, 1996 and 1995, commitments under standby letters of credit aggregated approximately $391,000 and $258,000, respectively. In 1996 and 1995, the Bank was not required to perform on a standby letter of credit. Page F-28 74 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE L-COMMITMENTS AND CONTINGENCIES, (Continued) The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the borrower. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, residential real estate and income-producing commercial properties on those commitments for which collateral is deemed necessary. The Company has employment agreements with three of its executive officers. Such agreements provide for minimum salary levels, adjustable solely at the discretion of the Board of Directors. These agreements contain certain provisions that, in the event a change in ownership control occurs, the term of the employment agreements becomes 24 months. If such a change in ownership control had occurred as of December 31, 1996, the commitment for future salary payments on these contracts would have been $690,000. NOTE M-SUPPLEMENTAL FINANCIAL DATA Components of other expense in excess of 1 percent of total interest and other income are as follows for the years ended December 31:
1996 1995 1994 ----------- ----------- ----------- Operating supplies $ 290,327 $ 238,566 $ 202,897 Computer services 572,239 402,520 238,991 FDIC assessment 48,353 258,646 444,176 Legal and professional fees 397,565 320,248 257,001
Page F-29 75 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 NOTE N-FAIR VALUES OF FINANCIAL INSTRUMENTS The estimated fair values of the Company's financial instruments are as follows at December 31:
1996 1995 --------------------------------- ---------------------------------- Carrying Estimated Carrying Estimated Value Fair Value Value Fair Value --------------- --------------- --------------- --------------- Financial assets: Cash and cash equivalents $ 13,920,000 $ 13,920,000 $ 9,130,000 $ 9,130,000 Investment securities held to maturity 14,387,000 14,692,000 10,116,000 10,619,000 Investment securities available for sale 36,490,000 36,490,000 50,845,000 50,845,000 Loans 162,614,000 160,651,000 134,682,000 133,909,000 Accrued interest receivable 1,681,000 1,681,000 1,709,000 1,709,000 Financial liabilities: Noncontractual deposits $ 125,491,000 $ 125,491,000 $ 118,966,000 $ 118,966,000 Contractual deposits 79,493,000 79,955,000 73,492,000 74,125,000 Short-term borrowings 11,091,000 11,091,000 4,184,000 4,184,000 Accrued interest payable 1,743,000 1,743,000 1,433,000 1,433,000 Off-balance-sheet instruments: Undisbursed credit lines $ 23,568,000 $ 22,941,000 Standby letters of credit 391,000 258,000
NOTE O-SUBSEQUENT EVENT On February 25, 1997, the Board of Directors of the Company declared a three-for-one stock split distributable on March 18, 1997, to shareholders of record February 25, 1997. This will result in 2,889,576 additional shares being issued. All references in the consolidated financial statements to number of shares, per share amounts, and market prices of the Company's common stock have been retroactively restated to reflect the increased number of shares outstanding as if the three-for-one stock split occurred January 1, 1994. Page F-30 76 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - -------------------------------------------------------------------------------- ================================================================================ NOTE P-CONDENSED FINANCIAL INFORMATION OF TIB FINANCIAL CORP. CONDENSED BALANCE SHEETS (Parent Only)
December 31, ---------------------------------- 1996 1995 --------------- --------------- ASSETS Cash on deposit with subsidiary $ 190,687 $ -- Dividends and other receivables 469,999 Investment in subsidiary 22,260,609 21,063,146 Organization expenses 131,858 -- -------------- -------------- TOTAL ASSETS $ 23,053,153 $ 21,063,146 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Dividends payable $ 432,236 $ -- -------------- -------------- STOCKHOLDERS' EQUITY Common stock 432,236 70,975 Surplus 6,140,199 6,150,518 Retained earnings 16,207,233 14,663,648 Market valuation reserve on investment securities available for sale (158,751) 178,005 -------------- -------------- TOTAL STOCKHOLDERS' EQUITY 22,620,917 21,063,146 -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 23,053,153 $ 21,063,146 ============== ==============
Page F-31 77 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - -------------------------------------------------------------------------------- ================================================================================ NOTE P-CONDENSED FINANCIAL INFORMATION OF TIB FINANCIAL CORP., (Continued) CONDENSED STATEMENTS OF INCOME (Parent Only)
For the years ended December 31, ---------------------------------------------------- 1996 1995 1994 -------------- -------------- -------------- OPERATING INCOME Dividends from subsidiary paid to shareholders $ 1,659,382 $ 1,058,321 873,114 Dividends from subsidiary 192,942 -- -- -------------- -------------- -------------- TOTAL OPERATING INCOME 1,852,324 1,058,321 873,114 -------------- -------------- -------------- OPERATING EXPENSE Amortization of organization costs 9,418 -- -- Other expense 33,945 -- -- -------------- -------------- -------------- TOTAL OPERATING EXPENSE 43,363 -- -- -------------- -------------- -------------- INCOME BEFORE INCOME TAX BENEFIT AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY 1,808,961 1,058,321 873,114 INCOME TAX BENEFIT 16,300 -- -- -------------- -------------- -------------- INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY 1,825,261 1,058,321 873,114 EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARY 1,377,706 1,942,622 1,812,508 -------------- -------------- -------------- NET INCOME $ 3,202,967 $ 3,000,943 $ 2,685,622 ============== ============== ==============
Page F-32 78 TIB FINANCIAL CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - -------------------------------------------------------------------------------- ================================================================================ NOTE P-CONDENSED FINANCIAL INFORMATION OF TIB FINANCIAL CORP., (Continued) CONDENSED STATEMENTS OF CASH FLOWS (Parent Only)
For the years ended December 31, ---------------------------------------------------- 1996 1995 1994 -------------- -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,202,967 $ 3,000,943 $ 2,685,622 Equity in undistributed earnings of subsidiary (1,377,706) (1,942,622) (1,812,508) Amortization of organization costs 9,418 -- -- Increase in other assets (611,276) -- -- -------------- -------------- -------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,223,403 1,058,321 873,114 -------------- -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from exercise of stock options and warrants 350,942 82,373 210,880 Cash dividends paid (1,227,146) (1,058,321) (873,114) Capital contributed to subsidiary (156,512) (82,373) (210,880) Proceeds from note payable 124,000 -- -- Repayment of note payable (124,000) -- -- -------------- -------------- -------------- NET CASH USED BY FINANCING ACTIVITIES (1,032,716) (1,058,321) (873,114) ============== ============== ============== NET INCREASE IN CASH 190,687 -- -- CASH, BEGINNING OF YEAR -- -- -- -------------- -------------- -------------- Cash, END OF YEAR $ 190,687 $ -- $ -- ============== ============== ==============
Page F-33 79 TABLE OF CONTENTS Until ______, 1997, (90 days after the date of this Prospectus), all dealers effecting transactions in the registered securities, Page whether or not participating in this - ---- distribution, may be required to deliver a Additional Information........ Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus Prospectus Summary............ when acting as underwriters and with respect to their unsold allotments or subscriptions. Risk Factors.................. ----------------------------------------------- - The Offering.................. No person has been authorized to give any information or to make any representations in Dividend Policy............... connection with the offer contained in this Prospectus unless preceded or accompanied by Use of Proceeds............... this Prospectus, nor has any person been contained in this Prospectus, and, if given or Capitalization................ made, such information or representations must not be relied upon. This Prospectus does not Business...................... constitute an offer or solicitation in any jurisdiction to any person to whom it is Supervision and Regulation.... unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of Management.................... this Prospectus nor any sale made hereunder shall under any circumstances create an Certain Transactions.......... implication that there has been no change in the facts herein set forth since the date Principal Shareholders........ hereof. However, if any material change occurs while this Prospectus is required by law to be Description of Capital Stock.. delivered, this Prospectus will be amended or supplemented accordingly. Legal Matters................. ----------------------------------------------- Experts....................... Financial Statements.......... - TIB FINANCIAL CORP. Up to 1,178,124 Shares of Common Stock by Selling Shareholders --------------------------------------- PROSPECTUS --------------------------------------- --------- -------, 1997 80 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The expenses of this offering are estimated to be as set forth below. The Company will pay all of such expenses. Legal Fees and Expenses ................................ $ 40,000 ----------- Blue Sky Fees .......................................... 1,000 ----------- Printing Fees .......................................... 2,575 ----------- SEC Registration Fee ................................... 1,910 ----------- EDGAR Filing Expenses .................................. 8,500 ----------- Accounting Fees and Expenses ........................... 80,000 ----------- Miscellaneous Expenses ................................. 2,500 ----------- Total .......................................... $136,485 -----------
ITEM 14.INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 607.0831 of the Florida Business Corporation Act provides that a corporation's articles of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of duty of care or other duty as a director. This Section also provides, however, that such a provision shall not eliminate or limit the liability of a director (i) for any appropriation, in violation of his duties, of any business opportunity of the corporation, (ii) for acts or omissions involving intentional misconduct or a knowing violation of law, (iii) for certain other types of liability set forth in the Act, and (iv) for transactions from which the director derived an improper personal benefit. Article 6 of the Registrant's Articles of Incorporation contains a provision eliminating or limiting the personal liability of a director of the Registrant to the fullest extent authorized by the Florida Business Corporation Act. In addition, Section 607.0850 of the Florida Business Corporation Act provides for indemnification of directors and officers of the Registrant for liability and expenses reasonably incurred by them in connection with any civil, criminal, administrative, or investigative action, suit or proceeding in which they may become involved by reason of being a director or officer of the Registrant. Indemnification is permitted if the director or officer acted in a manner which he believed in good faith to be in or not opposed to the best interests of the Registrant and, with respect to, in criminal actions, if he had no reasonable cause to believe his conduct to be unlawful. Article 8 of the Registrant's Articles of Incorporation contains a provision providing for the indemnification of officers and directors and advancement of expenses to the fullest and officers liability insurance which insures against liabilities that directors and officers of the Registrant may incur in such capacities. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES During the past three years, the only sales of unregistered securities of the Company sold by the Company have been those shares issued pursuant to the Registrant's Incentive Stock Option Plan and Non-Statutory Stock Option Plan (collectively, the "Plan"). For the calendar years 1996 and 1997, the Company issued 35,400 and 21,690 shares, respectively, of Common Stock pursuant to the exercise of the Plan's grants of stock options to officers, employees and directors of the Company. In accordance with the terms of the Plan, the purchase price for the shares of Common Stock issued to such officers, employees and directors pursuant to the exercise of stock options was fixed at the time each such option was granted. During this period, such purchase price ranged between $5.49 and $5.50 per share. The sales of such shares by the Company pursuant to the exercises of all such options were exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof as sales not involving any public offering. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The Documents as set forth on the Exhibit Index on page II-___ are incorporated herein by reference, and such documents are filed as exhibits to this Registration Statement. 81 ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 82 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Key Largo, State of Florida, on May 2, 1997. TIB FINANCIAL CORP. /s/ Edward V. Lett -------------------------- Edward V. Lett, President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated:
Signature Title Date - --------- ----- ---- /s/ Edward V. Lett - ------------------------- Director, President and May 2, 1997 Edward V. Lett Principal Executive Officer; Principal Financial and Accounting Officer * - ------------------------- Director May 2, 1997 W. Kenneth Meeks * - ------------------------- Director May 2, 1997 B.G. Carter * - ------------------------- Director May 2, 1997 Armando J. Henriquez
83
Signature Title Date - --------- ----- ---- * - ---------------------------- Director and Chairman May 2, 1997 James R. Lawson, III * - ---------------------------- Director May 2, 1997 Scott A. Marr * - ---------------------------- Director May 2, 1997 Derek D. Martin-Vegue * - ---------------------------- Director May 2, 1997 Joseph H. Roth, Jr. * - ---------------------------- Director May 2, 1997 Marvin F. Schindler * - ---------------------------- Director May 2, 1997 Richard J. Williams *By: /s/ Edward V. Lett ----------------------------------- Edward V. Lett, as Attorney-in-Fact
84
Exhibit No. Description Sequential Page ----------- ----------- --------------- 3.1* Articles of Incorporation 3.2* Bylaws 4.1* Specimen Stock Certificate 5.1 Opinion of Holland & Knight LLP as to legality of the securities being registered 10.1* Employment Contract between Edward V. Lett and TIB Bank of the Keys 10.2* 401(K) Savings and Employee Stock Ownership Plan 10.3* Employee Incentive Stock Option Plan 10.4** Employment Contract between Daniel W. Taylor and TIB Bank of the Keys 10.5** Employment Contract between Millard J. Younkers, Jr. and TIB Bank of the Keys 10.6** Employment Contract between Edward V. Lett and TIB Bank of the Keys (as amended September 24, 1996) 11.1** Computation of Earnings Per Share 21.1 Subsidiaries of the Company. The sole subsidiary of the Company is TIB Bank of the Keys, Key Largo, Florida, which is wholly owned by the Company 23.1 Consent of Holland & Knight LLP (included in Exhibit 5.1) 23.2 Consent of KPMG Peat Marwick LLP 23.3 Consent of Bricker & Melton, P.A. 27** Financial Data Schedule
* Items 3.1 through 4.1, and 10.1 through 10.3, as listed above, were previously filed by the Company as Exhibits (with the same respective Exhibit Number as indicated herein) to the Company's Registration Statement (Registration No. 333-03499) and such documents are incorporated herein by reference. ** Previously filed with this Registration Statement. EX-5.1 2 OPINION OF HOLLAND & KNIGHT LLP 1 EXHIBIT 5.1 [LETTERHEAD HOLLAND & KNIGHT] May 2, 1997 TIB Financial Corp. 99451 Overseas Highway Key Largo, Florida 33037-7808 Re: Registration Statement on Form S-1 (Commission File No. 333-24101) Gentlemen: We refer to the Registration Statement (the "Registration Statement") on Form S-1 (File No. 333-24101), filed by TIB Financial Corp. (the "Company"), with the Securities and Exchange Commission, for the purpose of registering under the Securities Act of 1933 an aggregate of 1,178,124 shares (the "Common Stock") of the authorized common stock, par value $.10 per share under the Securities Act of 1993. The Common Stock includes 1,148,124 shares that are presently issued and outstanding (the "Issued Shares") and 30,000 shares that are the subject of unexercised stock options (the "Option Shares"). In connection with the foregoing registration, we have acted as counsel for the Company, and have examined originals, or copies certified to our satisfaction, of all such corporate records of the Company, certificates of public officials and representatives of the Company, and other documents as we deemed it necessary to require as a basis for the opinion hereafter expressed. Based upon the foregoing, and having regard for legal considerations that we deem relevant, it is our opinion that the Issued Shares of Common Stock are duly authorized, legally issued and fully paid and non-assessable and the Option Shares of Common Stock, when issued upon the exercise of the stock options relating thereto, will be duly authorized, legally issued and fully paid and non-assessable. We hereby consent to the filing of the opinion as Exhibit 5.1 to the Registration Statement, and to the reference to this firm under the caption "Legal Matters" contained in the prospectus filed as part thereof. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. Very truly yours, HOLLAND & KNIGHT LLP /s/ Stanley H. Pollock By: ------------------------------------- Stanley H. Pollock EX-23.2 3 CONSENT OF KPMG PEAT MARWICK 1 EXHIBIT 23.2 The Board of Directors TIB Financial Corp. Key Largo, Florida: We consent to the use of our reports included herein and to the reference in our firm under the heading "Experts" in the prospectus. Miami, Florida May 2, 1997 KMPG PEAT MARWICK, LLP EX-23.3 4 CONSENT OF BRICKER & MELLON 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use, in this Registration Statement of TIB Financial Corp. on Form S-1, of our report dated February 21, 1997, except for Note O, as to which the date is February 25, 1997, appearing in the Prospectus and to references to us under the heading "Selected Financial Data" and "Experts" in such Prospectus. BRICKER & MELTON, P.A. May 2, 1997 Duluth, Georgia -----END PRIVACY-ENHANCED MESSAGE-----