SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ ] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file
MARCH 31, 1995 No. 0-13660
SEACOAST BANKING CORPORATION OF FLORIDA
(Exact name of registrant as specified in its charter)
Florida 59-2260678
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
815 Colorado Avenue, Stuart FL 34994
(Address of principal executive offices) (Zip code)
(407) 287-4000
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Class A Common Stock, Par Value $.10
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [x] NO [ ]
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of March 31, 1995:
Class A Common Stock, $.10 Par Value - 3,726,221 shares
Class B Common Stock, $.10 Par Value - 557,154 shares
INDEX
SEACOAST BANKING CORPORATION OF FLORIDA
Part I FINANCIAL INFORMATION PAGE #
Item 1 Financial Statements (Unaudited)
Condensed consolidated balance sheets -
March 31, 1995, December 31, 1994 and
March 31, 1994 3 - 4
Condensed consolidated statements of income -
Three months ended March 31, 1995 and 1994 5 - 6
Condensed consolidated statements of cash flows -
Three months ended March 31, 1995 and 1994 7 - 9
Notes to condensed consolidated financial
statements 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
(a) Restricted Stock Agreement
(b) Reports on Form 8-K
SIGNATURES
Part I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<C> <S> <C> <C> <C> <C>
Mar, 31 Dec, 31 Mar, 31
(Dollars in thousands) 1995 1994 1994
<S>
ASSETS
<S> <C> <C> <C>
Cash and due from banks 25019 25230 23998
Federal funds sold 55750 62350 9600
Securities:
At market 107810 131288 242110
At amortized cost
(market values:
$134,961 at 3/31/95,
$122,472 at 12/31/94 &
$ 63,779 at 3/31/94 135749 127373 63134
TOTAL SECURITIES 243559 258661 305244
Loans, net of unearned
income 303932 292790 256617
Less: Allowance for loan
losses (3337) (3373) (3604)
NET LOANS 300595 289417 253013
Bank premises and equipment 15159 15751 16302
Other real estate owned 0 165 3617
Other assets 10428 11137 8932
650510 662711 620706
LIABILITIES & SHAREHOLDERS'
EQUITY LIABILITIES
Deposits 581530 559629 550761
Federal funds purchased
& securities sold under
agreements to repurchase
maturing within 30 days 8584 44639 8722
Other liabilities 2767 2859 3259
592881 607127 562742
</TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<C> <S> <C> <C> <C> <C>
Mar 31, Dec 31, Mar 31,
(Dollars in thousands) 1995 1994 1994
<S> <C>
SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Preferred stock 0 0 0
Class A common stock 373 372 370
Class B common stock 56 56 57
Additional paid-in capital 18520 18498 18381
Retained earnings 41960 41049 37834
60909 59975 56642
Securities valuation equity (3280) (4391) 1322
(allowance)
TOTAL SHAREHOLDERS'
EQUITY 57629 55584 57964
650510 662711 620706
</TABLE>
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date. See notes to condensed
consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<C> <S> <C> <S> <C> <C>
Three Months Ended
March 31,
(Dollars in thousands, except per share 1994 1993
data)
<S> <C> <C>
Interest and dividends on investment 3957 4350
securities 6432 5093
Interest and fees on loans 653 113
Interest on federal funds sold
TOTAL INTEREST INCOME 11042 9556
Interest on deposits 1375 1367
Interest on time certificates 2967 1805
Interest on borrowed money 192 73
TOTAL INTEREST EXPENSE 4534 3245
NET INTEREST INCOME 6508 6311
Provision for loan losses 0 50
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 6508 6261
Noninterest income
Securities gains (losses) (53) (15)
Other income 1599 1764
TOTAL NONINTEREST INCOME 1546 1749
TOTAL NONINTEREST EXPENSES 5865 5930
INCOME BEFORE INCOME TAXES 2189 2080
Provision for income taxes 726 673
NET INCOME 1463 1407
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<C> <S> <C> <S> <C> <C>
Three Months Ended
March 31,
(Dollars in thousands, except per 1994 1993
share data)
<S> <C>
PER SHARE COMMON STOCK:
NET INCOME 0.34 0.33
CASH DIVIDENDS DECLARED:
Class A 0.130 0.120
Class B 0.109 0.100
Average shares outstanding 4309763 4298982
</TABLE>
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<S> <C> <C> <C> <C>
(In thousands of dollars)
Three Months Ended March 31 1995 1994
Increase(Decrease) in Cash and Cash
Equivalents
Cash flows from operating activities
Interest received 11395 10059
Fees and commissions received (1599) 1724
Interest paid (4340) (3275)
Cash paid to suppliers and employees (6451) (6333)
Income taxes paid 0 (290)
Net cash provided by operating activities 2203 1885
Cash flows from investing activities
Proceeds from maturity of securities
classified at market 11619 6624
Proceeds from maturity of securities
classified at amortized cost 1721 4596
Proceeds from sale of securities classified
at market 19526 5233
Proceeds from sale of securities classified
at amortized cost 0 0
Purchase of securities classified at market (16231)(42509)
Purchase of securities classified at
amortized cost 0 (983)
Proceeds from sale of loans 0 24160
Net new loans and principal repayments (11178) (7610)
Proceeds from the sale of other real
estate owned 219 370
Sale(purchase) of premises and equipment 125 (146)
Net change in other assets (129) (76)
Net cash provided by (used in) investing
activities 5672 (10341)
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)(Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<S> <C> <C> <C> <C>
(In thousands of dollars)
Three Months Ended March 31 1995 1994
<S>
Cash flows from financing activities
Net increase in deposits 21897 17261
Net decrease in federal funds purchased and
securities sold under agreements to
repurchase (36055) (31811)
Sale of common stock -- Employee Stock
Purchase Plan and Employee Profit --
Sharing Plan 22 64
Exercise of stock options 0 88
Dividends paid (550) (507)
Net cash used in financing activities (14686) (14905)
Net decrease in cash and cash equivalents (6811) (23361)
Cash and cash equivalents at beginning of year 87580 56959
Cash and cash equivalents at end of period 80769 33598
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)(Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<S> <C> <C> <C> <C>
(In thousands of dollars)
Three Months Ended March 31 1995 1994
<S>
Reconciliation of Net Income to Cash Provided
by Operating Activities
Net Income 1463 1407
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 605 741
Provision for loan losses 0 (50)
Loss on sale of securities 53 15
Gain on sale of loans 0 (40)
Loss(gain) on sale and writedown of
foreclosed assets (54) 129
Loss on disposition of fixed assets 28 19
Change in interest receivable 208 248
Change in interest payable 194 (30)
Change in prepaid expenses (730) (720)
Change in accrued taxes 913 507
Change in other liabilities (477) (441)
Total adjustments 740 478
Net cash provided by operating activities 2203 1885
Supplemental disclosure of noncash investing
activities:
Transfers from loans to other real estate
owned 0 0
Market value adjustment to securities 1560 (5257)
Transfer from securities held for sale to
held for investment 10049 0
</TABLE>
See notes to condensed consolidated financial statement.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEACOAST
BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1995,
are not necessarily indicative of the results that may be expected for the
year ended December 31, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1994.
NOTE B - CONTINGENT LIABILITIES
Various claims and lawsuits are pending against the Company and its
subsidiaries. Although the amount of any ultimate liability with respect to
such matters cannot be determined, in the opinion of management, after
consultation with legal counsel, those claims and other lawsuits, when
resolved, will not have a material adverse effect on the consolidated
financial condition of the Company and it's subsidiaries.
NOTE C - ACQUISITION
On April 14, 1995, the Company acquired American Bank Capital Corporation of
Florida and its subsidiary, American Bank of Martin County. The transaction
was treated as a purchase with the Company paying $9.3 million. The
following represents the proforma impact as of and for the year ended
December 31, 1994, assuming the acquisition occurred January 1, 1994:
<TABLE>
<C> <C> <C> <S> <C>
(Dollars in
December 31, 1994 thousands)
<S> <C>
Total assets 726244
Total loans 340022
Total deposits 621524
Shareholders'equity 55584
Intangible assets 7662
Tangible Tier 1 capital to 7.46%
adjusted assets
</TABLE>
<TABLE>
<C> <S> <C>
(Dollars in thousands except per share amounts)
For the year ended December 31, 1994
<S> <C>
Net interest income 27328
Noninterest income 7771
Noninterest expense 24330
Net income 6910
Earnings per share 1.60
</TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FIRST QUARTER 1995
The following discussion and analysis is designed to provide a better
understanding of the significant factors related to the company's results
of operations and financial condition. Such discussion and analysis should
be read in conjunction with the company's Condensed Consolidated Financial
Statements and the notes attached thereto.
EARNINGS SUMMARY
Net income for the first quarter of 1995 totalled $1,463,000 or $0.34 per
share, compared with $1,407,000 or $0.33 per share in the first quarter of
1994 and $1,636,000 or $0.38 per share in the fourth quarter of 1994. Net
income for the fourth quarter of 1994 included an after tax gain on sales of
other real estate owned of $233,000 or $0.05 per share.
Return on average assets was 0.92 percent and return on average
shareholders' equity was 9.82 percent for the first quarter of 1995, compared
to first quarter 1994's performance of 0.93 percent and 10.17 percent,
respectively, and the prior year's fourth quarter results of 1.04 percent
and 10.88 percent, respectively.
NET INTEREST INCOME
Earnings in the first three months of 1995 benefited from an improved net
interest margin. On a tax equivalent basis the margin increased to 4.49
percent from 4.43 percent for the fourth quarter of 1994. Due to competing
institutions in our market holding deposit rates level for NOW and savings
deposits and increasing rates marginally for money market accounts, the rate
paid for interest bearing liabilities for the first quarter of 1995 was
limited to a 41 basis point increase from the fourth quarter of 1994.
Enhancing the margin since fourth quarter of 1994 were increases in the yield
on loans of 56 basis points, resulting from improved loan demand and periodic
repricing of adjustable rate mortgages. Also, the yield on federal funds
sold increased 71 basis points.
For the first quarter a year ago, the net interest margin recorded was 4.63
percent. An increase in the general level of interest rates over the last
twelve months has resulted in a 60 basis point increase in the yield on
average earning assets to 7.57 percent.
Similarly, but to a higher degree, the rate paid for interest bearing
liabilities has increased 90 basis points to 3.58 percent.
Average earning assets for the first quarter of 1995 increased $34,242,000 or
6.1 percent to $596,809,000, compared to prior year's first quarter. Loan
demand picked up pace in the latter half of 1994 and into 1995 providing a
$39,681,000 or 15.4 percent increase in average loans to $297,533,000.
Average investment securities declined $35,575,000 or 12.3 percent, while
average federal funds sold grew $30,136,000 to $44,550,000. The increase in
average federal funds sold is related to securities sales and maturities
occurring in the fourth quarter and in the first quarter of 1995.
These funds will be utilized to fund loan growth or will be reinvested.
In part, the mix of deposits had an unfavorable impact on the rate paid for
interest-bearing liabilities. Average certificates of deposit have increased
$50,638,000 or 26.7 percent to $240,630,000, while average balances for
NOW, savings and money market accounts, which are lower cost interest
bearing deposits, have declined by $32,430,000 to an aggregate balance of
$256,061,000. Favorably affecting deposit mix was an increase in average
demand deposits of 7.6 percent from $61,284,000 to $65,919,000.
If loan demand continues to improve as a result of the economy firming up, and
local competition allows rates paid for core deposits to remain low, the
net interest margin should continue to improve over the remainder of 1995.
PROVISION FOR LOAN LOSSES
No provision was recorded in the first quarter of this year, compared to a
$50,000 provision in the first quarter of 1994 and no provisioning in the
fourth quarter of 1994. Net charge-offs for the first quarter declined
slightly from $68,000 last year to $36,000 in 1995. Net charge offs
annualized as a percent of average loans totalled 0.05 percent for the
first quarter of 1995, compared to 0.15 percent for all of 1994.
Management determines the provision for loan losses which is charged to
operations by constantly analyzing and monitoring delinquencies, nonperforming
loans and the level of outstanding balances for each loan category, as well
as the amount of net charge offs, and by estimating losses inherent in its
portfolio. While the company's policies and procedures used to estimate
the monthly provision for loan losses charged to operations are considered
adequate by management and are reviewed from time to time by the Office of
the Comptroller of the Currency (OCC), there exist factors beyond the
control of the company, such as general economic conditions both locally and
nationally, which make management's judgment as to the adequacy of the
provision necessarily approximate and imprecise.
NONINTEREST INCOME
Noninterest income, excluding losses from securities sales, declined $165,000
or 9.4 percent to $1,599,000 compared to one year earlier. The
largest decrease in noninterest income occurred in brokerage commissions and
fees which decreased $83,000 or 21.7 percent compared to prior year. The
financial market turmoil during 1994 carried into 1995 culminating in
first quarter's results and lower volumes of business. The company
intends to continue to emphasize its brokerage services to both existing
and new customers, as expectations are that financial markets will be more
robust during 1995.
he next largest decrease was in service charges on deposits which declined
$29,000 or 5.5 percent to $499,000, a result of a lower volume of service
charges. Other income declined $28,000 or 19.0 percent due to gains of
$40,000 on the sale of $24.2 million in fixed rate residential mortgage
loans recognized during the first quarter of 1994. No such sales were recorded
in 1995.
NONINTEREST EXPENSES
When compared to 1994, noninterest expenses for the first quarter
decreased by $65,000 or 1.1 percent to $5,865,000. The results reflect
management's efforts to reduce overhead expenses, without impacting marketing
initiatives and service levels provided to bank clients.
Salaries and wages increased $147,000 or 6.8 percent from the first quarter of
1994. A new branch opened in November 1994 in Port St. Lucie, Florida
increasing salaries and wages $30,000 during the first quarter of 1995
compared to last year and wages for lending personnel grew $46,000, effected
by increased loan demand. Employee benefits remained level year to year.
Occupancy expenses and furniture and equipment expenses, on an aggregate
basis, increased $27,000 or 2.5 percent versus first quarter results last year,
entirely due to the branch addition. The premium for Federal Deposit
Insurance Corporation ("FDIC") insurance was $93,000 lower, reflecting action
by the FDIC to lower premium rates from $0.23 per $100 of deposits to $0.045
per $100 of deposits, effective in the second half of 1995.
Costs associated with foreclosed and repossessed asset management decreased
$114,000 when compared to the first quarter of 1994 and legal and professional
fees recorded for the first quarter of 1995 were $51,000 lower. No other
real estate owned ("OREO") remained at March 31, 1995.
Offsetting the above declines was an increase in other expense of $75,000
or 6.0 percent in the first quarter compared to last year for the same
period. Higher telephone, stationery, printing and supply, and courier
related costs aggregated to $67,000 of the increase.
INCOME TAXES
Income taxes as a percentage of income before taxes were 33.2 percent for the
first quarter of this year, compared to 32.4 percent in 1994. The
increase in rate reflects a higher rate of provisioning for state income
taxes, a result of lower state intangible taxes paid to the State of Florida
that can be taken as a credit.
FINANCIAL CONDITION
CAPITAL RESOURCES
Earnings retained by the company during the first quarter of 1995 and over the
prior twelve months has provided the company with continued improvement in
its capital ratios. The company's ratio of average shareholders' equity to
average total assets during the first quarter of 1995 was 9.40 percent,
compared to 9.15 percent during the first quarter of 1994.
Regulatory agencies have implemented a risk-based capital framework with a
minimum ratio of total capital to risk-weighted assets of 8 percent. At March
31, 1995, the company's ratio of total capital to risk-weighted assets under
these risk-based rules was 19.48 percent and its ratio of Tier 1 capital to
total adjusted assets was 9.13 percent. In comparison, these ratios were
21.09 percent and 9.11 percent, respectively, at March 31, 1994.
LOAN PORTFOLIO
All of the company's loan activity is with customers located within its
defined market area known as the Treasure Coast of Florida. This area is
located on the southeastern coast of Florida above Palm Beach County and
extends north to Brevard County.
Total loans (net of unearned income and excluding the allowance for loan losses)
were $303,932,000 at March 31, 1995, $47,315,000 or 18.4 percent more than at
March 31, 1994, and $11,142,000 or 3.8 percent more than at December 31, 1994.
At March 31, 1995, the company's mortgage loan balances secured by
residential properties amounted to $151,099,000 or 49.7 percent of total loans.
The next largest concentration was loans secured by commercial real estate
which totalled $77,820,000 or 25.6 percent. The company was also a creditor
for consumer loans to individual customers (primarily secured by
motor vehicles) totalling $37,773,000, commercial loans of $12,254,000, home
equity lines of credit of $9,264,000, and unsecured credit cards of $6,678,000.
All loans and commitments for one-to-four family residential properties
and commercial real estate are generally secured with first mortgages on
property with the amount loaned at inception to the fair value of the
property not to exceed 80 percent. Nearly all residential real estate loans
are made upon terms and conditions that would make such loans eligible for
resale under Federal National Mortgage Association ("FNMA") or Federal Home
Loan Mortgage Corporation ("FHLMC") guidelines.
Real estate mortgage lending (particularly residential properties) is
expected to remain an important segment of the company's lending activities.
Exposure to market interest rate volatility with respect to mortgage loans is
managed by attempting to match maturities and repricing opportunities for
assets against liabilities, when possible. At March 31, 1995,
approximately $101 million or 67 percent of the company's mortgage loan
balances secured by residential properties were adjustable, of which $96
million were adjustable rate 15- or 30-year mortgage loans ("ARMs") that
reprice based upon the one year constant maturity United States Treasury Index
plus a margin. These 15- and 30-year ARMs generally consist of two
types: 1) those repricing annually by up to one percent with a four percent
cap over the life of the loan, of which balances of approximately $35 million
were outstanding at March 31, 1995, and 2) those limited to a two percent per
annum increase and a six percent cap over the life of the loan, of which
approximately $61 million in balances existed at March 31, 1995.
The company's historical charge off rates for residential real estate loans
have been minimal, with annualized charge offs for the first quarter of 1995
of 0.07 percent and none for all of 1994.
At March 31, 1995, the company had commitments to make loans (excluding
unused home equity lines of credit and credit card lines) of $16,497,000,
compared to $11,159,000 at March 31, 1994.
The company attempts to reduce its exposure to the risk of the local real
estate market by limiting the aggregate size of its commercial real
estate portfolio, currently 25.6 percent of total loans, and by making
commercial real estate loans primarily on owner occupied properties. The
remainder of the real estate loan portfolio is residential mortgages to
individuals, and home equity loans, which the company considers less
susceptible to adverse effects from a downturn in the real estate market,
especially given the area's large percentage of retired persons.
ALLOWANCE FOR LOAN LOSSES
Net losses on credit cards and residential real estate totalled $61,000 and
$26,000, respectively, for the first three months of 1995, compared to net
losses of $31,000 and a recovery of $2,000, respectively, in 1994. Current
and historical credit losses arising from real estate lending transactions
continue to compare favorably with the company's peer group. Net recoveries
recorded for commercial real estate loans and installment loans of $28,000
and $20,000, respectively, in the first quarter of 1995 compared favorably
with the prior year when $41,000 in commercial real estate loan charge
offs and $10,000 in installment loan charge offs were reported. Net
recoveries for commercial loans of $3,000 in the first quarter of 1995 compared
to $22,000 in recoveries in 1994.
The ratio of the allowance for loan losses to net loans outstanding was 1.10
percent at March 31, 1995. This ratio was 1.40 percent at March 31, 1994. The
allowance for loan losses as a percentage of nonaccrual loans and loans 90
days or more past due was 95.2 percent at March 31, 1995, compared to 128.9
percent at the same date in 1994.
NONPERFORMING ASSETS
At March 31, 1995, the company's ratio of nonperforming assets to loans
outstanding plus other real estate owned was 1.15 percent, compared to 2.46
percent one year earlier. No accruing loans past due 90 days or more were
outstanding, compared to $12,000 at March 31, 1994, and no OREO remained at
March 31, 1995, compared to an outstanding balance of $3,617,000 at the end
of the first quarter in 1994.
Nonaccrual loans totalled $3,506,000 at March 31, 1995, compared to a
balance of $2,784,000 at March 31, 1994. All of the nonaccrual loans
outstanding at March 31, 1995 were performing, except one for $68,000. These
performing loans were placed on nonaccrual status because the company has
determined that the collection of principal or interest in accordance with
the terms of such loans is uncertain. All of the amount reported in
nonaccrual loans (100 percent) at March 31, 1995 is secured with
real estate. Management does not expect significant losses for which an
allowance for loan losses has not been provided associated with the
ultimate realization of these assets.
SECURITIES
Debt securities that the company has the intent and ability to hold to
maturity are carried at amortized cost. All other securities are carried at
market value and are available for sale. At March 31, 1995, the company had
$107,810,000 or 44.3 percent of total securities available for sale and
securities held to maturity were carried at an amortized cost of $135,749,000,
representing 55.7 percent of total securities.
The company's securities portfolio decreased $61,685,000 from March 31, 1994.
The securities portfolio as a percentage of earning assets was 40.4 percent at
March 31,1995, compared to 53.4 percent one year ago. This decline is
directly related to growth in the loan portfolio and changes to the
portfolio mix which have been transacted or pending.
During 1994, management reduced the total portfolio's interest rate risk by
reducing the average life of the portfolio from four years to less than
three years and by increasing the percentage of adjustable and floating rate
securities. During the first quarter of 1995, proceeds of $19.5 million from
securities sales and maturing funds of $13.4 million were derived, of
which $17.8 million was reinvested in mortgage backed securities with an
average weighted life of less than two years. Remaining funds were
invested in overnight federal funds sold, which at March 31, 1995 totalled
$55,750,000, pending their reinvestment. Management believes a
significant portion of these funds will be used to fund increases in
the loan portfolio.
Company management considers the overall quality of the securities portfolio
to be high. The securities portfolio had an unrealized net loss of
$3,003,000 or 1.2 percent of amortized cost at March 31, 1995, compared to a
net loss of $8,721,000 or 3.4 percent of amortized cost at December 31, 1994,
and a net gain of $2,672,000 or 0.9 percent of amortized cost at March 31,
1994. No securities are held which are not traded in liquid markets or that
meet Federal Financial Institution Examination Council ("FFIEC") definition
of a high risk investment. The company does have any assets which would be
defined as a derivative security.
DEPOSITS
Total deposits increased $30,769,000 or 5.6 percent to $581,530,000 at
March 31, 1995, compared to one year earlier. Certificates of deposit
increased $73,030,000 or 38.3 percent to $263,782,000 over the past twelve
months, while lower cost interest bearing deposits (NOW, savings and money
markets deposits) declined $44,644,000 or 15.3 percent to $248,113,000.
Noninterest bearing demand deposits increased $2,383,000 to $69,635,000.
The increase in certificates of deposit and decline in NOW, savings and money
market deposits is directly related to higher interest rates offered on
certificates, reflecting the general rise in interest rates during 1994 and
1995, and resulting renewed interest by customers in investing in certificates
of deposit.
INTEREST RATE SENSITIVITY
Interest rate movements and deregulation of interest rates have made
managing the company's interest rate sensitivity increasingly important.
The company's Asset/Liability Management Committee ("ALCO") is
responsible for managing the company's exposure to changes in market
interest rates. The committee attempts to maintain stable net interest
margins by generally matching the volume of assets and liabilities maturing,
or subject to repricing, and by adjusting rates to market conditions and
changing interest rates.
Interest rate exposure is managed by monitoring the relationship between
earning assets and interest bearing liabilities, focusing primarily on those
that are rate sensitive. Rate sensitive assets and liabilities are those
that reprice at market interest rates within a relatively short period,
defined here as one year or less. The difference between rate sensitive
assets and rate sensitive liabilities represents the company's interest
sensitivity gap, which may be either positive (assets exceed liabilities)
or negative (liabilities exceed assets).
On March 31, 1995, the company had a negative gap position based on
contractual maturities and prepayment assumptions for the next twelve
months, with a negative cumulative interest rate sensitivity gap as a
percentage of total earning assets of 16.0 percent. This means that the
company's assets reprice more slowly than its deposits. In a declining
interest rate environment, the cost of the company's deposits and other
liabilities may be expected to fall faster than the interest received on
its earning assets, thus increasing the net interest spread. If interest
rates generally increase, the negative gap means that the interest
received on earning assets may be expected to increase more slowly than the
interest paid on the company's liabilities, therefore decreasing the net
interest spread.
It has been the company's experience that deposit balances for NOW and
savings accounts are stable and subjected to limited repricing when interest
rates increase or decrease within a range of 200 basis points. Therefore,
the company's ALCO uses model simulation to manage and measure its interest
rate sensitivity.
The company has determined that an acceptable level of interest rate risk
would be for net interest income to fluctuate no more than 30 percent
given an immediate change in interest rates (up or down) of 200 basis points.
At December 31, 1994, net interest income would decline 9 percent if interest
rates would immediately rise 200 basis points.
The company does not presently use interest rate protection products in
managing its interest rate sensitivity.
LIQUIDITY MANAGEMENT
Contractual maturities for assets and liabilities are reviewed to adequately
maintain current and expected future liquidity requirements. Sources of
liquidity, both anticipated and unanticipated, are maintained through a
portfolio of high quality marketable assets, such as residential mortgage
loans, securities available/ for sale and federal funds sold. The company has
access to federal funds lines of credit and is able to provide short term
financing of its activities by selling, under an agreement to repurchase,
United States Treasury and Government agency securities not pledged to secure
public deposits or trust funds. At March 31, 1995, the company had federal
funds lines of credit available and unused of $32,500,000 and had
$141,434,000 of United States Treasury and Government agency securities and
mortgage backed securities not pledged and available for use under repurchase
agreements.
Liquidity, as measured in the form of cash and cash equivalents (including
federal funds sold), totalled $80,769,000 at March 31, 1995 as compared to
$33,598,000 at March 31,1994. Cash and cash equivalents vary with seasonal
deposit movements and are generally higher in the winter than in the summer,
and vary with the level of principal repayments and investment activity
occurring in the company's securities portfolio and loan portfolio.
As is typical of financial institutions, cash flows from investing
activities (primarily in loans and securities) and from financial activities
(primarily through deposit generation and short term borrowings) exceeded
cash flows from operations. In 1995, the cash flow from operations of
$2,203,000 was $318,000 higher than during the same period of 1994. Cash
flows from investing and financing activities reflect the increase in loan and
deposit balances experienced.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements presented herein have been prepared in accordance
with generally accepted accounting principles, which require the measurement
of financial position and operating results in terms of historical
dollars, without considering changes in the relative purchasing power of
money, over time, due to inflation.
Unlike most industrial companies, virtually all of the assets and liabilities
of a financial institution are monetary in nature. As a result, interest
rates have a more significant impact on a financial institution's
performance than the general levels of inflation. Since the beginning of
1994, the Federal Reserve Bank has increased interest rates 300 basis
points in an effort to curb inflation through monetary policy. In addition,
inflation increases financial institutions' costs for goods and services
purchased, the cost of salaries and benefits, occupancy expense, and similar
items. Inflation and related increases in interest rates generally
decrease the market value of investments and loans held and may adversely
affect liquidity, earnings, and share-holders' equity. Mortgage
originations and refinancings tend to slow as interest rates increase,
and likely will reduce the company's earnings from such activities and the
income from the sale of residential mortgage loans in the secondary market.
Interest rates do not necessarily move in the same magnitude as the prices of
goods and services. In today's environment, with values of real estate
falling due to increased amounts of funds available for real estate
investment, and the anticipated effect of the RTC's efforts to liquidate
unprecedented volume of real properties from failed thrifts, the values of
real estate collateralizing the company's loans and real estate held as other
owned, could be adversely affected.
Part II OTHER INFORMATION
Item 6 (a) RESTRICTED STOCK AGREEMENT
PERSONAL AND CONFIDENTIAL
SEACOAST BANKING CORPORATION OF FLORIDA
RESTRICTED STOCK AGREEMENT
Seacoast Banking Corporation of Florida (the "Company") hereby grants
to A. Douglas Gilbert (the "Executive") 10,000 shares of the Company's
common stock, in accordance with and subject to the terms and conditions set
forth herein ("Restricted Stock").
Restricted Stock Grant
Number of shares of Restricted Stock granted: 10,000
Date of Grant: March 31, 1995
Vesting Date(s) of Restricted Stock: Dec. 31, 1995 2,500 shares
Dec. 31, 1996 2,500 shares
Dec. 31, 1997 2,500 shares
Dec. 31, 1998 2,500 shares
Restrictions applicable to Restricted Stock:
(a) The Executive must remain in the continuous employ of the Company
or a subsidiary of the Company until the respective vesting dates shown above
as to each group of 2,500 shares (the "Restricted Period"). For example,
if on December 31, 1995 the Executive has since the grant date been in
the continuous employ of the Company or a subsidiary, 2,500 shares will
vest and no longer be subject to forfeiture. Similarly, if the
Executive's employment were to cease between December 31, 1996 and December
31, 1997, 5,000 of the shares would have vested and 5,000 would be forfeited.
(b) The shares will be issued in the name of the Executive as Restricted
Stock and will be held by the Company during the Restricted Period.
(c) The Executive, as beneficial owner of the Restricted Shares,
shall have full voting and dividend rights with respect to the Restricted
Shares during the Restricted Period.
The following additional terms shall apply to this Restricted Stock
Agreement:
1. Tax Withholding. Prior to delivery of any certificate or
certificates for shares acquired pursuant to the vesting of Restricted Stock
hereunder, the Executive must satisfy federal, state and local
withholding tax obligations by either (a) delivery to the Company of
shares of common stock of the Company, or (b) directing the Company to
withhold certain of such shares, or (c) remitting to the Company a sufficient
amount of cash to satisfy the withholding requirements. No election to
satisfy withholding under (a) or (b) shall be effective unless approved by
the Board of Directors of the Company, in its sole discretion. If withholding
is to be satisfied under either (a) or (b), the stock used for payment shall
have a fair market value (as determined by the Board) on the date of
delivery or withholding, which shall be the date the withholding tax is
determined, equal to the amount of the taxes to be withheld. Any election by
the Executive to satisfy withholding under (a) or (b) must be made prior to
the date the amount of the withholding tax is determined. Any such
election must be in writing signed by the Executive and shall be
irrevocable. The portion of any withholding tax represented by a fractional
share must be paid in cash.
2. Payment of Withholding Obligations. Prior to the delivery of
stock certificates to the Executive pursuant to vesting of the Restricted
Stock, the Executive shall deliver to the Company his check and/or
a stock certificate registered in the name of the Executive duly assigned
to the Company (with the assignment guaranteed by a bank, trust company or
member firm of the New York Stock Exchange, or by a combination of the
foregoing), or directions for withholding of shares (as applicable) which
the Board of Directors has permitted the Executive to transfer for
satisfying federal and state withholding tax obligations.
3. Transferability. The shares of Restricted Stock granted hereby
are not transferable or assignable prior to vesting. The shares of Restricted
Stock have not been registered under the Securities Act of 1933, as amended
(the "Securities Act") or any state securities law ("State Securities Act"),
and, even after vesting, may not be sold or transferred, nor will any
assignee thereof be recognized as an owner by the Company for any purpose,
unless a registration statement under the Securities Act and any applicable
State Securities Act with respect to such shares shall then be in effect or
unless the availability of an exemption from registration with respect to
any proposed disposition or transfer of such shares shall be established to
the satisfaction of counsel to the Company.
4. Delivery of Shares. Stock certificates shall be delivered as
soon as practicable after vesting of the Restricted Stock, but may be
postponed for such period as may be required for the Company with
reasonable diligence to comply if deemed advisable by the Company, with
registration requirements under the Securities Act of 1933, as amended,
listing requirements under the rules of any stock exchange, and requirements
under any other law or regulation applicable to the issuance or transfer
of such shares.
5. Section 16 Implications. If the Executive is subject to Section 16
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
grant hereby of the Restricted Stock constitutes a non-exempt "purchase" of
10,000 shares of common stock of the Company, and the Executive must file
a Form 4 with the Securities Exchange Commission reporting such
acquisition before the 10th day of the month following the month in
which the grant date occurred (i.e., by April 10, 1995). For short-swing
profit purposes, this "purchase" will be matched with any non-exempt sale
occurring within six months before or after the grant date.
Consequently, the Executive should avoid sales of Company common stock for six
months after the grant date. The vesting of the Restricted Stock will
have no effect for purposes of Section 16, and no form need be filed with
the SEC reporting such vesting. If the shares are forfeited prior to
vesting, the Executive should report such forfeiture on a Form 4 or Form 5,
although such forfeiture will not be deemed a "sale" for purposes of
short-swing profit liability under Section 16(b). The eventual sale of
the common stock after vesting will constitute a non-exempt sale for purposes
of Section 16 and must be reported on Form 4 before the 10th day of the
month following the month in which the sale occurred. For short-swing profit
purposes, such sale will be matched with any non-exempt purchase occurring
within six months before or after the sale date.
6. Successors. This Restricted Stock Agreement shall be binding
upon any successor of the Company, in accordance with the terms of this
Restricted Stock Agreement.
SEACOAST BANKING CORPORATION OF FLORIDA
By: \S\ DALE M. HUDSON
Date: April 3, 1995
Attestation: \S\ WILLIAM R. HAHL
I hereby accept the above Restricted Stock grant in accordance with and
subject to the terms and conditions set forth above.
I agree that any shares of common stock received by me hereunder will
not be sold or otherwise disposed of by me except in a manner in compliance
with applicable securities laws. I agree to notify the Company at lease
five business days in advance of any proposed sale or other disposition of
any such shares.
\S\ A. DOUGLAS GILBERT
Executive
Item 6 (b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on January 9, 1995.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEACOAST BANKING CORPORATION OF FLORIDA
May 11, 1995 /s/ Dennis S. Hudson, III
DENNIS S. HUDSON, III
Executive Vice President &
Chief Operating Officer
May 11, 1995 /s/ William R. Hahl
WILLIAM R. HAHL
Senior Vice President &
Chief Financial Officer
