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
MARCH 31, 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
(Address of principal executive offices) (Zip code)
(561) 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, 1997:
Class A Common Stock, $.10 Par Value - 3,874,197 shares
Class B Common Stock, $.10 Par Value - 384,638 shares
<PAGE>
INDEX
SEACOAST BANKING CORPORATION OF FLORIDA
Part I FINANCIAL INFORMATION PAGE #
Item 1 Financial Statements (Unaudited)
Condensed consolidated balance sheets -
March 31, 1997, December 31, 1996 and March 31, 1996............3-4
Condensed consolidated statements of income - Three Months
Ended March 31, 1997 and 1996...................................5-6
Condensed consolidated statements of cash flows - Three
Months Ended March 31, 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...........................11-19
Part II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K..................................20
SIGNATURES ..................................................................21
Article 9 - Financial Data Schedule ......................................22-23
Part I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
March December March
(Dollars in thousands) 31, 31, 31,
1997 1996 1996
- --------------------------------------------------------------------------------
ASSETS
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Cash and due from banks ...................... 25649 24340 21924
Federal funds sold ........................... 25200 76250 19100
Securities:
Held for Sale (at market)................. 147632 159133 169266
Held for Investment (market values:
$53,359 at Mar. 31, 1997
$50,555 at Dec. 31,1996 &
$50,946 at Mar. 31, 1996)............... 52949 49667 50137
------ ------ ------
TOTAL SECURITIES ....................... 200581 208800 219403
Loans ........................................ 486881 471597 431695
Less: Allowance for loan losses.............. (4294) (4286) (4197)
------ ------ ------
NET LOANS .............................. 482587 467311 427498
Bank premises and equipment .................. 16489 16110 15911
Other real estate owned ...................... 871 1011 688
Core deposit intangibles ..................... 1892 1975 2227
Goodwill ..................................... 3807 3882 3919
Other assets ................................. 8543 8729 7652
------ ------ ------
765619 808408 718322
====== ====== ======
LIABILITIES & SHAREHOLDERS'
EQUITY LIABILITIES
Deposits ..................................... 674025 692757 641024
Federal funds purchased and securities
sold under agreements to repurchase,
maturing within 30 days..................... 21064 45088 10926
Other liabilities ............................ 3015 3794 3376
------ ------ -------
698104 741639 655326
CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (Unaudited)
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
March 31, December 31, March 31,
(Dollars in thousands) 1997 1996 1996
- --------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock ....................... 0 0 0
Class A common stock .................. 390 380 378
Class B common stock .................. 39 49 51
Additional paid-in capital ............ 18634 18612 18399
Retained earnings ..................... 51212 50121 46924
Less: Treasury stock .................. (815) (911) (1212)
----- ----- ------
69460 68251 64540
Securities valuation allowance........... (1945) (1482) (1544)
------ ------ ------
TOTAL SHAREHOLDERS'
EQUITY .......................... 67515 66769 62996
------ ----- ------
765619 808408 718322
====== ====== ======
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
Three Months
Ended
March 31,
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share 1997 1996
data)
- --------------------------------------------------------------------------------
Interest and dividends on securities ............... 3033 3345
Interest and fees on loans ......................... 10150 9192
Interest on federal funds sold ..................... 451 669
----- -----
TOTAL INTEREST INCOME .......................... 13634 13206
Interest on deposits ............................... 1379 1318
Interest on time certificates ...................... 3866 3851
Interest on borrowed money ......................... 278 281
----- -----
TOTAL INTEREST EXPENSE ......................... 5523 5450
----- -----
<PAGE>
NET INTEREST INCOME .................................. 8111 7756
Provision for loan losses ................................ 150 150
---- ----
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES .. 7961 7606
Noninterest income
Securities gains (losses) .............................. (102) 24
Other income ........................................... 2348 2155
---- ----
TOTAL NONINTEREST INCOME ............................. 2246 2179
TOTAL NONINTEREST EXPENSES ........................... 7151 6634
---- ----
INCOME BEFORE INCOME TAXES ........................... 3056 3151
Provision for income taxes ............................... 1121 1140
---- ----
NET INCOME ........................................... 1935 2011
==== ====
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Ended
March 31,
1997 1996
- --------------------------------------------------------------------------------
(Dollars in thousands, except per
share data)
- --------------------------------------------------------------------------------
PER SHARE COMMON STOCK:
NET INCOME ............................ 0.45 0.47
CASH DIVIDENDS DECLARED:
Class A ............................. 0.200 0.150
Class B ............................. 0.180 0.135
Average shares outstanding ................. 4350504 4286498
- --------------------------------------------------------------------------------
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Three Months Ended March 31 1997 1996
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash
Equivalents
Cash flows from operating activities .................... 13921 13135
Interest received ..................................... 2367 2156
Fees and commissions received ......................... (5530) (5585)
Interest paid ......................................... (8111) (7285)
Cash paid to suppliers and employees .................. (210) (93)
Income taxes paid
------ ------
Net cash provided by operating activities ............... 2437 2328
Cash flows from investing activities
Proceeds from maturity of securities held for sale..... 5221 13857
Proceeds from maturity of securities held
for investment ...................................... 2665 4078
Proceeds from sale of securities held for sale ........ 15448 3979
Purchase of securities held for sale .................. (10056) (29013)
Purchase of securities held for investment ............ (5928) 0
Net new loans and principal repayments ................ (15388) (16857)
Proceeds from the sale of other real estate owned...... 144 311
Deletions (additions) to bank premises and equipment... (786) (216)
Deletions (additions) to intangible assets ............ 0 417
Net change in other assets............................. (16) 418
------ ------
Net cash used in investing activities ................... (8696) (23026)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)(Unaudited)
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
- --------------------------------------------------------------------------------
Three Months Ended March 31 1997 1996
- --------------------------------------------------------------------------------
Cash flows from financing activities
Net decrease in deposits ............................. (18732) (19938)
Net decrease in federal funds purchased and
repurchase agreements .............................. (24024) (32981)
Issuance of common stock -- Employee Stock
Purchase and Profit Sharing Plans...................... 0 0
Exercise of stock options.............................. 25 198
Treasury stock (acquired) issued....................... 93 53
Dividends paid......................................... (844) (628)
----- -----
Net cash used in financing activities .................. (43482) (53296)
----- -----
<PAGE>
Net decrease in cash and cash equivalents .............. (49741) (73994)
Cash and cash equivalents at beginning of year ......... 100590 115018
------ ------
Cash and cash equivalents at end of period ............. 50849 41024
====== ======
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)(Unaudited)
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
- --------------------------------------------------------------------------------
Three Months Ended March 31 1997 1996
- --------------------------------------------------------------------------------
Reconciliation of Net Income to Cash Provided
by Operating Activities
Net Income ............................................. 1935 2011
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization ....................... 624 571
Provision for loan losses ........................... 150 150
Loss (gain) on sale of securities ................... 102 (24)
Loss on sale and writedown of foreclosed assets ..... 8 25
Loss on disposition of fixed assets ................. 0 5
Change in interest receivable ....................... 257 (73)
Change in interest payable .......................... (7) (135)
Change in prepaid expenses .......................... (771) (166)
Change in accrued taxes ............................. 1022 1147
Change in other liabilities ......................... (883) (1183)
---- ----
Total adjustments ...................................... 502 317
---- ----
Net cash provided by operating activities .............. 2437 2328
==== ====
- --------------------------------------------------------------------------------
Supplemental disclosure of noncash investing activities:
Transfers from loans to other real estate owned....... 12 135
Market value adjustment to securities................. (785) (1392)
- --------------------------------------------------------------------------------
See notes to condensed consolidated financial statement.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
<PAGE>
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,
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.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FIRST 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
Net income for the first quarter of 1997 totalled $1,935,000 or $0.45 per share,
comparable with the $1,954,000 or $0.45 per share recorded in the fourth quarter
of 1996 and slightly lower than the $2,011,000 or $0.47 per share reported in
the first quarter of 1996. Earnings were impacted in the first quarter of 1997
by investment securities losses of $102,000 ($64,000 after taxes), while gains
of $20,000 and $24,000 were recorded in the fourth and first quarters,
respectively, of 1996. Securities sold during the first quarter of 1997 were
replaced with higher earning assets which will enhance future earnings.
Return on average assets was 1.02 percent and return on average shareholders'
equity was 11.31 percent for the first quarter of 1997, compared to fourth
quarter 1996's performance of 1.04 percent and 11.43 percent, respectively, and
the prior year's first quarter results of 1.09 percent and 12.56 percent,
respectively.
<PAGE>
NET INTEREST INCOME
Earnings in 1996 and for the first quarter of 1997 have benefited from a net
interest margin that has remained relatively stable. On a tax equivalent basis
the margin increased to 4.62 percent during the first quarter of 1997 from 4.61
percent in the fourth quarter of 1996. The cost of interest-bearing liabilities
increased one basis point to 3.69 percent from fourth quarter, with rates for
NOW, savings and certificates of deposit increasing 19, 6 and 2 basis points,
respectively. Rates for savings deposits and short term borrowings (entirely
composed of repurchase agreements) declined 7 and 9 basis points, respectively.
In part, the increase in the rate for NOW accounts is directly related to the
success of a new product called Money Manager, whereby banking customers have
the opportunity to link their transaction account (and earn a higher rate, 5.00
percent presently) to their brokerage account in the Company's subsidiary, FNB
Brokerage Services, Inc.. Offsetting the slight increase in funding cost, the
yield on earning assets increased 7 basis points to 7.73 percent during the
first quarter of 1997, compared to the fourth quarter. An increase in the yield
on loans of 10 basis points and a changing earning assets mix (with an $18.1
million growth in average loans) more than offset a decline of 7 basis points in
the yield on securities.
For the first quarter a year ago, the net interest margin was 4.56 percent. The
yield on average earning assets was 7.73 percent and rate on interest-bearing
liabilities was 3.72 percent.
Average earning assets for the first quarter of 1997 are $27,194,000 or 3.9
percent higher when compared to the prior year's first quarter. Average loan
balances grew $59,390,000 or 14.1 percent to $480,866,000, while average
investment securities declined $16,673,000 or 7.6 percent and average federal
funds sold decreased $15,523,000 or 31.0 percent to $34,524,000. The level of
federal funds sold is expected to further decline as loan growth is funded and
deposits decline as they normally do in the summer months.
The mix of earning assets has had a favorable impact on the margin. Loans (the
highest yielding component of earning assets) as a percentage of average earning
assets increased to 66.9 percent in the first quarter of 1997, compared to 60.9
percent a year ago. Average certificates of deposit (the highest cost component
of interest-bearing liabilities) as a percentage of interest-bearing liabilities
increased slightly to 49.2 percent, compared to 48.1 percent in the first
quarter of 1996. Favorably affecting the mix of deposits was an increase in
average noninterest-bearing demand deposits of $5,182,000 or 6.2 percent to
$88,854,000.
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 should continue at a level commensurate with
first quarter results over the remainder of 1997.
<PAGE>
PROVISION FOR LOAN LOSSES
A provision of $150,000 was recorded in the first quarter of this year, the same
provisioning as the first quarter and fourth quarter of 1996. Net charge-offs
for the first quarter increased slightly from $19,000 last year to $142,000 in
1997. Net charge-offs annualized as a percent of average loans totalled 0.12
percent for the first quarter of 1997, compared to 0.02 percent for the same
quarter in 1996.
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
$193,000 or 9.0 percent to $2,348,000 compared to one year earlier.
The largest increase in noninterest income occurred in service charges on
deposit accounts which increased $124,000 or 18.7 percent compared to prior
year. In addition, other service charges and fees grew $32,000 or 11.0 percent.
These results reflect internal growth and the repricing of certain services, in
particular overdraft fees which increased 45.1 percent compared to prior year.
Fees from trust and brokerage services in the quarter reached $1,076,000, up 3.2
percent from prior year. The Company intends to continue to emphasize its
brokerage and trust services to both existing and new customers, as expectations
are that these financial products will remain in demand.
NONINTEREST EXPENSES
When compared to 1996, noninterest expenses for the first quarter increased by
$517,000 or 7.8 percent to $7,151,000. The Company's overhead ratio increased
slightly, from 66.3 percent a year ago to 67.8 percent in the first quarter of
1997.
Salaries and wages increased $289,000 or 11.1 percent from the
first quarter of 1996. Additional employment costs in lending,
<PAGE>
trust and brokerage, from expanding the Company's telephone banking center and
the addition of two new branches (Sebastian, Florida in the third quarter of
1996 and Nettles Island in January of this year), have been incurred over the
last twelve months.
Occupancy expenses and furniture and equipment expenses, on an aggregate basis,
increased $101,000 or 10.0 percent versus first quarter results last year. Of
this increase, costs for maintenance and repairs have risen $34,000 and lease
payments for space occupied by the company have increased $46,000. Costs related
to the new branches totaled $20,000.
The premium for Federal Deposit Insurance Corporation ("FDIC") insurance was
$28,000 lower, reflecting action by the FDIC to lower premium rates, effective
for 1997. The rate the Company's subsidiary bank is being assessed 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 and disposition, declined 11.2 percent on an
aggregate basis, a reflection of lower nonperforming asset balances (see
"Nonperforming Assets").
Marketing expenses increased $76,000 or 20.7 percent, primarily as a result of
increases in sales promotion, ad agency production and printing costs, and
public relations costs associated with heightened efforts to market products and
services within the Company's market. The other expense category increased
$111,000 or 7.2 percent in 1997 year over year. The increase was primarily
caused by a $64,000 increase in telephone costs related to technology upgrades
implemented to enhance communications between branches and the Company's main
office headquarters.
INCOME TAXES
Income taxes as a percentage of income before taxes were 36.7 percent for the
first quarter of this year, compared to 36.2 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 quarter of 1997 and over the
prior twelve months have 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 1997 was 9.02 percent, compared to 8.69
percent during the first quarter of 1996.
<PAGE>
The risk-based capital minimum ratio for total capital to risk- weighted assets
is 8 percent. At March 31, 1997, the Company's ratio of total capital to
risk-weighted assets was 15.42 percent and its ratio of Tier 1 capital to total
adjusted assets was 8.30 percent. In comparison, these ratios were 15.30 percent
and 7.71 percent, respectively, at March 31, 1996.
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 $486,881,000 at March 31, 1997, $55,186,000 or 12.8 percent more than at
March 31, 1996, and $15,284,000 or 3.2 percent more than at December 31, 1996.
During the first quarter of 1997, $5.1 million in fixed rate residential
mortgage loans were securitized, and over the past twelve months, $34.8 million
in such loans were securitized, all through the Federal Home Loan Mortgage
Corporation ("FHLMC").
At March 31, 1997, the Company's mortgage loan balances secured by residential
properties amounted to $266,762,000 or 54.8 percent of total loans. The next
largest concentration was loans secured by commercial real estate which totalled
$116,790,000 or 24.0 percent. The Company was also a creditor for consumer loans
to individual customers (primarily secured by motor vehicles) totalling
$51,775,000, commercial loans of $21,423,000, home equity lines of credit of
$9,818,000, and unsecured credit cards of $7,759,000.
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. 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. At March 31,
1997, approximately $159 million or 59 percent of the Company's residential
mortgage loan balances were adjustable, compared to $139 million or 59 percent
of the Company's mortgage loan balances at March 31, 1996. Of the $159 million,
$155 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
<PAGE>
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 $30 million were outstanding at March 31, 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 $61 million in balances existed at March 31, 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 $64 million
were outstanding at March 31, 1997. Loans secured by residential mortgages
having fixed rates totaled approximately $108 million at March 31, 1997, of
which 15- and 30-year mortgages totaled $60 million and $26 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 no charge-offs for the first quarter of 1997 compared to
$84,000 for all of 1996.
At March 31, 1997, the Company had commitments to make loans (excluding unused
home equity lines of credit and credit card lines) of $24,208,000, compared to
$19,007,000 at March 31, 1996.
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 24.0 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 $120,000 and $35,000,
respectively, for the first three months of 1997, compared to net losses of
$50,000 and net recoveries of $3,000, respectively, in 1996. Current and
historical credit losses arising from real estate lending transactions continue
to compare favorably with the Company's peer group. No losses arising from
residential real estate were recorded in the first quarter, versus $9,000 a year
ago. Net recoveries recorded for commercial real estate loans of $16,000 in the
first quarter of 1997 compared with the prior year when net recoveries of
$28,000 were reported. Net charge-offs for commercial loans of $3,000 in the
first quarter of 1997 compared to $9,000 in recoveries in 1996.
The ratio of the allowance for loan losses to net loans outstanding was 0.88
percent at March 31, 1997. This ratio was 0.97 percent at March 31, 1996. The
allowance for loan losses as a percentage of
<PAGE>
nonaccrual loans and loans 90 days or more past due was 277.6 percent at March
31, 1997, compared to 90.9 percent at the same date in 1996.
NONPERFORMING ASSETS
At March 31, 1997, the Company's ratio of nonperforming assets to loans
outstanding plus other real estate owned ("OREO") was 0.50 percent, compared to
1.20 percent one year earlier.
At March 31, 1997, accruing loans past due 90 days or more of $38,000 and OREO
of $871,000 were outstanding. In 1996 on the same date, loans totaling $135,000
were past due 90 days or more and OREO balances of $688,000 were outstanding.
Nonaccrual loans totalled $1,547,000 at March 31, 1997, compared to a balance of
$4,481,000 at March 31, 1996. All of the nonaccrual loans outstanding at March
31, 1997 were performing (current with respect to payments), with the exception
of seven loans aggregating to $539,000. 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 March 31, 1997, 88.9 percent is
secured with real estate, the remainder is ninety percent guaranteed 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 March 31, 1997, the Company had $147,632,000 or
73.6 percent of total securities available for sale and securities held to
maturity were carried at an amortized cost of $52,949,000, representing 26.4
percent of total securities.
The Company's securities portfolio decreased $18,822,000 from March 31, 1996.
The securities portfolio as a percentage of earning assets was 28.1 percent at
March 31, 1997, compared to 32.7 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 quarter of 1997, proceeds of $15.4 million from securities
sales and maturing funds of $7.9 million were derived. Securities sales included
the divestiture of mutual funds totaling $10.5 million and a $5.0 million
Federal National Mortgage Association ("FNMA") bond with a duration of 4.6
years. Additions to the securities portfolio totaled $16.0 million and consisted
of:
<PAGE>
1) $9.8 million in fixed rate Federal Home Loan Mortgage Corporation ("FHLMC")
collateralized mortgage obligations with an average duration of 3.5 years, 2)
$1.0 million for a FNMA mortgage backed security for Ft. Pierce, Florida for
low- to moderate-income housing, a Community Reinvestment Act ("CRA")
investment, and 3) a $5.1 million FHLMC mortgage backed security resulting from
the securitization of 30-year fixed rate residential mortgage loans from the
Company's loan portfolio.
Company management considers the overall quality of the securities portfolio to
be high. The securities portfolio had an unrealized net loss of $2,212,000 or
1.1 percent of amortized cost at March 31, 1997, compared to a net loss of
$896,000 or 0.4 percent of amortized cost at March 31, 1996. While rates have
remained low, a shifting U.S. Treasury yield curve caused an increase 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 $33,001,000 or 5.1 percent to $674,025,000 at March 31,
1997, compared to one year earlier. Certificates of deposit increased
$25,807,000 or 9.2 percent to $304,911,000 over the past twelve months and lower
cost interest bearing deposits (NOW, savings and money markets deposits)
increased $1,522,000 or 0.6 percent to $277,872,000. Noninterest bearing demand
deposits increased $5,672,000 or 6.6 percent to $91,242,000.
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
<PAGE>
liabilities represents the Company's interest sensitivity gap, which may be
either positive (assets exceed liabilities) or negative (liabilities exceed
assets).
On March 31, 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 32.7 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. 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, 1996,
net interest income would decline 6.3 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 March 31, 1997, the Company had federal funds lines of credit
available and unused of $45,500,000 and had $116,509,000 of United States
Treasury and Government agency securities and mortgage backed securities not
pledged and available for use under repurchase agreements.
<PAGE>
Liquidity, as measured in the form of cash and cash equivalents (including
federal funds sold), totalled $50,849,000 at March 31, 1997 as compared to
$41,024,000 at March 31, 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 $2,437,000 was $109,000
higher than during the same period of 1996. 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. However, inflation affects financial institutions'
increased cost of 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.
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on February 26, 1997 (and
amended on February 27, 1997) with respect to the
Company's acquisition of Port St. Lucie National Bank
<PAGE>
Holding Corp., a $130 million financial instituion located in
Port St. Lucie, Florida. No other reports on Form 8-K were
filed for the three month period ended March 31, 1997.
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 14, 1997 /s/ Dennis S. Hudson, III
- ------------ -------------------------
DENNIS S. HUDSON, III
Executive Vice President &
Chief Operating Officer
May 14, 1997 /s/ William R. Hahl
- ------------ -------------------
WILLIAM R. HAHL
Senior Vice President &
Chief Financial Officer
ARTICLE 9 - FINANCIAL DATA SCHEDULE
At March 31, 1997, and for the three month period ended March 31, 1997:
Cash ....................................................... 25649
Interest Bearing Deposits .................................. 0
Federal Funds Sold ......................................... 25200
Trading Assets ............................................. 0
Investments Held For Sale .................................. 147632
Investments Carrying Value ................................. 52949
Investments Market Value ................................... 53359
Loans ...................................................... 486881
Allowance .................................................. 4294
Total Assets ............................................... 765619
Deposits ................................................... 674025
Short Term Borrowings ...................................... 21064
Other Liabilities .......................................... 3015
<PAGE>
Long Term Borrowings ........................................... 0
Common Stock ................................................... 429
Mandatory Preferred Stock ...................................... 0
Other Preferred Stock .......................................... 0
Other Shareholders Equity ...................................... 67086
Total Liabilities and Equity ................................... 765619
Interest on Loans .............................................. 10150
Interest on Investments ........................................ 3033
Other Interest Income .......................................... 451
Total Interest Income .......................................... 13634
Interest on Deposits ........................................... 5245
Total Interest Expense ......................................... 5523
Net Interest Income ............................................ 8111
Provision for Loan Losses ...................................... 150
Securities Gains (Losses) ...................................... (102)
Other Expenses ................................................. 7151
Pretax Income .................................................. 3056
Net Income - Pre-Extraordinary ................................. 1121
Extraordinary Items ............................................ 0
Accounting Changes ............................................. 0
Net Income ..................................................... 1935
Earnings Per Share - Primary ................................... 0.45
Earnings Per Share - Fully Diluted ............................. 0.45
Yield on Earning Assets ........................................ 7.73
Loans - Nonaccrual ............................................. 1547
Loans - Past Due 90 Days or More ............................... 38
Loans - Restructured Troubled Debt ............................. 0
Loans - Potential Problem Loans ................................ 0
Allowance for Loan Losses - Beg Balance ........................ 4286
Charge-offs .................................................... 206
Recoveries ..................................................... 64
Allowance for Loan Losses - Closing Balance .................... 4294
Allowance for Loan Losses - Domestic ........................... 4294
Allowance for Loan Losses - Foreign ............................ 0
Allowance for Loan Losses - Unallocated ........................ 0
