SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file
JUNE 30, 1997 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
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(Address of principal executive offices) (Zip code)
(407) 287-4000
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(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
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(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 June 30, 1997:
Class A Common Stock, $.10 Par Value - 4,726,825 shares
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Class B Common Stock, $.10 Par Value - 384,638 shares
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<PAGE>
INDEX
SEACOAST BANKING CORPORATION OF FLORIDA
Part I FINANCIAL INFORMATION PAGE #
Item 1 Financial Statements (Unaudited)
Condensed consolidated balance sheets -
June 30, 1997, December 31, 1996 and
June 30, 1996 ........................................ 3 - 4
Condensed consolidated statements of income
Three months ended June 30, 1997 and 1996; and
Six months ended June 30, 1997 and 1996 .................... 5 - 6
Condensed consolidated statements of cash flows -
Six months ended June 30, 1997 and 1996 .................... 7 - 9
Notes to condensed consolidated financial
statements ................................................. 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 11 - 20
Part II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders.......... 21 - 22
Item 6 Reports on Form 8-K.......................................... 22
SIGNATURES............................................................ 23
Exhibit Article 9 - Financial Data Schedule.......................... 24 - 25
<PAGE>
Part I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
June 30, December 31, June 30,
(Dollars in thousands) 1997 1996 1996
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ASSETS
Cash and due from banks .......... 24515 29358 22013
Federal funds sold ............... 16150 80650 3950
Securities:
At market .................... 154595 170530 182813
At amortized cost (market values:
$55,317 at June 30, 1997,
$53,549 at Dec. 31, 1996 &
$50,864 at June 30, 1996) .. 54635 52639 50724
----- ----- -----
TOTAL SECURITIES ........... 209230 223169 233537
Loans, net of unearned income .... 589082 576324 531814
Less: Allowance for loan losses. (5451) (5657) (5149)
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NET LOANS .................. 583631 570667 526665
Bank premises and equipment ...... 18252 17213 16777
Other real estate owned .......... 768 1064 696
Core deposit intangibles ......... 1808 1975 2143
Goodwill ......................... 3732 3882 4028
Other assets ..................... 11796 10523 16758
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869882 938501 826567
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LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
Deposits ......................... 777353 811493 724616
Federal funds purchased and securities
sold under agreements to repurchase,
maturing within 30 days ...... 9797 45088 24247
Other liabilities ................ 3486 4925 5226
------ ------ ------
790636 861506 754089
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
June 30, December 31, June 30,
(Dollars in thousands) 1997 1996 1996
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SHAREHOLDERS' EQUITY
Preferred stock ................... 0 0 0
Class A common stock .............. 475 465 464
Class B common stock .............. 39 49 50
Additional paid-in capital ........ 26949 26936 26756
Retained earnings ................. 53928 52090 49745
Treasury stock ................ (729) (911) (1131)
----- ----- -----
80662 78629 75884
Securities valuation equity (allowance) (1416) (1634) (3406)
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TOTAL SHAREHOLDERS'
EQUITY ...................... 79246 76995 72478
----- ----- -----
869882 938501 826567
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Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date. See notes to condensed consolidated
financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
(Dollars in thousands, except per share data) 1997 1996 1997 1996
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Interest and dividends on investment
securities 3460 3620 6730 7256
Interest and fees on loans ....... 12460 11181 24818 22149
Interest on federal funds sold ... 317 136 852 848
----- ----- ----- -----
TOTAL INTEREST INCOME ........ 16237 14947 32400 30253
Interest on deposits ............. 1773 1514 3547 3129
Interest on time certificates .... 4795 4296 9445 8832
Interest on borrowed money ....... 116 177 394 458
---- ---- ---- ----
TOTAL INTEREST EXPENSE ....... 6684 5987 13386 12419
---- ---- ----- -----
NET INTEREST INCOME ........ 9553 8960 19014 17834
Provision for loan losses ........ 172 214 388 397
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 9381 8746 18626 17437
Noninterest income
Securities gains (losses) ...... 65 20 (37) 45
Other income ................... 2806 2595 5525 5171
---- ---- ---- ----
TOTAL NONINTEREST INCOME ..... 2871 2615 5488 5216
TOTAL NONINTEREST EXPENSES ... 9995 7594 18309 15219
---- ---- ----- -----
INCOME BEFORE INCOME TAXES . 2257 3767 5805 7434
Provision for income taxes ....... 820 1327 2108 2645
---- ---- ---- ----
NET INCOME ................. 1437 2440 3697 4789
==== ==== ==== ====
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<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------
(Dollars in thousands, except per 1997 1996 1997 1996
share data)
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PER SHARE COMMON STOCK:
NET INCOME 0.28 0.47 0.71 0.93
CASH DIVIDENDS
DECLARED:
Class A 0.20 0.15 0.40 0.30
Class B 0.18 0.135 0.36 0.27
Average shares outstanding 5226679 5175379 5228867 5168448
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See notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
Six Months Ended June 30 1997 1996
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Increase(Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Interest received ............................. 32248 30014
Fees and commissions received ................. 5396 4887
Interest paid ................................. (13689) (12613)
Cash paid to suppliers and employees .......... (18789) (14200)
Income taxes paid ............................. (2768) (2779)
------ ------
Net cash provided by operating activities ....... 2398 5309
Cash flows from investing activities
Maturities of securities held for sale ........ 14136 34706
Maturities of securities held for investment .. 3934 6888
Proceeds from sale of securities held for sale 44749 19734
Purchase of securities held for sale .......... (42548) (37659)
Purchase of securities held for investment .... (5928) 0
Proceeds from sale of loans ................ 30862 47140
Net new loans and principal repayments ...... (44218) (107654)
Proceeds-sale of other real estate owned ...... 539 919
Deletions (additions) to bank premises
and equipment ............................ (2089) (417)
Net change in other assets ................... (89) (5099)
------ ------
Net cash provided by(used in)investing activities . (652) (41442)
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
Six Months Ended June 30 1997 1996
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Cash flows from financing activities
Net decrease in deposits ....................... (34133) (40584)
Net decrease in federal funds purchased and
securities sold under agreements to
repurchase ................................... (35291) (19660)
Exercise of stock options ...................... 87 262
Treasury stock issued (acquired) ............... 107 68
Dividends paid ................................. (1859) (1259)
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Net cash used in financing activities ............ (71089) (61173)
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Net decrease in cash and cash equivalents ........ (69343) (97306)
Cash and cash equivalents at beginning of year ... 110008 123269
------ ------
Cash and cash equivalents at the end of period ... 40665 25963
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<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
Six Months Ended June 30 1997 1996
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Reconciliation of Net Income to Cash Provided by
Operating Activities
Net Income ....................................... 3697 4789
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization .................. 1336 1289
Provision for loan losses ...................... 388 397
Loss (gain) on sale of securities .............. 37 (45)
Gain on sale of loans .......................... (193) (284)
Loss (gain) on sale and writedown of foreclosed
assets ....................................... 68 (17)
Loss on disposition of fixed assets ............ 106 4
Change in interest receivable .................. (144) (277)
Change in interest payable ..................... (302) (194)
Change in prepaid expenses ..................... (1012) (129)
Change in accrued taxes .............. (470) 74
Change in other liabilities .................... (1113) (298)
---- ----
Total adjustments ................................ (1299) 520
---- ----
Net cash provided by operating activities ........ 2398 5309
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Supplemental disclosure of noncash investing activities:
Transfers from loans to other real estate owned .. 311 709
Transfers from loans to securities held for sale . 17395 26463
Market value adjustment to securities ............ 249 (4160)
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See notes to condensed consolidated financial statement.
<PAGE>
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 six month period ended June 30, 1997,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1997. 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, 1996.
NOTE B - ACQUISITION
On May 30, 1997, the Company acquired Port St. Lucie National Bank Holding
Corporation and its subsidiaries, Port St. Lucie National Bank and Spirit
Mortgage. The transaction was treated as a pooling of interests and the prior
year financial results have been restated accordingly.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
SECOND QUARTER 1997
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
The Company acquired Port St. Lucie National Bank Holding Corporation on May 30,
1997, and its subsidiaries, Port St. Lucie National Bank and Spirit Mortgage.
The transaction was accounted for as a pooling of interests and, as such, prior
period financial results have been restated. Additional deposits of
approximately $116.0 million and loans of $93.7 million were recorded at May 30,
1997, and over 10,000 new banking customers were acquired. The acquisition
increases the Company's subsidiary bank market share in Port St. Lucie to over
30 percent, creating the largest bank in the city of Port St. Lucie and rivaling
the 36 percent share in the Company's dominant Stuart/Martin County market.
During the second quarter of 1997, the Company took a charge of $1,467,000
($928,000 after taxes or $0.18 per share) related to the termination of certain
contracts, a consolidation of facilities and other one-time expenses related to
the merger. For the six month period ended June 30, 1997, an aggregate charge of
$1,542,000 ($975,000 after taxes) was recorded for merger related expenditures.
Reported earnings for the second quarter of 1997 do not reflect any significant
cost savings as the merger was completed late in the quarter. The Company
expects these savings to be realized in the second half of the year.
Net income for the second quarter of 1997 totalled $1,437,000 or $0.28 per
share, compared with $2,440,000 or $0.47 per share in the second quarter of 1996
and $2,260,000 or $0.43 per share in the first quarter of 1997.
Return on average assets was 0.65 percent and return on average shareholders'
equity was 7.14 percent for the second quarter of 1997, compared to second
quarter 1996's performance of 1.17 percent and 13.06 percent, respectively, and
1997's first quarter results of 1.02 percent and 11.48 percent, respectively.
NET INTEREST INCOME
Earnings for the first and second quarter of 1997 have benefited
from a stable net interest margin. On a tax equivalent basis the margin
increased to 4.62 percent in the second quarter of 1997 from 4.59 percent in the
first quarter of this year. The cost of interest bearing liabilities increased
one basis point to 3.85 percent from first
<PAGE>
quarter, with rates for NOW and savings deposits decreasing 1 and 8 basis
points, respectively, and rates for money market deposits and certificates of
deposit both remaining flat. This follows a similar decline of 1 basis point in
the rate paid on total interest bearing liabilities in the first quarter of 1997
from fourth quarter. In addition to the improvement in cost of funds for the
second quarter, the yield on average total earning assets increased 1 basis
point to 7.82 percent as compared to first quarter. The yield on loans
declined 14 basis points to 8.45 percent during the second quarter, but
average loans outstanding as a percentage of earning assets increased to 70.6
percent compared to 69.1 percent in the first quarter. The increase in loans
occurred even though $21.8 million in fixed rate residential mortgages were
either securitized during the second quarter and transferred to the Company's
available for sale securities portfolio or sold. In addition, improvement in
the yields on securities and federal funds sold of 19 and 11 basis points
contributed to the higher margin.
For the second quarter a year ago, the net interest margin recorded was 4.65
percent. A yield on average earnings assets of 7.72 percent and rate on interest
bearing liabilities of 3.69 percent was recorded.
Average earning assets for the second quarter of 1997 increased $53,639,000 or
6.8 percent to $837,724,000, compared to prior year's second quarter. Enhanced
loan demand provided a $60,878,000 or 11.5 percent increase in average loans to
$591,649,000. Average loans as a percentage of earning assets increased to 70.1
percent compared to 67.7 percent a year ago. Average investment securities
declined $20,466,000 or 8.4 percent to $222,541,000, but average federal funds
sold increased $13,230,000 to $23,534,000. The level of federal funds sold is
expected to decline as loan growth is funded and deposits decline as they
normally do in the summer months.
Favorably affecting the mix of deposits in the second quarter as compared to
last year, average noninterest-bearing demand deposits increased $6,654,000 or
6.5 percent to $108,544,000 and average other lower cost core deposit
products (NOW, savings and money market deposits) increased on an
aggregate basis by $12,301,000 or 4.0 percent to $322,246,000. Average
certificates of deposit (the highest cost component of interest bearing
liabilities) increased $36,357,000 or 11.1 percent to $363,364,000, and as a
percentage of deposits increased slightly to 45.8 percent compared to 44.3
percent in the second quarter of 1996.
If loan demand continues at its current pace as a result of the economy
remaining firm, and local competition allows rates paid for core deposits to
remain low, the net interest margin could continue to improve over the remainder
of 1997.
PROVISION FOR LOAN LOSSES
A provision of $172,000 was recorded in the second quarter of this year,
compared to $214,000 in provisioning in the second quarter of 1996 and $216,000
in provisioning in the first quarter
<PAGE>
of this year. Net charge-offs for the second quarter totaled $434,000, compared
to net charge offs of $93,000 for the second quarter last year and net
charge-offs of $160,000 for the first quarter of 1997. Net charge-offs
annualized as a percent of average loans totaled 0.20 percent for the first half
of 1997, compared to net charge-offs of 0.05 percent for the same period in
1996. Although the net charge-offs ratio is slightly higher than one year
earlier, the level is still among the lowest in the industry.
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 gains and losses from securities sales, increased
$211,000 or 8.1 percent to $2,806,000 in the second quarter compared to one year
earlier.
The largest increase in noninterest income occurred in service charges on
deposits which increased $164,000 or 20.0 percent compared to prior year. This
increase can be largely attributed to additional business volumes in four new
branch locations established over the last twelve months, three in Indian River
County (South Vero Square and Oak Pointe opening in the current quarter,
Sebastian in the third quarter of 1996), and one in St. Lucie County (Nettles
Island which opened in January of this year) and the repricing of certain
services, in particular overdraft fees which were increased 37.5 percent
(from $20 to $27.50).
While trust income grew $55,000 or 10.7 percent, brokerage commissions and fees
declined $59,000 or 10.4%. The decline in brokerage commissions and fees is
attributable to replacing two experienced brokers. The Company intends to
continue to emphasize its brokerage and trust services as expectations are
that these financial products will remain in demand, in particular by the
over 10,000 new banking customers from the acquisition who have not had such
services available to them.
Noninterest income, excluding gains and losses from securities sales, for the
first half of 1997 increased $354,000 or 6.8 percent, with increases in service
charges on deposits of $311,000 or 19.2 percent and $87,000 or 8.3 percent in
trust income. As indicated above for the quarter, the increase in service
charges on deposits is related to internal growth and the repricing of certain
services.
<PAGE>
NONINTEREST EXPENSES
When compared to 1996, noninterest expenses for the second quarter increased by
$2,401,000or 31.6 percent to $9,995,000 and for the first half increased
$3,090,000 or 20.3 percent to $18,309,000. In the second quarter and first six
months of 1997, expenses of $1,467,000 and $1,542,000, respectively, were
incurred related to the termination of certain contracts, a consolidation of
facilities and other one-time expenses related to the merger. Without the effect
of these expenses,
noninterest expenses increased 12.3 percent and 10.2 percent, respectively, for
the second quarter and first half of 1997 when compared to prior year.
Salaries and wages increased $421,000 or 14.2 percent, compared to the second
quarter of 1996, and increased $756,000 or 12.7 percent for the first half of
1997. Employee benefits have risen 5.5 percent year to year for the first six
months. Additional employment costs in lending, trust and brokerage, from
expanding the Company's telephone banking center and the addition of four new
branches have been incurred over the past twelve months. These efforts have
provided the Company with a tremendous opportunity for future growth in loans,
deposits and other products to better leverage the Company's capital position
and improve earnings in the future.
Occupancy expenses and furniture and equipment expenses, on an aggregate basis,
increased $73,000 or 6.0 percent versus second quarter results last year and
were $196,000 or 8.3 percent higher for the first six months of 1997 versus
prior year. The premium for Federal Deposit Insurance Corporation ("FDIC")
insurance was $22,000 lower for the second quarter and $48,000 lower for the
first six months of 1997 versus last year, reflecting lower premium rates
charged by the FDIC effective for 1997. The rate the Company's subsidiary bank
is being assessed by the FDIC has been and is the lowest rate, based on FDIC
guidelines.
Costs for legal and professional services and costs associated with foreclosed
and repossessed asset management for the second quarter increased $30,000 when
compared to 1996, but were $33,000 lower compared to the first half of
1996, a reflection of lower nonperforming asset balances (see "Nonperforming
Assets").
When compared to last year, marketing expenses increased $79,000 or 16.9 percent
for the second quarter of 1997 and $177,000 or 20.2 percent for the six months
ending June 30, 1997, primarily as a result of increases in sales promotion, ad
agency production, printing and media costs, and public relations costs
associated with the expanded branch distribution mentioned above. The other
expense category increased $266,000 or 15.2 percent year over year for the
second quarter, and was $415,000 or 11.7 percent higher for the first half
of the year. The increase in other expense was caused primarily by
incremental costs associated with the new branch facilities and by: 1) a
one-time charge for customer fraud of $130,000, 2) an increase in telephone
costs (of $44,000 for the second quarter; $106,000 for the first six months)
related to technology upgrades implemented to enhance communications
between existing branches and the Company's main office headquarters, and
3) additional expenditures for merchant and credit card processing (of
$62,000 for the second quarter; $124,000 for the first half of 1997).
<PAGE>
INCOME TAXES
Income taxes as a percentage of income before taxes were 36.3 percent for the
first half of this year, compared to 35.6 percent in 1996. 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. In addition, lower levels of tax-exempt interest income have contributed
to a higher effective tax rate.
FINANCIAL CONDITION
CAPITAL RESOURCES
Earnings retained by the Company during the first half of 1997 and over the
prior twelve months have provided the Company with a slight increase in its
capital ratios. The Company's ratio of average shareholders' equity to average
total assets during the second quarter of 1997 was 9.05 percent, compared to
9.00 percent in the second quarter of 1996.
The risk-based capital minimum ratio of total capital to risk-weighted assets is
8 percent. At June 30, 1997, the Company's ratio of total capital to
risk-weighted assets was 15.28 percent and its ratio of Tier 1 capital to total
adjusted assets was 8.35 percent. In comparison, these ratios (as reported) were
15.44 percent and 8.25 percent, respectively, at June 30, 1996.
LOAN PORTFOLIO
The company's loan activity is generally confined to customers located within
the 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 $589,082,000 at June 30, 1997, $57,268,000 or 10.8 percent more than at
June 30, 1996, and $12,758,000 or 2.2 percent more than at December 31, 1996.
During the first half of 1997, $48.0 million of residential mortgages
were securitized or sold, and over the past twelve months, $89.5 million in
such loans were securitized or sold.
At June 30, 1997, the company's mortgage loan balances secured by residential
properties amounted to $317,860,000 or 54.0 percent of total loans. The next
largest concentration was loans secured by commercial real estate which totaled
$134,107,000 or 22.8 percent. The Company was also a creditor for consumer loans
to individual customers (primarily secured by motor vehicles) totaling
$65,987,000, commercial loans of $31,818,000, construction loans of $17,214,000
(of which approximately $10.5 million is residential construction), home equity
lines of credit of $12,908,000, and unsecured credit cards of $8,709,000.
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 FHLMC guidelines.
<PAGE>
Real estate mortgage lending (particularly residential properties) is expected
to remain an important segment of the Company's lending activities. At June 30,
1997, approximately $193 million or 61 percent of the Company's residential
mortgage loan balances were adjustable. Of the $193 million, $189 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 three 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 $31 million were outstanding at June 30,
1997, 2) those limited to a two percent per annum increase and a six percent cap
over the life of the loan, of which approximately $77 million in balances
existed at June 30, 1997, and 3) those that have a fixed rate for a period of
three, five or seven years, at the end of which they are limited to a two
percent per annum increase and a four percent cap over the life of the loan, of
which approximately $81 million were outstanding at June 30, 1997. Loans secured
by residential mortgages having fixed rates totaled approximately $125 million
at June 30, 1997, of which 15- and 30-year mortgages totaled $63 million and $31
million, respectively. Remaining fixed rate balances were comprised of home
improvement loans with maturities less than 15 years.
The Company's historical charge off rates for residential real estate loans have
been minimal, with charge offs of $30,000 for the first six months of 1997
compared to $84,000 for all of 1996.
At June 30, 1997, the Company had commitments to make loans (excluding unused
home equity lines of credit and credit card lines) of $31,275,000, compared to
$36,246,000 at June 30, 1996.
The Company attempts to manage its real estate exposure risk by limiting the
aggregate size of its commercial real estate portfolio, currently 22.8
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 installment loans totaled $225,000 and $97,000,
respectively, for the first six months of 1997, compared to net losses of
$95,000 and $49,000, respectively, in 1996. Current and historical credit losses
arising from real estate lending transactions continue to compare favorably with
the Company's peer group. Losses of $30,000 for residential real estate were
recorded in 1997, versus $14,000 a year ago. Net charge-offs recorded for
commercial real estate loans of $26,000 in the first half of 1997 compared with
the prior year when net recoveries of $6,000 were received. Net charge-offs for
commercial loans of $216,000 in the first six months of 1997 compared to $11,000
in recoveries in 1996.
The ratio of the allowance for loan losses to net loans outstanding was 0.93
percent at June 30, 1997. This ratio was 0.97 percent at June 30, 1996. The
allowance for loan losses as a percentage of nonaccrual loans and loans 90 days
or more past due was 240.7 percent at June 30, 1997, compared to 110.6 percent
at the same date in 1996.
<PAGE>
NONPERFORMING ASSETS
At June 30, 1997, the Company's ratio of nonperforming assets to loans
outstanding plus other real estate owned was 0.49 percent, compared to 0.98
percent one year earlier.
At June 30, 1997, accruing loans past due 90 days or more of $168,000 and OREO
of $768,000 were outstanding. In 1996 on the same date, $160,000 in loans were
past due 90 days or more and $696,000 in OREO balances were outstanding.
Nonaccrual loans totaled $2,097,000 at June 30, 1997, compared to a balance of
$4,497,000 at June 30, 1996. All of the nonaccrual loans outstanding at June 30,
1997 were performing (current with respect to payments), with the exception of
thirteen loans aggregating to $724,000. The 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.
Of the amount reported in nonaccrual loans at June 30, 1997, approximately 89
percent is secured with real estate, the remainder by the Small Business
Administration (SBA). 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 June 30, 1997, the Company had $154,595,000 or
73.9 percent of total securities available for sale and securities held to
maturity were carried at an amortized cost of $54,635,000, representing 26.1
percent of total securities.
The Company's securities portfolio decreased $24,307,000 from June 30, 1996. The
securities portfolio as a percentage of earning assets was 25.7 percent at June
30, 1997, compared to 30.4 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 the first half of 1997, proceeds of $44.7 million from securities sales
and maturing funds of $18.0 million were derived. Sales in the first and second
quarter of 1997 were transacted to fund loan growth, offset the impact of
seasonal declines in deposits which normally occur in the summer, and to reduce
the Company's sensitivity to possible interest rate increases. Securities
purchases of $48.4 million were transacted in the first half of 1997. Of this
total, $17.4 million was 15- and 30-year fixed rate residential loans
securitized and transferred from the Company's loan portfolio to the available
for sale securities portfolio.
<PAGE>
Company management considers the overall quality of the securities portfolio to
be high. The securities portfolio had an unrealized net loss of $1,149,000 or
0.5 percent of amortized cost at June 30, 1997, compared to a net loss of
$4,594,000 or 1.9 percent of amortized cost at June 30, 1996. While rates have
remained low, a shifting U.S. Treasury curve caused a reduction in unrealized
depreciation. 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.
DEPOSITS
Total deposits increased $52,737,000 or 7.3 percent to $777,353,000 at June 30,
1997, compared to one year earlier. Certificates of deposit increased
$33,688,000 or 10.3 percent to $298,561,000 over the past twelve months. Lower
cost interest bearing deposits (NOW, savings and money markets deposits)
increased to a lesser degree, by $7,360,000 or 2.5 percent to $300,056,000.
Impacting deposit mix favorably, noninterest bearing demand deposits increased
$11,689,000 or 11.9 percent to $109,757,000.
With the possibility that interest rates may increase further as a result of
Federal Reserve action, heightened interest by consumers to invest in
certificates of deposit as an alternative investment vehicle may occur.
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 June 30, 1997, 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 25.3 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.
<PAGE>
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. 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 June 30, 1997, net
interest income would decline 5.8 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
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
opportunities for business expansion. 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 June 30, 1997, the
Company had federal funds lines of credit available of $45,500,000 and had
$117,731,000 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), totaled $40,665,000 at June 30, 1997 as compared to
$25,963,000 at June 30, 1996. 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 1997, the cash flow from operations of $2,398,000 was
$2,911,000 lower than during the same period of 1996. Cash flows from investing
and financing activities reflect the change 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.
<PAGE>
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. However, inflation affects financial institutions'
increased cost 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 shareholders' 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.
<PAGE>
Part II OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 1997 Annual Meeting of Shareholders was held May 30, 1997.
(b) All directors reported to the Commission in the 1997 proxy statement
were re-elected in entirety.
(c) The following matters were voted upon at the meeting:
(i) To approve, ratify, confirm and adopt the
Agreement and Plan of Merger, dated as of
February 19, 1997, by and between the
Company and Port St. Lucie National Bank
Holding Corp. ("PSHC"), a Florida
corporation, pursuant to which PHSC will
merge with and into Seacoast and the Company
shall issue up to 900,000 shares of Class A
Common stock.
The Company's Articles of Incorporation
require that the holders of Company Class A
stock approve the Merger Agreement as a
separate class as well as a single class
together with the Class B stock.
Out of 6,665,497 total votes represented at
the meeting, the number of votes cast in
favor and against the Agreement were
6,015,334 (90.2%) and 16,037, respectively.
This represented an affirmative vote of
72.2% of all shares of common stock
outstanding and entitled to vote.
Out of 3,354,447 Class A votes represented
at the meeting, the number of Class A votes
in favor and against the Agreement were
2,747,634 (81.9%) and 14,237, respectively.
This represented an affirmative vote of
70.9% of all shares of Class A common stock
outstanding and entitled to vote.
(ii) The election of eight directors to serve
until the 1997 Annual Meeting of
Shareholders and until their successors have
been elected and qualified. Out of 6,665,497
votes represented at the meeting, the number
of votes cast for and against their
re-election were 6,652,167 (99.8%) and zero,
respectively.
(ii) The approval of a proposed amendment to Article XI of the
Company's Articles of Incorporation to clarify the voting
requirements in connection with certain business
combinations.
<PAGE>
The Company's Articles of Incorporation
require that the holders of Company Class A
stock approve amendments to the Articles of
Incorporation as a separate class as well as
a single class together with the Class B stock.
Out of 6,665,497 total votes represented at
the meeting, the number of votes cast in
favor and against the amendment were
5,923,785 (88.9%) and 98,157, respectively.
This represented an affirmative vote of
70.4% of all shares of common stock
outstanding and entitled to vote.
Out of 3,354,447 Class A votes represented
at the meeting, the number of votes cast in
favor and against the amendment were
2,672,885 (79.7%) and 81,957, respectively.
This represented an affirmative vote of
69.0% of all shares of Class A common stock
outstanding and entitled to vote.
(iii)The ratification of the appointment of
Arthur Andersen LLP as independent auditors
for the fiscal year ending December 31,
1997. Out of 6,665,497 votes represented at
the meeting, the number of votes cast for
and against their ratification were
6,650,672 (99.8%) and 4,528, respectively.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
A report on Form 8-K was filed on June 6, 1997 with
respect to the Company's acquisition of Port St. Lucie
National Bank Holding Corp., located in Port St. Lucie,
Florida. No other reports on Form 8-K were filed for the three
month period ended June 30, 1997.
<PAGE>
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
August 14, 1997 /s/ Dale M. Hudson
- --------------- ------------------
DALE M. HUDSON
President & Chief Executive
Officer
August 14, 1997 /s/ William R. Hahl
- --------------- -------------------
WILLIAM R. HAHL
Senior Vice President &
Chief Financial Officer
<PAGE>
ARTICLE 9 - FINANCIAL DATA SCHEDULE
At June 30, 1997, and for the six month period ended June 30, 1997:
Cash ...................................... 24515
Interest Bearing Deposits ................. 0
Federal Funds Sold ........................ 16150
Trading Assets ............................ 0
Investments Held For Sale ................. 154595
Investments Carrying Value ................ 54635
Investments Market Value .................. 55317
Loans ..................................... 589082
Allowance ................................. 5451
Total Assets .............................. 869882
Deposits .................................. 777353
Short Term Borrowings ..................... 9797
Other Liabilities ......................... 3486
Long Term Borrowings ...................... 0
Common Stock .............................. 514
Mandatory Preferred Stock ................. 0
Other Preferred Stock ..................... 0
Other Shareholders Equity ................. 78732
Total Liabilities and Equity .............. 869882
Interest on Loans ......................... 24818
Interest on Investments ................... 6730
Other Interest Income ..................... 852
Total Interest Income ..................... 32400
Interest on Deposits ...................... 12992
Total Interest Expense .................... 13386
Net Interest Income ....................... 19014
Provision for Loan Losses ................. 388
Securities Gains (Losses) ................. (37)
Other Expenses ............................ 18309
Pretax Income ............................. 5805
Net Income - Pre-Extraordinary ............ 3697
Extraordinary Items ....................... 0
Accounting Changes ........................ 0
Net Income ................................ 3697
Earnings Per Share - Primary .............. .71
Earnings Per Share - Fully Diluted......... .71
Yield on Earning Assets ................... 7.82
Loans - Nonaccrual ........................ 2097
Loans - Past Due 90 Days or More .......... 168
Loans - Restructured Troubled Debt ........ 0
Loans - Potential Problem Loans ........... 0
Allowance for Loan Losses - Beg Balance ... 5657
Charge-offs ............................... 733
Recoveries ................................ 139
Allowance for Loan Losses - Closing Balance 5451
Allowance for Loan Losses - Domestic ...... 5451
Allowance for Loan Losses - Foreign ....... 0
Allowance for Loan Losses - Unallocated ... 0
