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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual Report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended Commission File
DECEMBER 31, 1996 NO. 0-13660
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SEACOAST BANKING CORPORATION OF FLORIDA
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(Exact name of registrant as specified in its charter)
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Florida 59-2260678
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(State or other jurisdiction of incorporation or organization) (IRS employer identification number)
815 Colorado Avenue, Stuart, Florida 34994
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(Address of principal executive offices) (Zip code)
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(561) 287-4000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
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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 by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 28, 1997:
Class A Common Stock, $.10 par value - $89,381,915 based upon the closing
sale price on February 28, 1997, using beneficial ownership stock rules adopted
pursuant to Section 13 of the Securities Exchange Act of 1934, to exclude
voting stock owned by directors and certain executive officers, some of whom
may not be held to be affiliates upon judicial determination.
Class B Common Stock, $.10 par value - $2,744,183 based upon the closing sale
price on February 28, 1997, of the Class A Common Stock, $.10 par value, into
which each share of Class B Common Stock, $.10 par value, is immediately
convertible on a one-for-one basis, using beneficial ownership stock rules
adopted pursuant to Section 13 of the Securities Exchange Act of 1934, to
exclude voting stock owned by directors and certain executive officers, some of
whom may not be held to be affiliates upon judicial determination.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of February 28 1996:
Class A Common Stock, $.10 Par Value - 3,872,694 shares
Class B Common Stock, $.10 Par Value - 384,638 shares
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Documents Incorporated by Reference:
1. Portions of the registrant's 1997 Proxy Statement for the Annual
Meeting of Shareholders ("1997 Proxy Statement") which is part of the
Joint Proxy Statement/Prospectus contained in the registrant's
Registration Statement on Form S-4, are incorporated by reference into
Part III.
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FORM 10-K INDEX
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PART I
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Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security-Holders
PART II
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Item 5. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
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Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) List of All Financial Statements
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995, and 1994
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
(a)(2) List of Financial Statement Schedules
(a)(3) List of Exhibits
(b) Reports on Form 8-K
(c) Exhibits
(d) Financial Statement Schedules
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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
Certain of the matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Annual Report may constitute forward-looking statements for
purposes of the Securities Act of 1933, as amended and the Securities Exchange
Act of 1934, as amended and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of Seacoast Banking Corporation of Florida (the "Company") to
be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. The Company's actual
results may differ materially from the results anticipated in these forward
looking statements due to a variety of factors, including, without limitation:
the effects of future economic conditions; governmental monetary and fiscal
policies, as well as legislative and regulatory changes; the risks of changes in
interest rates on the level and composition of deposits, loan demand, and the
values of loan collateral, securities, and interest rate risks; the effects of
competition from other commercial banks, thrifts, mortgage banking firms,
consumer finance companies, credit unions, securities brokerage firms, insurance
companies, money market and other mutual funds and other financial institutions
operating in the Company's market area and elsewhere, including institutions
operating locally, regionally, nationally and internationally, together with
such competitors offering banking products and services by mail, telephone and
computer and the Internet; and the failure of assumptions underlying the
establishment of reserves for possible loan losses. All written or oral
forward-looking statements attributable to the Company are expressly qualified
in their entirety by these Cautionary Statements.
PART I
ITEM 1. BUSINESS
General
Seacoast Banking Corporation of Florida ("Seacoast") is a bank holding
company registered under the Bank Holding Company Act of 1956, as amended ("BHC
Act"). Seacoast was incorporated under the laws of the State of Florida on
January 24, 1983, by the management of its principal subsidiary, First National
Bank and Trust Company of the Treasure Coast ("Bank") for the purpose of
forming a holding company for the Bank. On December 30, 1983, Seacoast
acquired all of the outstanding shares of the common stock of the Bank in
exchange for 810,000 shares of its $.10 par value Class A common stock ("Class
A Common Stock") and 810,000 shares of its $.10 par value Class B common stock
("Class B Common Stock").
The Bank commenced operations in 1933 under the name "Citizens Bank of
Stuart" pursuant to a charter originally granted by the State of Florida in
1926. The Bank converted to a national banking association on August 29, 1958.
Through the Bank and its broker-dealer subsidiary, Seacoast offers a
full array of deposit accounts and retail banking services, engages in consumer
and commercial lending and provides a wide variety of trust and asset
management services, as well as securities and annuity products. Seacoast's
primary service area is the "Treasure Coast", which, as defined by Seacoast,
consists of the counties of Martin, St. Lucie and Indian River on Florida's
southeastern coast. The Bank operates banking offices in the following cities:
five in Stuart, two in Palm City, one in Jensen Beach, two on Hutchinson
Island, one in Hobe Sound, two in Vero Beach, one in Sebastian, four in Port
St. Lucie, and one in Ft. Pierce.
Most of the banking offices have one or more Automatic Teller Machines
(ATMs) which provide customers with 24-hour access to their deposit accounts.
Seacoast is a member of two state-wide funds transfer systems known as the
"HONOR System" and the "Presto System", which permit banking customers access
to their accounts at over 21,800 locations in eighteen states in the Southeast.
The HONOR System also permits the Bank's customers access to their accounts via
other systems outside the State of Florida.
Customers can also use the Bank's "MoneyPhone" system to access
information on their loan and deposit account balances, and to transfer funds
between linked accounts, make loan payments, as well as to verify deposits or
checks that may have cleared. This service is accessible by phone 24-hours a
day, seven days a week.
In addition, customers may access information via the Bank's Telephone
Banking Center ("TBC"). From 7 A.M. to 7 P.M., servicing personnel in the TBC
are available to open accounts, take applications for certain types of loans,
resolve account problems and offer information on other bank products and
services to existing and potential customers. The Company recently began
offering PC banking for personal computers.
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Seacoast has three indirect subsidiaries. FNB Brokerage Services,
Inc. ("FNB Brokerage") provides brokerage services. South Branch Building,
Inc. is a general partner in a partnership which constructed a branch facility.
Big O RV Resort, Inc. was formed to own and operate certain properties acquired
through foreclosure, however it is currently inactive. The operations of these
subsidiaries contribute less than 10% of the consolidated assets and revenues
of Seacoast.
As a bank holding company, Seacoast is a legal entity separate and
distinct from its subsidiaries. Seacoast coordinates the financial resources
of the consolidated enterprise and maintains financial, operational and
administrative systems that allow centralized evaluation of subsidiary
operations and coordination of selected policies and activities. Seacoast's
operating revenues and net income are derived primarily from its subsidiaries
through dividends, fees for services performed and interest on advances and
loans.
As of December 31, 1996, Seacoast and its subsidiaries employed 335
full-time equivalent employees.
Expansion of Business
Seacoast has expanded its products and services to meet the changing
needs of the various segments of its market and it expects to continue this
strategy. Prior to 1991, Seacoast had expanded geographically by adding
branches, including the acquisition of a thrift branch in St. Lucie County.
Seacoast from time to time considers acquisitions of other depository
institutions or corporations engaged in bank-related activities. On September
20, 1991, the Bank acquired from the Resolution Trust Corporation ("RTC") 10
branches and approximately $110 million of deposits of a failed thrift,
American Pioneer Federal Savings Bank ("American Pioneer"), for a deposit
premium of $752,000 (of which $313,000 remains outstanding as an intangible
asset at December 31, 1996). Following the acquisition, the Bank temporarily
rented all the branch facilities from the RTC at commercially reasonable rates
to preserve existing customer relationships and to facilitate their transfer to
the Bank. On October 18, 1991, the Bank ceased renting the branch office
facilities it did not intend to acquire to avoid duplication of existing
facilities. After negotiation, definitive agreements with the RTC were
executed for the purchase of five branch facilities. See "Item 2. Properties".
On April 14, 1995, the Bank acquired approximately $46 million in
loans and $62 million in deposits by purchasing American Bank Capital
Corporation of Florida ("American Bank") and its subsidiary, American Bank of
Martin County. The transaction was treated as a purchase with the Bank paying
$9.3 million in cash. At December 31, 1996, intangible assets resulting from
this acquisition include goodwill of $3,882,000 and core deposit premium of
$1,662,000. Following the acquisition, the Bank closed its existing East Ocean
office location to move to a more attractive location acquired from American
Bank, and continued operation of an office location owned by American Bank in
southern Martin County. See "Item 2. Properties".
As of February 19, 1997, Seacoast entered into an Agreement and Plan
of Merger (the "PSHC Agreement") with Port St. Lucie National Bank Holding
Corp. ("PSHC"), pursuant to which PSHC will merge with and into Seacoast (the
"PSHC Merger"). It is anticipated that immediately after the "PSHC Merger,
PSHC's subsidiary bank, Port St. Lucie National Bank, will merge (the with and
into the Bank. Under the terms of the PSHC Agreement, 900,000 shares of
Seacoast Class A Common Stock will be issued for all the outstanding shares of
PSHC common stock, warrants and options to purchase common stock of PSHC. The
value of the transaction is approximately $26 million based on Seacoast's
closing Class A share price of $28.75 on February 18, 1997. The PSHC Merger is
subject to regulatory approvals and approvals by PSHC's shareholders and
Seacoast's shareholders. It is intended that the transaction qualify for the
pooling-of-interests method of accounting for business combinations. Seacoast
and the Bank will be the entities resulting the PSHC Merger and Bank Merger.
There are no assurances that the transaction will be consummated. As of
December 31, 1996, PSHC had total consolidated assets of approximately $130
million, total consolidated deposits of approximately $119 million and total
consolidated shareholders' equity of approximately $10 million.
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Florida law permits statewide branching. Seacoast anticipates future
expansion within its market area by opening additional offices and facilities.
New banking facilities were opened in November 1994 in St. Lucie West, a new
community west of Port St. Lucie, and in May 1996 in a WalMart superstore in
Sebastian in northern Indian River County. Most recently, in January 1997,
Seacoast opened a branch in Nettles Island, a predominately modular home
community on Hutchinson Island in southern St. Lucie County. Plans are underway
for the addition of three branch offices in Indian River County in 1997. See
"Item 2. Properties".
Competition
Seacoast and its subsidiaries operate in the highly competitive markets
of Martin, St. Lucie and Indian River Counties in southeastern Florida. The
Bank not only competes with other banks in its markets, but it also competes
with various other types of financial institutions for deposits, certain
commercial, fiduciary and investment services and various types of loans and
certain other financial services. The Bank also competes for interest-bearing
funds with a number of other financial intermediaries and investment
alternatives, including mutual funds, brokerage and insurance firms, investment
advisors, governmental and corporate bonds, and other securities.
Seacoast and its subsidiaries compete not only with financial institutions
based in the State of Florida, but also with a number of large out-of-state and
foreign banks, bank holding companies and other financial institutions which
have an established market presence in the State of Florida, or which offer
products by mail, telephone or over the Internet. Many of Seacoast's
competitors are engaged in local, regional, national and international
operations and have greater assets, personnel and other resources than Seacoast.
Some of such competitors are subject to less regulation and/or more favorable
tax treatment than Seacoast.
Supervision and Regulation
Bank holding companies and banks are extensively regulated under
federal and state law. This discussion is qualified in its entirety by
reference to the particular statutory and regulatory provisions referred to
below and is not intended to be an exhaustive description of the status or
regulations applicable to the Company's and the Bank's business. Supervision,
regulation, and examination of the Company and the Bank and their respective
Subsidiaries by the bank regulatory agencies are intended primarily for the
protection of depositors rather than holders of Company capital stock. Any
change in applicable law or regulation may have a material effect on the
Company's business.
Bank Holding Company Regulation
The Company, as a bank holding company, is subject to supervision and
regulation by the Board of Governors of the Federal Reserve System ("Federal
Reserve") under the BHC Act. The Company is required to file with the Federal
Reserve periodic reports and such other information as the Federal Reserve may
request. The Federal Reserve examines the Company, and may examine the
Company's Subsidiaries.
The BHC Act requires prior Federal Reserve approval for, among other
things, the acquisition by a bank holding company of direct or indirect
ownership or control of more than 5% of the voting shares or substantially all
the assets of any bank, or for a merger or consolidation of a bank holding
company with another bank holding company. With certain exceptions, the BHC
Act prohibits a bank holding company from acquiring direct or indirect
ownership or control of voting shares of any company which is not a bank or
bank holding company and from engaging directly or indirectly in any activity
other than banking or managing or controlling banks or performing services for
its authorized subsidiaries. A bank holding company, may, however, engage in
or acquire an interest in a company that engages in activities which the
Federal Reserve has determined by regulation or order to be so closely related
to banking or managing or controlling banks to be a proper incident thereto.
The Company is a legal entity separate and distinct from the Bank and
its other subsidiaries. Various legal limitations restrict the Bank from
lending or otherwise supplying funds to the Company or its non-bank
subsidiaries. The Company and the Bank are subject to Section 23A of the
Federal Reserve Act. Section 23A defines "covered transactions", which include
extensions of credit, and limits a bank's covered transactions with any
affiliate to 10% of such bank's capital and surplus. All covered and exempt
transactions between a bank and
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its affiliates must be on terms and conditions consistent with safe and sound
banking practices, and banks and their subsidiaries are prohibited from
purchasing low-quality assets from the bank's affiliates. Finally, Section 23A
requires that all of a bank's extensions of credit to an affiliate be
appropriately secured by acceptable collateral, generally United States
government or agency securities. The Company and the Bank also are subject to
Section 23B of the Federal Reserve Act, which generally limits covered and
other transactions among affiliates to terms and under circumstances, including
credit standards, that are substantially the same or at least as favorable to
the bank or its subsidiary as prevailing at the time for transactions with
unaffiliated companies.
The BHC Act, as amended by the interstate banking provisions of the
Reigle-Neal Interstate Banking and Branch Efficiency Act of 1994 ("Interstate
Banking Act"), which became effective on September 29, 1995, repealed the prior
statutory restrictions on interstate acquisitions of banks by bank holding
companies, such that Seacoast and any other bank holding company located in
Florida may now acquire a bank located in any other state, and any bank holding
company located outside Florida may lawfully acquire any bank based in another
state, regardless of state law to the contrary, in either case subject to
certain deposit-percentage, aging requirements, and other restrictions. The
Interstate Banking Act also generally provides that, after June 1, 1997,
national and state-chartered banks may branch interstate through acquisitions of
banks in other states. By adopting legislation prior to that date, a state has
the ability to either "opt in" and accelerate the date after which interstate
branching is permissible or "opt out" and prohibit interstate branching
altogether. Florida has responded to the enactment of the Interstate Banking
Act by enacting the Florida Interstate Branching Act (the "Florida Branching
Act"), which is effective June 1, 1997 and permits interstate branching through
merger transactions under the interstate Banking Act. Under the Florida
Branching Act, with the prior approval of the Florida Department of Banking and
Finance, a Florida bank may establish, maintain and operate one or more branches
in a state other than the State of Florida pursuant to a merger transaction in
which the Florida bank is the resulting bank. In addition, the Florida
Branching Act provides that one or more Florida banks may enter into a merger
transaction with one or more out-of-state banks, and an out-of-state bank
resulting from such transaction may maintain and operate the branches of the
Florida bank that participated in such merger. An out-of-state bank, however,
is not permitted to acquire a Florida bank in a merger transaction unless the
Florida bank has been in existence and continuously operated for more than
three years.
Federal Reserve policy requires a bank holding company to act as a
source of financial strength and to take measures to preserve and protect bank
subsidiaries in situations where additional investments in a troubled bank may
not otherwise be warranted. In addition, under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), where a bank holding
company has more than one bank or thrift subsidiary, each of the bank holding
company's subsidiary depository institutions are responsible for any losses to
the Federal Deposit Insurance Corporation ("FDIC") as a result of an affiliated
depository institution's failure. As a result, a bank holding company may be
required to loan money to its subsidiaries in the form of capital notes or
other instruments which qualify as capital under regulatory rules. However,
any loans from the holding company to such subsidiary banks likely will be
unsecured and subordinated to such bank's depositors and perhaps to other
creditors of the bank.
On February 20, 1997, the Federal Reserve adopted, effective April 21,
1997, amendments to its Regulation Y implementing certain provisions of The
Economic Growth and Regulatory Paperwork Reduction Act of 1996 ("EGRPRA"),
which was signed into law on September 30,1996. Among other things, these
amendments to Federal Reserve Regulation Y reduce the notice and application
requirements applicable to bank and nonbank acquisitions and de novo expansion
by well-capitalized and well-managed bank holding companies; expand the list
of nonbanking activities permitted under Regulation Y; reduce certain
limitations on previously permitted activities; and amend Federal Reserve
anti-tying restrictions to allow banks greater flexibility to package products
and services with their affiliates.
Bank and Bank Subsidiary Regulation Generally
The Bank is subject to supervision, regulation, and examination by the
Office of the Comptroller of the Currency (the "OCC") which monitors all areas
of the operations of the Bank, including reserves, loans, mortgages, issuances
of securities, payment of dividends, establishment of branches, and capital.
The Bank is a member of the FDIC and, as such, its deposits are insured by the
FDIC to the maximum extent provided by law. See "FDIC Insurance Assessments".
Under Florida law, the Bank currently may establish and operate
branches throughout the State of Florida, subject to the maintenance of
adequate capital for each branch and the receipt of OCC approval.
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The OCC recently has adopted a series of revisions to its regulations,
including expanding the powers exercisable by operations subsidiaries. These
changes also modernize and streamline corporate governance, investment and
fiduciary powers.
In December 1996, the OCC adopted the Federal Financial Institutions
Examination Council's ("FFIEC") updated statement of policy entitled "Uniform
Financial Institutions Rating System" ("UFIRS") effective January 1, 1997.
UFIRS is an internal rating system used by the federal and state regulators for
assessing the soundness of financial institutions on a uniform basis and for
identifying those institutions requiring special supervisory attention. Under
the previous UFIRS, each financial institution was assigned a confidential
composite rating based on an evaluation and rating of five essential components
of an institution's financial condition and operations including Capital
adequacy: Asset quality, Management, Earnings, and Liquidity. The major
changes include an increased emphasis on the quality of risk management
practices and the addition of a sixth component for Sensitivity to market risk.
For most institutions, the FFIEC has indicated that market risk primarily
reflects exposures to changes in interest rates. When regulators evaluate this
component, consideration is expected to be given to: management's ability to
identify, measure, monitor, and control market risk; the institution's size;
the nature and complexity of its activities and its risk profile; and the
adequacy of its capital and earnings in relation to its level of market risk
exposure. Market risk is rated based upon, but not limited to, an assessment
of the sensitivity of the financial institution's earnings or the economic
value of its capital to adverse changes in interest rates, foreign exchanges
rates, commodity prices, or equity prices; management's ability to identify,
measure, monitor, and control exposure to market risk; and the nature and
complexity of interest rate risk exposure arising from nontrading positions.
FNB Brokerage, a Bank subsidiary, is registered as a securities
broker-dealer under the Exchange Act and is regulated by the Securities and
Exchange Commission ("SEC"). As a member of the National Association of
Securities Dealers, Inc. ("NASD"), it also is subject to examination and
supervision of its operations and accounts by the NASD.
Community Reinvestment Act
The Company and the Bank are subject to the provisions of the
Community Reinvestment Act of 1977, as amended (the "CRA")and the federal
banking agencies' regulations thereunder. Under the CRA, all banks and thrifts
have a continuing and affirmative obligation, consistent with its safe and
sound operation to help meet the credit needs for their entire communities,
including low- and moderate-income neighborhoods. The CRA does not establish
specific lending requirements or programs for financial institutions, nor does
it limit an institution's discretion to develop the types of products and
services that it believes are best suited to its particular community,
consistent with the CRA. The CRA requires a depository institution's primary
federal regulator, in connection with its examination of the institution, to
assess the institution's record of assessing and meeting the credit needs of
the community served by that institution, including low- and moderate-income
neighborhoods. The regulatory agency's assessment of the institution's record
is made available to the public. Further, such assessment is required of any
institution which has applied to: (i) charter a national bank; (ii) obtain
deposit insurance coverage for a newly-chartered institution; (iii) establish a
new branch office that accepts deposits, (iv) relocate an office; or (v) merge
or consolidate with, or acquire the assets or assume the liabilities of, a
federally regulated financial institution. In the case of a bank holding
company applying for approval to acquire a bank or other bank holding company,
the Federal Reserve will assess the records of each subsidiary depository
institution of the applicant bank holding company, and such records may be the
basis for denying the application.
Under new CRA regulations, effective January 1, 1996, the
process-based CRA assessment factors have been replaced with a new evaluation
system that rates institutions based on their actual performance in meeting
community credit needs. The evaluation system used to judge an institution's
CRA performance consists of three tests: a lending test; an investment test;
and a service test. Each of these tests will be applied by the institution's
primary federal regulator taking into account such factors as: (i) demographic
data about the community; (ii) the institution's capacity and constraints;
(iii) the institution's product offerings and business strategy; and (iv) data
on the prior performance of the institution and similarly-situated lenders.
The new lending test--the most important of the three tests for all
institutions other than wholesale and limited purpose (e.g., credit card)
banks--will evaluate an institution's lending activities as measured by its
home mortgage loans, small business and farm loans, community development
loans, and, at the option of the institution, its consumer loans.
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Each of these lending categories will be weighed to reflect its
relative importance to the institution's overall business and, in the case of
community development loans, the characteristics and needs of the institution's
service area and the opportunities available for this type of lending.
Assessment criteria for the lending test will include: (i) geographic
distribution of the institution's lending; (ii) distribution of the
institution's home mortgage and consumer loans among different economic
segments of the community; (iii) the number and amount of small business and
small farm loans made by the institution; (iv) the number and amount of
community development loans outstanding; and (v) the institution's use of
innovative or flexible lending practices to meet the needs of low-to-moderate
income individuals and neighborhoods. At the election of an institution, or if
particular circumstances so warrant, the banking agencies will take into
account in making their assessments lending by the institution's affiliates as
well as community development loans made by the lending consortia and other
lenders in which the institution has invested. As part of the new regulation,
all financial institutions will be required to report data on their small
business and small farm loans as well as their home mortgage loans, which are
currently required to be reported under the Home Mortgage Disclosure Act.
The investment test focuses on the institution's qualified investments
within its service area that (i) benefit low-to-moderate income individuals and
small businesses or farms; (ii) address affordable housing needs; or (iii)
involve donations of branch offices to minority or women's depository
institutions. Assessment of an institution's performance under the investment
test is based upon the dollar amount of the institution's qualified
investments, its use of innovative or complex techniques to support community
development initiatives, and its responsiveness to credit and community
development needs.
The service test evaluates an institution's systems for delivering
retail banking services, taking into account such factors as: (i) the
geographic distribution of the institution's branch offices and ATMs; (ii) the
institution's record of opening and closing branch offices and ATMs; and (iii)
the availability of alternative product delivery systems such as home banking
and loan production offices in low-to-moderate income areas. The federal
regulators also will consider an institution's community development service as
part of the service test. A separate community development test will be
applied to wholesale or limited purpose financial institutions.
Institutions having total assets of less than $250 million will be
evaluated under more streamlined criteria. Seacoast and the Bank are
ineligible for these streamlined criteria. In addition, a financial
institution will have the option of having its CRA performance evaluated based
on a strategic plan of up to five years in length that it had developed in
cooperation with local community groups. In order to be rated under a
strategic plan, the institution will be required to obtain the prior approval
of its federal regulator.
The interagency CRA regulations provide that an institution evaluated
under a given test will receive one of five ratings for that test:
outstanding, high satisfactory, low satisfactory, needs to improve, or
substantial non-compliance. An institution will receive a certain number of
points for its rating on each test, and the points are combined to produce an
overall composite rating of either outstanding, satisfactory, needs to improve,
or substantial non-compliance. Under the agencies' rating guidelines, an
institution that receives an "outstanding" rating on the lending test will
receive an overall rating of at least "satisfactory", and no institution can
receive an overall rating of "satisfactory" unless it receives a rating of at
least "low satisfactory" on its lending test. In addition, evidence of
discriminatory or other illegal credit practices would adversely affect an
institution's overall rating. Under the new regulations, an institution's CRA
rating would continue to be taken into account by its primary federal regulator
in considering various types of applications. As a result of the Bank's most
recent CRA examination in August, 1995, the Bank received a "satisfactory" CRA
rating.
The Bank is also subject to, among other things, the provisions of the
Equal Credit Opportunity Act (the "ECOA") and the Fair Housing Act (the "FHA"),
both of which prohibit discrimination based on race or color, religion,
national origin, sex, and familial status in any aspect of a consumer or
commercial credit or residential real estate transaction. Based on recently
heightened concerns that some prospective home buyers and other borrowers may
be experiencing discriminatory treatment in their efforts to obtain loans, the
Department of Housing and Urban Development, the Department of Justice (the
"DOJ"), and all of the federal banking agencies in April 1994 issued an
Interagency Policy Statement on Discrimination in Lending in order to provide
guidance to financial institutions as to what the agencies consider in
determining whether discrimination exists, how the
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agencies will respond to lending discrimination, and what steps lenders might
take to prevent discriminatory lending practices. The DOJ has also recently
increased its efforts to prosecute what it regards as violations of the ECOA
and FHA.
Payment of Dividends
The Company is a legal entity separate and distinct from its banking
and other subsidiaries. The prior approval of the OCC is required if the total
of all dividends declared by a national bank (such as the Bank) in any calendar
year will exceed the sum of such bank's net profits for the year and its
retained net profits for the preceding two calendar years, less any required
transfers to surplus. Federal law also prohibits any national bank from paying
dividends that would be greater than such bank's undivided profits after
deducting statutory bad debt in excess of such bank's allowance for loan
losses.
In addition, the Company and the Bank are subject to various general
regulatory policies and requirements relating to the payment of dividends,
including requirements to maintain adequate capital above regulatory minimums.
The appropriate federal regulatory authority is authorized to determine under
certain circumstances relating to the financial condition of a national or
state member bank or a bank holding company that the payment of dividends would
be an unsafe or unsound practice and to prohibit payment thereof. The OCC and
the Federal Reserve have indicated that paying dividends that deplete a
national or state member bank's capital base to an inadequate level would be an
unsound and unsafe banking practice. The OCC and the Federal Reserve have each
indicated that financial depository institutions should generally pay dividends
only out of current operating earnings.
Capital
The Federal Reserve and the OCC have adopted final risk-based capital
guidelines for bank holding companies and national and state member banks. As
fully phased-in at the end of 1992, the guideline for a minimum ratio of
capital to risk-weighted assets (including certain off-balance-sheet
activities, such as standby letters of credit) is 8%. At least half of the
total capital must consist of common equity, retained earnings and a limited
amount of qualifying preferred stock, less goodwill and certain core deposit
intangibles ("Tier 1 capital"). The remainder may consist of subordinated
debt, non qualifying preferred stock and a limited amount of any loan loss
allowance ("Tier 2 capital" and, together with Tier 1 capital, "Total
Capital").
In addition, the federal bank regulatory agencies have established
minimum leverage ratio guidelines for bank holding companies, national banks,
and state member banks, which provide for a minimum leverage ratio of Tier 1
capital to adjusted average quarterly assets ("leverage ratio") equal to 3%,
plus an additional cushion of 100 to 200 basis points (i.e., 1%-2%) if the
institution has less than the highest regulatory rating. The guidelines also
provide that institutions experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore the Federal Reserve's guidelines indicate that the Federal Reserve
will continue to consider a "tangible Tier 1 leverage ratio" (deducting all
intangibles) in evaluating proposals for expansion or new activity. The Federal
Reserve and OCC have not advised the Company or the Bank of any specific minimum
leverage ratio or tangible Tier 1 leverage ratio applicable to them.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, requires the federal banking agencies to take
"prompt corrective action" regarding depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized", and "critically undercapitalized". A depository
institution's capital tier will depend upon how its capital levels compare to
various relevant capital measures and certain other factors, as established by
regulation.
All of the federal banking agencies have adopted regulations
establishing relevant capital measures and relevant capital levels. The
relevant capital measures are the Total Capital ratio, Tier 1 capital ratio,
and the leverage ratio. Under the regulations, a national or state member bank
will be (i) well capitalized if it has a Total Capital ratio of 10% or greater,
a Tier 1 capital ratio of 6% or greater, and a leverage ratio of 5% or greater
and is not subject to any order or written directive by a federal bank
regulatory agency to meet and maintain a specific capital level for any capital
measure, (ii) adequately capitalized if it has a Total
<PAGE> 12
Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a
leverage ratio of 4% or greater (3% in certain circumstances), (iii)
undercapitalized if it has a Total Capital ratio of less than 8%, a Tier 1
capital ratio of less than 4% (3% in certain circumstances), or (iv) critically
undercapitalized if its tangible equity is equal to or less than 2% of average
quarterly tangible assets.
As of December 31, 1996, the consolidated capital ratios of the
Company and the Bank were as follows:
<TABLE>
<CAPTION>
Regulatory
Minimum Company Bank
------- ------- ----
<S> <C> <C> <C>
Tier 1 capital ratio 4.0% 14.0% 12.5%
Total Capital ratio 8.0% 15.0% 13.5%
Leverage ratio 3.0-5.0% 8.3% 7.4%
</TABLE>
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
growth limitations and are required to submit a capital restoration plan for
approval. For a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution comply
with such capital restoration plan. The aggregate liability of the parent
holding company is limited to the lesser of 5% of the depository institution's
total assets at the time it became undercapitalized and the amount necessary to
bring the institution into compliance with applicable capital standards. If a
depository institution fails to submit an acceptable plan, it is treated as if
it is significantly undercapitalized. If the controlling holding company fails
to fulfill its obligations under FDICIA and files (or has filed against it) a
petition under the federal Bankruptcy Code, the claim would be entitled to a
priority in such bankruptcy proceeding over third party creditors of the bank
holding company.
Significantly undercapitalized depository institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. Critically undercapitalized institutions are subject to the appointment
of a receiver or conservator.
Because the Company and the Bank exceed applicable regulatory capital
requirements, the respective managements of the Company and the Bank do not
believe that the provisions of FDICIA have any material impact on the Company
and the Bank or their respective operations.
Bank regulators continue to indicate their desire to base capital
requirements upon the riskiness of the activities conducted and have long
discussed proposals to add an interest rate-risk component to risk-based
capital requirements.
FDICIA
FDICIA directs that each federal banking regulatory agency prescribe
standards for depository institutions and depository institution holding
companies relating to internal controls, information systems, internal audit
system, loan documentation, credit underwriting, interest rate exposure, asset
growth compensation, a maximum ratio of classified assets to capital, minimum
earnings sufficient to absorb losses, a minimum ratio of market value to book
value for publicly traded shares, and such other standards as the agency deems
appropriate.
FDICIA also contains a variety of other provisions that may affect the
operations of the Company and the Bank, including new reporting requirements,
regulatory standards for estate lending, "truth in savings" provisions, the
requirement that a depository institution give 90 days prior notice to
customers and regulatory authorities
<PAGE> 13
before closing any branch, and a prohibition on the acceptance or renewal of
brokered deposits by depository institutions that are not well capitalized or
are adequately capitalized and have not received a waiver from the FDIC. Under
regulations relating to brokered deposits, the Bank is well capitalized and not
restricted.
Enforcement Policies and Actions
FIRREA and subsequent federal legislation significantly increased the
enforcement authorities of the FDIC and other federal depository institution
regulators, and authorizes the imposition of civil money penalties up to $1
million per day. Persons who are affiliated with depository institutions can
be removed from any office held in such institution and banned for life from
participating in the affairs of any such institution. The banking regulators
have not hesitated to use the new enforcement authorities provided under
FIRREA.
Depositor Preference
The Omnibus Budget Reconciliation Act of 1993 provides that deposits
and certain claims for administrative expenses and employee compensation
against an insured depository institution would be afforded a priority over
other general unsecured claims against such an institution in the "liquidation
or other resolution" of such an institution by any receiver.
Fiscal and Monetary Policy
Banking is a business which depends on interest rate differentials.
In general, the difference between the interest paid by a bank on its deposits
and its other borrowings, and the interest received by a bank on its loans and
securities holdings, constitutes the major portion of a bank's earnings. Thus,
the earnings and growth of Seacoast and the Bank are subject to the influence
of economic conditions generally, both domestic and foreign, and also to the
monetary and fiscal policies of the United States and its agencies,
particularly the Federal Reserve. The Federal Reserve regulates the supply of
money through various means, including open market dealings in United States
government securities, the discount rate at which banks may borrow from the
Federal Reserve, and the reserve requirements on deposits. The nature and
timing of any changes in such policies and their effect on Seacoast and its
subsidiaries cannot be predicted.
FDIC Insurance Assessments
The Bank is subject to FDIC deposit insurance assessments. The Bank's
deposits are primarily insured by the FDIC's Bank Insurance Fund ("BIF"). The
Bank is also a member of the Savings Association Insurance Fund ("SAIF") to the
extent that the Bank owns savings deposits acquired in 1991 from the RTC in the
American Pioneer transaction. In 1996, the FDIC adopted a new risk-based
premium schedule which decreased the assessment rates for BIF depository
institutions. Under this schedule, which took effect for assessment periods
after January 1, 1996, the annual premiums ranged from zero to $.27 for every
$100 of deposits. Prior to January 1, 1996, the annual premiums ranged from
$.04 to $.31 for every $100 of deposit. Each financial institution is assigned
to one of three capital groups - well capitalized, adequately capitalized or
undercapitalized - and further assigned to one of three subgroups within a
capital group, on the basis of supervisory evaluations by the institution's
primary federal regulator and other information relevant to the institution's
financial condition and the risk posed to the applicable insurance fund. The
actual assessment rate applicable to a particular institution will, therefore,
depend in part upon the risk assessment classification so assigned to the
institution by the FDIC. SAIF insured deposits were assessed premiums for the
SAIF which have remained unchanged at $.23 to $.31 per $100 of deposits, based
upon the institution's assigned risk category and supervisory evaluation. In
the third quarter of 1996 a special one-time SAIF assessment of $0.657 per $100
of deposits was levied, resulting in a $500,000 charge to the Bank. Effective
October 1, 1996 for all Oakar and Sasser institutions, and January 1, 1997 for
all other institutions, the SAIF assessment was changed to four to 31 basis
points per annum. During the years ended December 31, 1995, and 1996, the Bank
paid $728,000 and $632,000, respectively, in BIF and SAIF deposit premiums.
The FDIC's Board of Directors has retained the 1996 BIF assessment
schedule of zero to 27 basis points per annum for the first semiannual period of
1997. In addition, the FDIC Board eliminated
<PAGE> 14
the $2,000 minimum annual assessment and authorized the refund of the
fourth-quarter minimum assessment of $500 paid by certain BIF-insured
institutions on September 30, 1996 by crediting such amount against each BIF
member's first semiannual assessment in 1997. EGRPRA recapitalized the FDIC's
SAIF Fund to bring it into parity with BIF. As part of this recapitalization,
The Deposit Insurance Funds Act of 1996 (the "Funds Act") authorized FICO to
levy assessments on BIF-assessable deposits at a rate equal to one-fifth of the
FICO assessment rate that is applied to deposits assessable by SAIF. The actual
annual assessment rates for FICO for 1997 have been set at 1.30 basis points for
BIF-assessable deposits and 6.48 basis points for SAIF deposits.
Community Development Act
The Community Development Act has several titles. Title I provides
for the establishment of community development financial institutions to
provide equity investments, loans and development services to financially
underserved communities. A portion of this Title also contains various
provisions regarding reverse mortgages, consumer protections for qualifying
mortgages and hearings for home equity lending, among other things. Title II
provides for small business loan securitization and securitizations of other
loans, including authorizing a study on the impact of additional securities
based on pooled obligations. Small business capital enhancement is also
provided. Title III of the Act provides for paperwork reduction and regulatory
improvement, including certain examination and call report issues, as well as
changes in certain consumer compliance requirements, certain audit requirements
and real estate appraisals, and simplification and expediting processing of
bank holding company applications, merger applications and securities filings,
among other things. It also provides for commercial mortgage-related
securities to be added to the definition of a "mortgage-related security" in
the Exchange Act. This will permit commercial mortgages to be pooled and
securitized, and permit investment in such instruments without limitation by
insured depository institutions. It also pre-empts state legal investment and
blue sky laws related to qualifying commercial mortgage securities. Title IV
deals with money laundering and currency transaction reports, and Title V
reforms the national flood insurance laws and requirements. The nature,
timing, and effect upon the Company of any changes resulting from the Community
Development Act cannot be predicted.
Legislative and Regulatory Changes
Various changes have been proposed with respect to restructuring and
changing the regulation of the financial services industry. FIRREA required a
study of the deposit insurance system. On February 5, 1991, the Department of
the Treasury released "Modernizing the Financial System; Recommendations for
Safer, More Competitive Banks". Among other matters, this study analyzed and
made recommendations regarding reduced bank competitiveness and financial
strength, overextension of deposit insurance, the fragmented regulatory system
and the under-capitalized deposit insurance fund. It proposed restoring
competitiveness by allowing banking organizations to participate in a full
range of financial services outside of insured commercial banks. Deposit
insurance coverage would be narrowed to promote market discipline.
EGRPRA streamlined the non-banking activities application process for
well-capitalized and well-managed bank holding companies. Under EGRPRA,
qualified bank holding companies may commence a regulatory approved non-banking
activity without prior notice to the Federal Reserve, and instead, written
notice is required within 10 days after commencing the activity. Under EGRPRA,
the prior notice period is reduced to 12 days in the event of any non-banking
acquisition or share purchase or de novo non-banking activity previously
approved by order of the Federal Reserve, but not yet implemented by
regulations, assuming the size of the acquisition or proposed activity does not
exceed 10% of risk-weighted assets of the acquiring bank holding company and the
consideration does not exceed 15% of Tier 1 capital.
Other legislative and regulatory proposals regarding changes in
banking, and the regulation of banks, thrifts and other financial institutions
and bank and bank holding company powers are being considered by the executive
branch of the Federal government, Congress and various state governments,
including Florida. Among other items under consideration are the possible
combination of BIF and SAIF, changes in or repeal of the Glass-Steagall Act
which separates commercial banking from investment banking, and changes in the
BHC Act to
<PAGE> 15
broaden the powers of "financial services" companies to own and control
depository institutions and engage in activities not closely related to
banking. Certain of these proposals, if adopted, could significantly change
the regulation of banks and the financial services industry. It cannot be
predicted whether any of these proposals will be adopted, and, if adopted, how
these proposals will affect the Company and the Bank. In a case presented to
the United States Supreme Court in 1996, the court found that the powers of
banking affiliates to conduct insurance business in the State of Florida was
permissible.
Statistical Information
Certain statistical information (as required by Guide 3) is included
in response to Item 7 of this Annual Report on Form 10-K. Certain statistical
information is included in response to Item 6 and Item 8 of this Annual Report
on Form 10-K.
ITEM 2. PROPERTIES
Seacoast and the Bank's main office occupy approximately 62,000 square
feet of a 68,000 square foot building in Stuart, Florida. The building,
together with an adjacent 10-lane drive-in banking facility and an additional
27,000 square foot office building, are situated on approximately eight acres
of land in the center of Stuart zoned for commercial use. The building and
land are owned by the Bank, which leases out portions of the building not
utilized by Seacoast and the Bank to unaffiliated parties.
Adjacent to the main office, the Bank leases approximately 21,400
square feet of office space to house operational departments, primarily
information systems and retail support. The Bank owns its data processing
equipment which is used for servicing bank deposits and loan accounts as well
as on-line banking services, providing tellers and other customer service
personnel with access to customers' records.
As of December 31, 1996, the net carrying value of branch offices
(excluding the main office) was approximately $7.7 million. Seacoast's branch
offices are described as follows:
Jensen Beach, opened in 1977, is a free-standing facility located in
the commercial district of a residential community contiguous to Stuart. The
1,920 square foot bank building and land are owned by the Bank. Improvements
include three drive-in teller lanes and one drive-up ATM as well as a parking
lot and landscaping.
East Ocean Boulevard, opened at it's original location in 1978 in a
2,400 square foot building leased to the Bank. It is still located on the main
thoroughfare between downtown Stuart and Hutchinson Island's beach-front
residential developments. The acquisition of American Bank provided an
opportunity for the Bank to move to a new location in April 1995. The first
three floors of a four story office condominium were acquired in the
acquisition. The 2,300 square foot branch area on the first floor has been
remodeled and operates as a full service branch including five drive-in lanes
and a drive-up ATM. The remaining 2,300 square feet on the ground floor was
sold in June 1996 and the third floor was sold in December 1995. All of the
second floor has been leased to tenants.
Cove Road, opened in late 1983, is conveniently located to housing
developments in the residential areas south of Stuart known as Port Salerno and
Hobe Sound. The Bank's subsidiary is a general partner in a partnership which
entered into a long term land lease for approximately four acres of property on
which it constructed a 7,500 square foot building. The Bank leases the
building and utilizes 3,450 square feet of the available space. The balance is
sublet by the Bank to other business tenants. The Bank has improved its
premises with three drive-in lanes, bank equipment, and furniture and fixtures,
all of which are owned by the Bank. A drive-up ATM will be added by March 31,
1997.
Hutchinson Island, opened on December 31, 1984, is in a shopping
center located on a coastal barrier island, close to numerous oceanfront
condominium developments. In 1993, the branch was expanded from 2,800
<PAGE> 16
square foot to 4,000 square feet and is under long term lease to the Bank. The
Bank has improved the premises with bank equipment, a walk-up ATM and three
drive-in lanes, all owned by the Bank.
Rivergate, opened October 28, 1985, in 1,700 square feet of leased
space in the Rivergate Shopping Center, Port St. Lucie, Florida. The Bank also
leased approximately 800 square feet of office space nearby, which served as
administrative offices. Both of these offices were under short term leases
which expired in 1988. The Bank moved to larger facilities in the Rivergate
Shopping Center in April of 1988 under a long term lease agreement. Furniture
and bank equipment located in the prior facility were moved to the new facility
which has approximately 3,400 square feet, with three drive-in lanes and a
drive-up ATM.
Northport was acquired on June 28, 1986 from Citizens Federal Savings
& Loan Association of Miami. This property consists of a storefront under long
term lease in the St. Lucie Plaza Shopping Center, Port St. Lucie, of
approximately 4,000 square feet. This office was closed March 31, 1994 and the
property is utilized for storage.
Wedgewood Commons, opened in April 1988, is located on an out parcel
under long term lease in the Wedgewood Commons Shopping Center, south of Stuart
on U.S. Highway 1. A 2,800 square foot building, four drive-in lanes, a walk-
up ATM and bank equipment, all of which is owned by the Bank are located on the
leased property.
Bayshore, opened on September 27, 1990, occupies 3,520 square feet of
a 50,000 square foot shopping center located in Port St. Lucie. The Bank has
leased the premises under a long term lease agreement and has made improvements
to the premises, including three drive-in lanes and a walk-up ATM, all of which
are owned by the Bank.
Hobe Sound, acquired from the Resolution Trust Corporation on December
23, 1991, is a two story facility containing 8,000 square feet and is centrally
located in Hobe Sound. Improvements include two drive-in teller lanes, a
drive-up ATM, and equipment and furniture, all of which are owned by the Bank.
Fort Pierce, acquired from the Resolution Trust Corporation on
December 23, 1991, is a 2,895 square foot facility located in the heart of Fort
Pierce and has three drive-in lanes and a drive-up ATM. Equipment and furniture
are all owned by the Bank.
Martin Downs , purchased from the Resolution Trust Corporation in
February 1992, is a 3,960 square foot bank building located at a high traffic
intersection in Palm City, an emerging commercial and residential community west
of Stuart. Improvements include three drive-in teller lanes, a drive-up ATM,
equipment and furniture.
Tiffany, purchased from the Resolution Trust Corporation in May 1992,
is a two story facility which contains 8,250 square feet and is located on a
corner of U.S. Highway One in Port St. Lucie offering excellent exposure in one
of the fastest growing residential areas in the region. The second story which
contains 4,250 square feet is leased to tenants. Three drive-in teller lanes,
a walk-up ATM, equipment and furniture are utilized and owned by the Bank.
Vero Beach, purchased from the Resolution Trust Corporation in
February 1993, is a 3,300 square foot bank building located in Vero beach on
U.S. Highway One and represents the Bank's initial presence in this Indian
River County market. A leasehold interest in a long-term land lease was
acquired. Improvements include three drive-in teller lanes, a walk-up ATM,
equipment and furniture, all of which are owned by the Bank.
Beachland was opened in February 1993, in 4,150 square feet of leased
space located in a three-story commercial building on Beachland Boulevard, the
main beachfront thoroughfare, in Vero Beach, Florida. An additional 1,050
square feet was leased during 1996. This facility has 2 drive-in teller lanes,
a drive-up ATM, furniture and equipment, all owned by the Bank.
<PAGE> 17
Sandhill Cove, opened in September 1993, is in an upscale life-care
retirement community. The 135 square foot office is located within the
facility which is located on 36 acres in Palm City, Florida. This community
will contain approximately 168 private residences.
St. Lucie West, opened in November 1994, is in a 3,600 square foot
building located at 1320 S.W. St. Lucie Blvd, Port St. Lucie. This facility
has three drive-in teller lanes and a drive-up ATM, all owned by the Bank.
Mariner Square, acquired from American Bank in April 1995, is a
3,600 square foot leased space located on the ground floor of a three story
office building located on U.S.Highway 1 between Hobe Sound and Port Salerno.
Approximately 700 square feet of the space is sublet to a tenant. The space
occupied by the Bank has been improved to be a full service branch with two
drive-in lanes, one serving as a drive-up ATM lane as well as a drive-in teller
lane, all owned by the Bank.
Sebastian opened in May 1996 as an in-store branch within a
174,000 square foot WalMart Superstore located on U.S. 1 in northern Indian
River County. The leased space occupied by the Bank totals 865 square feet.
The facility has a walk-up ATM, owned by the Bank.
For additional information, refer to Notes F and I of the Notes to
Consolidated Financial Statements in the 1996 Annual Report of Seacoast
incorporated herein by reference pursuant to Item 8 of this document.
In 1997, four new branches, one in St. Lucie County and three in
Indian River County, will open:
Nettles Island was opened in January 1997 in southern St. Lucie County
on Hutchinson Island. It occupies 350 square feet of leased space in a
predominantly modular home community. Furniture and equipment are owned. No
ATM or drive-in lanes are offered.
South Vero Square is expected to open in April 1997 in a 3,150 square
foot building owned by the Bank on South U.S. 1 in Vero Beach. The facility
will include three drive-in teller lanes, a drive-up ATM, and furniture and
equipment, all owned by the Bank.
Oak Point is anticipated to open in June 1997. It will occupy 9,000
square feet of leased space on the first and second floor of a 19,700 square
foot 3-story building, presently under construction in Indian River County.
The office will be in close proximity to Indian River Memorial Hospital and the
peripheral medical community adjacent to the hospital. The facility includes
three drive-in teller lanes, a walk-up ATM, and furniture and equipment, all
owned by the Bank.
Route 60 Vero is scheduled to open in June 1997 as well. Similar to
the Sebastian office, this facility will be housed in a WalMart Superstore in
western Vero Beach in Indian River County. The branch will occupy 750 square
feet of leased space and will include a walk-up ATM.
<PAGE> 18
ITEM 3. LEGAL PROCEEDINGS
The Company and its Subsidiaries, because of the nature of their
business, are subject to various threatened and pending legal actions in the
normal course of their business. 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 lawsuits, when resolved,
should not have a material adverse effect on the consolidated results of
operation or financial condition of Seacoast and its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
<PAGE> 19
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Class A Common Stock is traded in the over the counter market and
quoted on the Nasdaq National Market System. There is no established public
trading market for the Class B Common Stock of Seacoast. As of March 1, 1997,
there were approximately ______ record holders of the Class A Common Stock and
______ record holders of the Class B Common Stock.
Seacoast Class A Stock is traded in the over-the-counter market and is
quoted on the Nasdaq National Market ("Nasdaq National Market") under the symbol
"SBCFA". The following table sets forth the high and low sale prices per share
of Seacoast Class A Stock on the Nasdaq National Market and the dividends paid
per share of Seacoast Class A Stock for the indicated periods.
<TABLE>
<CAPTION>
Annual Dividends Declared
Sale Price Per Share of Per Share of
Seacoast Class A Stock Seacoast Class A Stock
----------------------- ----------------------
High Low
---- ---
1995
----
<S> <C> <C> <C>
First Quarter . . . . . . . . . . . . . . . 19.25 16.25 $0.13
Second Quarter . . . . . . . . . . . . . . 19.50 17.75 0.13
Third Quarter . . . . . . . . . . . . . . . 22.50 18.00 0.13
Fourth Quarter . . . . . . . . . . . . . . 25.25 21.625 0.15
1996
----
First Quarter . . . . . . . . . . . . . . . 22.75 20.25 0.15
Second Quarter . . . . . . . . . . . . . . 22.75 21.00 0.15
Third Quarter . . . . . . . . . . . . . . . 24.00 21.75 0.15
Fourth Quarter . . . . . . . . . . . . . . 26.50 23.25 0.20
</TABLE>
Seacoast's Articles of Incorporation prohibit the declaration or
payment of cash dividends on Class B Common Stock unless cash dividends are
declared or paid on Class A Common Stock in an amount equal to at least 110% of
any cash dividend on Class B Common Stock. Dividends on Class A Common Stock
payable in shares of Class A Common Stock shall be paid to holders of Class A
Common and Class B Common Stock at the same time and on the same basis.
In 1994, cash dividends of $.49 per share of Class A Common Stock and
$.445 per share of Class B Common Stock were paid. In 1995, cash dividends of
$.54 per share of Class A Common Stock and $.489 per share of Class B Common
Stock were paid. In 1996, cash dividends of $.65 per share of Class A Common
Stock and $.585 per share of Class B Common Stock were paid.
Dividends from the Bank are Seacoast's primary source of funds to pay
dividends on Seacoast capital stock. Under the National Bank Act, the Bank may
in any calendar year, without the approval of the OCC, pay dividends to the
extent of net profits for that year, plus retained net profits for the
preceding two years (less any required transfers to surplus). The need to
maintain adequate capital in the Bank also limits dividends that may be paid to
Seacoast. Information regarding a restriction on the ability of the Bank to
pay dividends to Seacoast is contained in Note B of the "Notes to Consolidated
Financial Statements" contained in Item 8 hereof. See also "Supervision and
Regulation" contained in Item 1 of this document.
The OCC and Federal Reserve have the general authority to limit the
dividends paid by insured banks and bank holding companies, respectively, if
such payment may be deemed to constitute an unsafe or unsound practice.
<PAGE> 20
If, in the particular circumstances, the OCC determines that the payment of
dividends would constitute an unsafe or unsound banking practice, the OCC may,
among other things, issue a cease and desist order prohibiting the payment of
dividends. This rule is not expected to adversely affect the Bank's ability to
pay dividends to Seacoast. See "Supervision and Regulation" contained in Item
1 of this document.
Each share of Class B Common Stock is convertible by its holder into
one share of Class A Common Stock at any time prior to a vote of shareholders
authorizing a liquidation of Seacoast.
<PAGE> 21
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
FOR THE YEAR
Net interest income $ 31,102 $ 27,090 $ 25,200
Provision for loan losses 450 250 145
Noninterest income:
Securities gains 72 480 752
Other 8,714 7,517 6,475
Noninterest expenses 27,517 24,246 23,005
Income before income taxes 11,921 10,591 9,277
Provision for income taxes 4,312 3,765 3,091
Income before cumulative effect
of a change in accounting
principle 7,609 6,826 6,186
Cumulative effect on prior years
of a change in accounting for
income taxes 0 0 0
Net income 7,609 6,826 6,186
Core earnings (1) 12,464 10,425 8,690
Per share data:
Income before cumulative
effect of a change in
accounting principle 1.77 1.58 1.44
Cumulative effect on prior
years of a change in
accounting for income taxes 0.00 0.00 0.00
Net income 1.77 1.58 1.44
Cash dividends paid:
Class A common 0.65 0.54 0.49
Book value 15.68 14.75 12.98
Dividends to net income 35.9% 33.4% 33.5%
AT YEAR END
Assets $808,408 $771,348 $662,711
Securities 208,800 213,638 258,661
Net loans 467,311 410,898 289,417
Deposits 692,757 660,967 559,629
Shareholders' equity (2) 66,769 62,200 55,584
Performance ratios:
Return on average assets 1.05% 1.00% 1.02%
Return on average equity 11.48 11.05 10.69
Net interest margin (3) 4.63 4.32 4.57
Average equity to average assets 9.14 9.01 9.51
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(Dollars in thousands except per share data)
1993 1992
- -----------------------------------------------------------------
FOR THE YEAR
<S> <C> <C>
Net interest income $ 26,059 $ 27,477
Provision for loan losses 150 1,103
Noninterest income:
Securities gains 1,204 1,759
Other 7,588 7,693
Noninterest expenses 24,345 26,655
Income before income taxes 10,356 9,171
Provision for income taxes 3,488 3,022
Income before cumulative effect of a change
in accounting principle 6,868 6,149
Cumulative effect on prior years of a change
in accounting for income taxes 264 0
Net income 7,132 6,149
Core earnings (1) 10,421 10,234
Per share data:
Income before cumulative
effect of a change in
accounting principle 1.60 1.45
Cumulative effect on prior
years of a change in
accounting for income taxes 0.06 0.00
Net income 1.66 1.45
Cash dividends paid:
Class A common 0.45 0.41
Book value 14.13 11.71
Dividends to net income 26.5% 27.9%
AT YEAR END
Assets $639,404 $613,558
Securities 283,732 292,935
Net loans 255,995 247,754
Deposits 533,486 551,368
Shareholders' equity (2) 60,257 49,707
Performance ratios:
Return on average assets 1.19% 1.02%
Return on average equity 13.47 12.92
Net interest margin (3) 4.80 5.07
Average equity to average assets 8.81 7.89
- -----------------------------------------------------------------
</TABLE>
(1) Income before taxes excluding the provision for loan losses, securities
gains and expenses associated with foreclosed and repossessed asset
management and dispositions.
(2) Includes $(1,482,000) in 1996, $(705,000) in 1995, $(4,391,000) in 1994
and $4,667,000 in 1993 related to adoption of Financial Accounting
Standard Board No. 115 "Accounting for Certain Investments in Debt and
Equity Securities".
(3) On a fully taxable equivalent basis.
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
1996 Management's Discussion and Analysis
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 Consolidated Financial Statements of the Company
and the notes thereto in Item 8 hereof, and the Selected Financial Data
provided in Item 6 hereof.
Net income for 1996 totalled $7,609,000 or $1.77 per share, compared with
$6,826,000 or $1.58 per share in 1995 and $6,186,000 or $1.44 per share in
1994. Return on average assets was 1.05 percent and return on average
shareholders' equity was 11.48 percent for 1996, compared to the prior year's
results of 1.00 percent and 11.05 percent, respectively, and 1994's results of
1.02 percent and 10.69 percent, respectively.
Earnings in 1996 were reduced by a one-time special assessment of $500,000
($316,000 after taxes) to replenish the Savings Association Insurance Fund
(SAIF) and a noncash nonrecurring charge of $600,000 ($379,000 after taxes)
related to the termination and settlement of the Company's pension plan.
The Company acquired $62 million in deposits and $46 million in loans from
American Bank Capital Corporation of Florida (American) and its subsidiary,
American Bank of Martin County, on April 14, 1995. The transaction was
accounted for as a purchase.
TABLE 1
CONDENSED INCOME STATEMENT
AS A PERCENT OF AVERAGE ASSETS
(Tax equivalent basis)
<TABLE>
<CAPTION>
1996 1995 1994
------------------
<S> <C> <C> <C>
Net interest income 4.33% 4.00% 4.21%
Provision for loan losses 0.06 0.04 0.02
Noninterest income
Securities gains 0.01 0.07 0.12
Other 1.20 1.10 1.06
Noninterest expenses 3.79 3.53 3.78
------------------
Income before income taxes 1.69 1.60 1.59
Provision for income taxes
including tax equivalent
adjustment 0.64 0.60 0.57
------------------
NET INCOME 1.05% 1.00% 1.02%
==================
</TABLE>
<PAGE> 24
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income (fully taxable equivalent) for 1996 rose $3,986,000 or 14.5
percent, due to increased business volumes and an improved net interest margin,
which increased from 4.32 percent a year ago to 4.63 percent. In 1996, rates
paid for all types of interest bearing deposits decreased, resulting in
declines of: 22 basis points to 1.36 percent for NOW accounts, 16 basis points
to 1.77 percent for savings deposits, 73 basis points to 2.12 percent for money
market deposits and 21 basis points to 5.27 percent for time deposits. In
addition, the interest rates paid for short term borrowings, primarily sweep
repurchase agreements with customers of the Company's subsidiary bank,
decreased 45 basis points to 4.14 percent. The resulting rate paid for all
interest bearing liabilities in 1996 was 3.64 percent, 21 basis points lower
than in 1995.
TABLE 2
CHANGES IN AVERAGE EARNING ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Increase/(Decrease) Increase/(Decrease)
---------------------- --------------------
1996 vs 1995 1995 vs 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities:
Taxable $(25,973) (11.4)% $(35,028) (13.4)%
Nontaxable (1,436) (10.6) (435) (3.1)
Federal funds sold and other
short term investments (15,063) (38.4) 25,119 177.8
Loans, net 85,428 24.0 85,713 31.7
-------------------------------------------
TOTAL $ 42,956 6.8% $ 75,369 13.5%
===========================================
</TABLE>
During 1996, average total deposits increased $24,873,000 or 4.1 percent.
Average time deposits increased $5,863,000 or 2.1 percent, while on an
aggregate basis, average balances for NOW, savings and money market accounts,
which are lower cost interest bearing deposits, increased $5,782,000 or 2.2
percent. Most significant of all, the deposit mix was favorably affected by an
increase in average noninterest bearing demand deposits of $13,228,000 or 18.3
percent.
The yield on earning assets improved 6 basis points during 1996 to 7.69
percent. A more favorable mix of higher yield loans versus investments offset
individual yield declines for investment securities, federal funds sold and the
loan portfolio of 24 basis points, 59 basis points and 10 basis points,
respectively. Average earning assets for 1996 increased $42,956,000 or 6.8
percent, compared to the prior year. Although $29.7 million in fixed rate
residential mortgage loans were securitized in 1996, average total loans grew
$85,428,000 or 24.0 percent. Partially funding the growth in loans were
declines in average investment securities of $27,409,000 or 11.4 percent and
average federal funds sold of $15,063,000 or 38.4 percent.
<PAGE> 25
TABLE 3
RATE/VOLUME ANALYSIS (ON A TAX EQUIVALENT BASIS)
Amount of Increase (Decrease) (Dollars in thousands)
<TABLE>
<CAPTION>
1996 vs 1995
------------
Due to Change In:
Volume Rate Mix Total
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Securities:
Taxable $(1,641) $ (600) $ 68 $(2,173)
Nontaxable (120) 26 (3) (97)
-----------------------------------
(1,761) (574) 65 (2,270)
Federal funds sold and
other short term
investments (893) (230) 88 (1,035)
Loans 7,373 (341) (82) 6,950
-----------------------------------
TOTAL INTEREST INCOME 4,719 (1,145) 71 3,645
INTEREST EXPENSE
NOW (including Super
NOW) (818) (233) 111 (940)
Savings deposits (125) (106) 11 (220)
Money market accounts 1,825 (649) (463) 713
Time deposits 321 (588) (12) (279)
-----------------------------------
1,203 (1,576) (353) (726)
Federal funds purchased
and other short term
borrowings 467 (36) (46) 385
-----------------------------------
TOTAL INTEREST EXPENSE 1,670 (1,612) (399) (341)
-----------------------------------
NET INTEREST INCOME $ 3,049 $ 467 $ 470 $ 3,986
===================================
</TABLE>
TABLE 3 (CONT'D)
RATE/VOLUME ANALYSIS (ON A TAX EQUIVALENT BASIS)
AMOUNT OF INCREASE (DECREASE) (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 vs 1994
--------------------------------
Due to Change In:
Volume Rate Mix Total
- --------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Securities:
Taxable $(2,116) $ 733 $ (98) $(1,481)
Nontaxable (37) (22) 1 (58)
--------------------------------
(2,153) 711 (97) (1,539)
Federal funds sold and
other short term
investments 1,118 209 371 1,698
Loans 6,915 1,522 483 8,920
--------------------------------
TOTAL INTEREST INCOME 5,880 2,442 757 9,079
INTEREST EXPENSE
NOW (including Super
NOW) (166) (52) 5 (213)
Savings deposits (245) (31) 5 (271)
Money market accounts 205 260 26 491
Time deposits 3,178 2,830 1,115 7,123
--------------------------------
2,972 3,007 1,151 7,130
Federal funds purchased
and other short term
borrowings (5) 96 (1) 90
--------------------------------
TOTAL INTEREST EXPENSE 2,967 3,103 1,150 7,220
--------------------------------
NET INTEREST INCOME $2,913 $ (661) $ (393) $ 1,859
================================
</TABLE>
<PAGE> 26
TABLE 4
CHANGES IN AVERAGE
INTEREST BEARING LIABILITIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Increase/(Decrease) Increase/(Decrease)
---------------------- --------------------
1996 vs 1995 1995 vs 1994
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
NOW (including
Super NOW) $(51,858) (47.5)% $(10,223) (8.6)%
Savings deposits (6,457) (10.2) (12,431) (16.4)
Money market
accounts 64,097 71.3 8,114 9.9
Time deposits 5,863 2.1 78,325 39.4
Federal funds 10,162 130.0 (133) (1.7)
purchased and
other short term
borrowings
-------------------------------------------
TOTAL $ 21,807 4.0% $ 63,652 13.2%
===========================================
</TABLE>
Since July 1995, the Federal Reserve Bank has lowered short term interest rates
75 basis points, with an identical decline occurring in the prime rate to
8.25%. This resulted in excellent loan demand in the Treasure Coast market.
Expectations are for loan demand to remain strong during 1997, with loans
exceeding anticipated deposit growth on a percentage basis.
Net interest income (fully taxable equivalent) for 1995 increased
$1,859,000 or 7.3 percent, with increased business volumes more than offsetting
the effect of a decline in the net interest margin from 4.57 percent a year ago
to 4.32 percent. While competing institutions in our market lowered deposit
rates for savings and NOW deposits during 1995, rates paid for other types of
deposits increased and resulted in a 32 basis points rise to 2.85 percent for
money market deposits and a 142 basis points rise to 5.48 percent for time
deposits. In addition, the rate paid for short term borrowings increased 121
basis points to 4.59 percent. The resulting rate paid for all interest bearing
liabilities in 1995 was 3.85 percent, 99 basis points higher than in 1994.
In part, a renewed interest by consumers in certificates of deposit offered at
higher rates during the second half of 1994 and during 1995 effected an
increase in the Company's cost of interest bearing liabilities. Average time
deposits increased $78,325,000 or 39.4 percent, while average balances for NOW,
savings and money market accounts declined $14,540,000 or 5.2 percent on an
aggregate basis. Favorably affecting deposit mix was an increase in average
noninterest bearing demand deposits of $9,084,000 or 14.4 percent.
The yield on earning assets increased 59 basis points during 1995 to 7.63
percent. Yield increases in 1995 for securities, federal funds sold and the
loan portfolio of 27 basis points, 148 basis points and 56 basis points,
respectively, were recorded and an improved mix of earning assets contributed
to the higher yield on earning assets. The acquisition of American and loan
demand, which picked up pace during 1995, provided an $85,713,000 or 31.7
increase in average loans. While $68 million in residential mortgage loans
were originated in 1995, no sales of residential mortgage loans were
transacted. Average securities declined $35,463,000 or 12.9 percent in 1995,
while average federal funds sold grew $25,119,000 or 177.8 percent. In part,
the increase in federal funds sold was related to securities sales of
$115,107,000 and maturities of $62,586,000 occuring during 1995, offset by
purchases of securities of $114,244,000. These short term assets matured or
were sold and utilized in 1996 to fund loan growth.
For the years ended December 31, 1996 and 1995, Table 3 discloses the increases
and decreases in net interest income attributable to changes in the volume and
rates of individual earning assets and interest bearing liabilities. The
balances of nonaccruing loans are included in average loans outstanding.
<PAGE> 27
TABLE 5
THREE-YEAR SUMMARY
BALANCES, INTEREST INCOME AND EXPENSES, YIELDS AND RATES (1)
<TABLE>
<CAPTION>
(Dollars in thousands) 1996
- --------------------------------------------------------------
Yield/
Average Balance Interest Rate
- --------------------------------------------------------------
<S> <C> <C> <C>
Assets
Earning assets:
Securities
Taxable $200,881 $12,164 6.06%
Nontaxable 12,118 1,038 8.57
--------------------------
Total Securities 212,999 13,202 6.20
Federal funds
sold and other
short term
investments 24,183 1,292 5.34
Loans (2) 441,313 37,666 8.53
--------------------------
TOTAL EARNING ASSETS 678,495 52,160 7.69
Allowance for loan losses (4,245)
Cash and due from
banks 20,362
Bank premises and
equipment 16,052
Other assets 14,774
--------------------------
$725,438
==========================
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing
liabilities:
NOW (Including
Super NOW) $ 57,257 $ 781 1.36%
Savings deposits 57,028 1,008 1.77
Money market 153,933 3,271 2.12
accounts
Time deposits 283,124 14,916 5.27
Federal funds 17,978 744 4.14
purchased and
other short
term borrowings
--------------------------
TOTAL INTEREST BEARING 569,320 20,720 3.64
LIABILITIES
Demand deposits 85,538
Other liabilities 4,304
--------------------------
659,162
Shareholders' 66,276
Equity
--------------------------
$725,438
==========================
Interest expense 3.06%
as % of earning
assets
Net interest $31,440 4.63%
income/yield on
earning assets
==========================
</TABLE>
<PAGE> 28
TABLE 5 (CONT'D)
THREE-YEAR SUMMARY
BALANCES, INTEREST INCOME AND EXPENSES, YIELDS AND RATES (1)
<TABLE>
<CAPTION>
(Dollars in thousands) 1995
- ---------------------------------------------------------------------
Average Yield/
Balance Interest Rate
- ---------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Earning assets:
Securities
Taxable $226,854 $14,337 6.32%
Non Taxable 13,554 1,135 8.37
--------------------------
TOTAL SECURITIES 240,408 15,472 6.44
Federal funds sold and other
short term investments 39,246 2,327 5.93
Loans (2) 355,885 30,716 8.63
--------------------------
TOTAL EARNING ASSETS 635,539 48,515 7.63
Allowance for loan losses (3,845)
Cash and due from banks 24,152
Bank premises and equipment 16,769
Other assets 13,228
--------------------------
$685,843
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing
liabilities:
NOW (Including Super NOW) $109,115 $ 1,721 1.58%
Savings deposits 63,485 1,228 1.93
Money market accounts 89,836 2,558 2.85
Time deposits 277,261 15,195 5.48
Federal funds purchased and other
short term borrowings 7,816 359 4.59
--------------------------
TOTAL INTEREST BEARING LIABILITIES 547,513 21,061 3.85
Demand deposits 72,310
Other liabilities 4,258
--------------------------
624,081
Shareholders' Equity 61,762
--------------------------
$685,843
==========================
Interest expense as % of
earning assets 3.31%
Net interest income/yield on
earning assets $27,454 4.32%
==========================
</TABLE>
<PAGE> 29
TABLE 5 (CONT'D)
THREE-YEAR SUMMARY
BALANCES, INTEREST INCOME AND EXPENSES, YIELDS AND RATES (1)
<TABLE>
<CAPTION>
(Dollars in thousands) 1994
- ---------------------------------------------------------------
Average Yield/
Balance Interest Rate
- ---------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Earning assets:
Securities
Taxable $261,882 $15,818 6.04%
Nontaxable 13,989 1,193 8.53
--------------------------
TOTAL SECURITIES 275,871 17,011 6.17
Federal funds sold and other
short term investments 14,127 629 4.45
Loans (2) 270,172 21,796 8.07
--------------------------
TOTAL EARNING ASSETS 560,170 39,436 7.04
Allowance for loan losses (3,545)
Cash and due from banks 23,737
Bank premises and equipment 16,182
Other assets 11,951
--------------------------
$608,495
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing
liabilities:
NOW (Including Super NOW) $119,338 $ 1,934 1.62%
Savings deposits 75,916 1,499 1.97
Money market accounts 81,722 2,067 2.53
Time deposits 198,936 8,072 4.06
Federal funds purchased and
other short term borrowings 7,949 269 3.38
--------------------------
TOTAL INTEREST BEARING
LIABILITIES 483,861 13,841 2.86
Demand deposits 63,226
Other liabilities 3,518
--------------------------
550,605
Shareholders' Equity 57,890
--------------------------
$608,495
==========================
Interest expense as % of
earning assets 2.47%
Net interest income/yield on
earning assets $25,595 4.57%
==========================
</TABLE>
(1) The tax equivalent adjustment is based on a 34% tax rate.
(2) Nonaccrual loans are included in loan balances. Fees on loans are
included in interest on loans.
<PAGE> 30
PROVISION FOR LOAN LOSSES
The improved loan demand and growth in total loans outstanding in 1996 resulted
in relatively higher provisioning, but was mitigated by a continued favorable
net charge off ratio (0.05 percent in 1996 and 0.03 percent in 1995, versus
0.20 percent for the Company's peer group), and resulted in a provision for
loan losses in 1996 of $450,000. The provision for loan losses in 1995 was
$250,000, and in 1994 was $145,000. See "Nonperforming Assets" and "Allowance
for Loan Losses."
The Company's internal loan monitoring systems provide detailed monthly
analysis of delinquencies, nonperforming assets, and potential problem loans,
which are reviewed regularly by both senior management and the Board of
Directors.
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, 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. Due to a forecast of increased loan demand and
balances outstanding, management believes higher provisions for loan losses
will result in 1997, compared to 1996 and 1995.
NONINTEREST INCOME
Table 6 shows noninterest income for the years indicated.
Noninterest income, excluding gains from sales of securities, increased
$1,197,000 or 15.9 percent in 1996 compared to the prior year. The largest
increase in noninterest income occurred in brokerage commissions and fees which
increased $491,000 or 31.6 percent. Lower interest rates in 1996 caused
renewed interest in financial products compared to 1995. Trust income
increased, by $161,000 or 8.4 percent. Additional sales staff in trust and the
repricing of trust services in 1995 accounted for the improved results. 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.
Also increasing, service charges on deposits grew $358,000 or 14.6 percent, a
result of internal growth, certain services being repriced, and a full year
impact of the acquisition.
<PAGE> 31
TABLE 6
NONINTEREST INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended % Change
-------------------------------------------
1996 1995 1994 96/95 95/94
- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Service charges on
deposit accounts $2,812 $2,454 $2,033 14.6% 20.7%
Trust fees 2,069 1,908 1,722 8.4 10.8
Other service
charges and fees 1,193 1,098 1,028 8.7 6.8
Brokerage
commissions and
fees 2,046 1,555 1,190 31.6 30.7
Other 594 502 502 18.3 0.0
-------------------------------------------
8,714 7,517 6,475 15.9 16.1
Securities gains 72 480 752 (85.0) (36.2)
-------------------------------------------
TOTAL $8,786 $7,997 $7,227 9.9% 10.7%
===========================================
</TABLE>
Noninterest income, excluding gains from sales of securities, increased
$1,042,000 or 16.1 percent in 1995 compared to prior year. The largest
increase occurred in service charges on deposits which increased $421,000 or
20.7 percent. Service charges on deposits grew during the year as a result of
the acquisition and certain services being repriced. The next two largest
increases during 1995 were in brokerage commissions and fees and trust fees
which increased $365,000 or 30.7 percent and $186,000 or 10.8 percent,
respectively, year over year. An uncertain rate of economic growth and
inflation contributed to financial market turmoil during 1994 and resulted in
reduced brokerage activity.
Residential real estate lending is an important segment of the Company's
lending activities, and exposure to market interest rate volatility is managed
at times by the sale of fixed rate loans in the secondary market. Consumer
interest in fixed rate mortgages returned in the second half of 1995 and in
1996 due to lower interest rates, while higher rates in 1994 had consumers
switching to lower initial rate periodic adjustable rate mortgages.
While no sales were recorded in 1996 and 1995, during 1994, a gain of $45,000
on the sale of $24.7 million in fixed rate residential mortgages was recorded
in other income. During 1996 and 1995, the proceeds from sales of securities
and funds received from maturing securities have been utilized to fund seasonal
deposit declines and lending activities. As a result of sales of securities in
1996, a $72,000 net gain was recognized. During 1995, as interest rates
declined and the market value of the securities portfolio increased, sales of
securities generated a net gain of $480,000. During 1994, securities sales
were executed to reduce the Company's exposure to predicted increasing interest
rates in the future. As a result, a net gain of $752,000 was recognized in
1994.
<PAGE> 32
NONINTEREST EXPENSES
Table 7 shows the Company's noninterest expenses for the years indicated.
TABLE 7
NONINTEREST EXPENSES
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended
-------------------------
1996 1995 1994
-------------------------
<S> <C> <C> <C>
Salaries and wages $10,738 $ 9,650 $ 8,682
Pension and other employee 2,531 1,951 1,815
benefits
Occupancy 2,304 2,331 2,230
Furniture and equipment 1,781 1,900 2,027
Marketing 1,632 1,367 1,262
Legal and professional fees 844 742 888
FDIC assessments 632 728 1,191
Foreclosed and repossessed
asset management and 165 64 20
dispositions
Amortization of intangibles 661 418 88
Other 6,229 5,095 4,802
-------------------------
TOTAL $27,517 $24,246 23,005
=========================
</TABLE>
<PAGE> 33
TABLE 7 (CONT'D)
NONINTEREST EXPENSES
(Dollars in thousands)
<TABLE>
<CAPTION>
% Change
-------------
96/95 95/94
-------------
<S> <C> <C>
Salaries and wages 11.3% 11.1%
Pension and other employee
benefits 29.7 7.5
Occupancy (1.2) 4.5
Furniture and equipment (6.3) (6.3)
Marketing 19.4 8.3
Legal and professional fees 13.7 (16.4)
FDIC assessments (13.2) (38.9)
Foreclosed and repossessed
asset management and
dispositions 157.8 220.0
Amortization of intangibles 58.1 375.0
Other 22.3 6.1
-------------
TOTAL 13.5% 5.4%
===== =====
</TABLE>
When compared to 1995, noninterest expenses increased $3,271,000 or 13.5
percent in 1996. Included in the increase was a one-time charge of $500,000 in
Federal Deposit Insurance Corporation (FDIC) assessments (incurred in the third
quarter) to recapitalize the Savings Association Insurance Fund (SAIF). The
one-time charge related to the deposits of a failed local thrift acquired by
the Company in 1991 from the Resolution Trust Corporation (RTC).
In 1996, salaries and wages increased $1,088,000 or 11.3 percent and employee
benefits rose $580,000 or 29.7 percent. Commercial loan officers were added in
1996 and increased the costs in lending by $297,000. Higher revenue in
brokerage resulted in increased commissions paid of $270,000 over the last
twelve months. The full-year impact of a new branch acquired from American in
April 1995 and the addition of a new branch in August 1996, increased salaries
and wages $209,000. A one-time $600,000 charge to terminate the Company's
defined benefit plan increased employee benefit costs. However, revenue growth
exceeded the increase in salaries and wages and employee benefits, and resulted
in the Company's overhead ratio (excluding the one-time SAIF charge of
$500,000) declining to 67.3 percent from 69.3 percent a year ago.
Occupancy and furniture and equipment expenses, on an aggregate basis, declined
$146,000 or 3.5 percent, principally due to lower depreciation costs associated
with furniture and equipment. Marketing expenses increased $265,000 or 19.4
percent, primarily as a result of increases in sales promotion and ad agency
production and print costs associated with heightened efforts to market
products and services within the Company's market.
Legal and professional fees increased $102,000 or 13.7 percent. Usage of audit
services to independently review internal controls and legal services to assist
with regulatory filings and to defend actions brought against the Company were
greater in 1996, compared to prior year. Costs associated with foreclosed and
repossessed asset management increased $101,000, but totaled
<PAGE> 34
only $165,000. These results reflect the level of activity with respect to
problem asset management.
The premium for FDIC and SAIF insurance was $96,000 or 13.2 percent lower in
1996, and would have been lower if not for the one-time charge of $500,000.
The FDIC insurance rate assessed on deposits was reduced in mid-1995 for
commercial banks to a range of 0.04 percent to 0.10 percent, depending on the
capital adequacy examination ratings imposed by governing regulatory
authorities on individual financial institutions, while the rate charged to
savings and loans ranged from 0.23 percent to 0.29 percent. This action by the
FDIC effected a reduction in expense in 1995 of $463,000 or 38.9 percent. For
1997, the rate for commercial banks has been reduced to 0.013 percent and for
savings and loans to 0.065 percent. The rate the Company's subsidiary bank is
being assessed has been and is the lowest rate indicated, based on the
guidelines.
Amortization of intangible assets increased $243,000 or 58.1 percent as a
result of a full-year impact for the acquisition of American, for which the
Company recorded amortizable intangible assets of goodwill and core deposits.
The other expense category increased $1,134,000 or 22.3 percent in 1996 with
higher costs incurred for education and training of $178,000, telephone and
communications systems of $110,000, data processing of $201,000, and
stationery, printing and supplies of $93,000. Other expenses in this category
increased as well, reflecting higher activity and business volumes.
When compared to 1994, noninterest expenses increased $1,241,000 or 5.4 percent
in 1995. The largest component of this increase was salaries and wages which
increased $968,000 or 11.1 percent. A new branch opened in November 1994 in
Port St. Lucie, Florida and a new branch acquired from American on April 14,
1995 increased salaries and wages $158,000. In addition, wages for lending
personnel grew $126,000 when compared to prior year, effected by increased loan
demand. Also, salaries related to trust and brokerage activities increased
$229,000 and $147,000, respectively. Employee benefits increased $136,000 or
7.5 percent, due to a $97,000 increase in group health insurance benefits,
higher payroll taxes and increased costs associated with the Company's 401K
salary deferral and profit sharing plans.
Occupancy expenses and furniture and equipment expenses, on an aggregate basis,
declined $26,000 in 1995. Marketing expenses increased $105,000 or 8.3
percent, primarily as a result of increases in sales promotion and public
relations costs.
Legal and professional fees decreased $146,000 or 16.4 percent and costs
associated with foreclosed and repossessed asset management totaled only
$64,000. Amortization of intangible assets increased $330,000 or 375.0 percent
as a result of the acquisition of American and the other expense category
increased $293,000 or 6.1 percent in 1995. The increase in the other expense
category was primarily caused by higher postage and special delivery
expenditures and telephone costs, up $154,000 and $101,000, respectively.
INCOME TAXES
Income taxes for the year 1996 were $4,312,000, 14.5 percent above the
$3,765,000 for 1995, which was 21.8 percent above the $3,091,000 for 1994.
Income taxes as a percentage of income before taxes were 36.2 percent for 1996,
compared to 35.5 percent in 1995 and 33.0 percent in 1994. Most of the
increase in rate in 1996 is due to a
<PAGE> 35
full year impact of amortization of goodwill and core deposit intangibles
associated with the acquisition of American which are not deductible expenses
for tax purposes. In addition to the impact of the acquisition, the increase
in rate in 1995 as compared to 1994 reflects higher provisioning for state
income taxes, a result of lower intangible taxes paid that can be taken as a
credit.
The Company has $1,234,000 of deferred tax assets, for which no valuation
allowance is required because $880,000 of this balance is related to unrealized
securities losses which, as a result of SFAS No. 115, are deemed to be
temporary, as well as, sufficient taxable income to carryback to recover these
differences.
FINANCIAL CONDITION
The Company increased its assets 4.8 percent between December 31, 1995 and
December 31, 1996. In comparison, the Company increased its assets 16.4
percent between December 31, 1994 and December 31, 1995.
CAPITAL RESOURCES
The Company's ratio of shareholders' equity to period end assets was 8.26
percent at December 31, 1996, compared with 8.06 percent one year earlier.
This ratio is impacted by SFAS No. 115, "Accounting for Certain Debt and Equity
Securities," by which a securities valuation allowance of $1,482,000 was
recognized at December 31, 1996, compared to a securities valuation allowance
of $705,000 at December 31, 1995.
Excluding the effect of this standard, the Company's ratio of shareholders'
equity to period end assets was 8.44 percent and 8.16 percent, respectively, at
year end 1996 and 1995. Book value per common share outstanding totalled
$15.68 at December 31, 1996, compared to $14.75 at December 31, 1995. Without
the effect of SFAS No. 115, book value was $16.03 at December 31, 1996,
compared to $14.92 at December 31, 1995, an increase of 7.4 percent.
<PAGE> 36
Table 8 summarizes the Company's capital position and selected ratios.
TABLE 8
CAPITAL RESOURCES
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
TIER 1 CAPITAL
Common stock $ 429 $ 429 $ 428
Additional paid in capital 18,314 18,612 18,498
Retained earnings 50,419 45,540 41,049
Treasury Stock (911) (1,676) 0
Valuation allowance (801) (645) (1,257)
Intangibles (5,713) (6,488) 0
------------------------------
Total Tier 1 capital 61,737 55,772 58,718
TIER 2 CAPITAL
Allowance for loan losses, 4,286 4,066 3,373
as limited
------------------------------
Total Tier 2 capital 4,286 4,066 3,373
------------------------------
Total risk based capital $ 66,023 $ 59,838 $ 62,091
==============================
Risk weighted assets $440,039 $402,736 $313,728
==============================
Tier 1 risk based capital 14.03% 13.85% 18.72%
ratio
Regulatory minimum 8.00 8.00 8.00
Total risk based capital ratio 15.00 14.86 19.79
Tier 1 capital to adjusted 8.32 7.93 9.42
total assets (1)
Regulatory minimum 4.00 4.00 4.00
Shareholders' equity to assets 8.26 8.06 8.39
Average shareholders' equity 9.14 9.01 9.51
to average total assets
</TABLE>
(1) Intangible assets have been deducted from tier 1 capital and adjusted total
assets for this calculation.
Tangible book value per common share, reflecting a deduction from shareholders'
equity for intangible assets of $6,388,000 and $6,884,000 at December 31, 1996
and 1995, respectively, was 14.18 percent at December 31, 1996, compared to
13.12 percent at December 31, 1995, an increase of 8.1 percent.
The Company is considered well capitalized, based on all measures of regulatory
capital.
LOAN PORTFOLIO
Table 9 shows total loans (net of unearned income) by category outstanding at
the indicated dates.
The Company makes substantially all its loans to customers located within the
three counties of the Treasure Coast. It has no foreign loans or highly
leveraged transaction (HLT) loans.
<PAGE> 37
TABLE 9
LOANS OUTSTANDING
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 1996 1995 1994
- ------------------------------------------------------
<S> <C> <C> <C>
Real estate mortgage $378,227 $335,031 $229,713
Real estate construction 11,880 10,540 8,728
Commercial and financial 22,857 17,205 11,296
Installment loans to 58,187 51,959 42,912
individuals
Other loans 446 229 141
----------------------------
TOTAL $471,597 $414,964 $292,790
============================
</TABLE>
TABLE 9 (CONT'D)
LOANS OUTSTANDING
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 1993 1992
- --------------------------------------------
<S> <C> <C>
Real estate mortgage $205,002 $197,696
Real estate construction 2,710 3,680
Commercial and financial 9,692 8,626
Installment loans to 42,158 41,430
individuals
Other loans 55 413
------------------
TOTAL $259,617 $251,845
==================
</TABLE>
Total loans (net of unearned income and excluding the allowance for loan
losses) were $471,597,000 at December 31, 1996, $56,633,000 or 13.6 percent
more than at December 31, 1995. The increase in the Company's loan balances
also reflects the impact of the securitization of $29.7 million in fixed rate
residential mortgage loans during 1996. No sales of fixed rate residential
loans were transacted in 1995.
At December 31, 1996, the Company's mortgage loan balances secured by
residential properties amounted to $255,295,000 or 54.1 percent of total loans.
The next largest concentration was loans secured by commercial real estate
which totalled $112,833,000 or 23.9 percent. Most of the commercial real
estate loans were made to local businesses and professionals and are secured by
owner occupied properties. Loans and commitments for 1-4 family residential
properties and commercial real estate are generally secured with first
mortgages on property, with the loan to fair value of the property not
exceeding 80 percent on the date the loan is made. The Company was also a
creditor for consumer loans to individual customers (primarily secured by motor
vehicles) totalling $49,771,000 and unsecured credit cards of $8,416,000.
Total loans (net of unearned income and excluding the allowance for loan
losses) were $414,964,000 at December 31, 1995, $122,174,000 or 41.7 percent
greater than at December 31, 1994. Approximately $46 million in loans were
acquired as a result of the acquisition of American during 1995. At December
31, 1995, the Company's portfolio of mortgage loan balances secured by
residential properties amounted to $223,813,000 or 53.9 percent of total loans
and loans secured by commercial real estate totalled $100,879,000 or 24.3
percent of total loans. Consumer loans to individual customers and credit card
loans totalled $44,249,000 and $7,710,000, respectively.
The Treasure Coast is a residential community with commercial activity centered
in retail and service businesses serving the local residents. Therefore, real
estate mortgage lending is 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 December 31,
1996, approximately $156 million or 61 percent of the Company's mortgage loan
balances secured by residential properties were adjustable, compared to $141
million or 63 percent at December 31, 1995.
<PAGE> 38
TABLE 10
LOAN MATURITY DISTRIBUTION
(Dollars in thousands)
<TABLE>
<CAPTION>
Commercial,
Financial & Real Estate
December 31, 1996 Agricultural Construction Total
- -----------------------------------------------------------
<S> <C> <C> <C>
In one year or less $ 4,697 $ 7,570 $12,267
After one year but
within five years:
Interest rates are 1,716 3,623 5,339
floating or
adjustable
Interest rates are 12,400 0 12,400
fixed
In five years or more:
Interest rates are 3,564 183 3,747
floating or
adjustable
Interest rates are 480 504 984
fixed
------------------------------
TOTAL $22,857 $11,880 $34,737
==============================
</TABLE>
Of the $156 million, $152 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 $33 million were outstanding at December 31, 1996, 2) those
limited to a two percent per annum increase and a six percent cap over the life
of the loan, of which approximately $63 million in balances existed at year end
1996, and 3) those that have 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 $56
million were outstanding at December 31, 1996.
Of the $91 million of new residential loans originated in 1996, $49 million
were adjustable rate and $41 million were fixed rate. In comparison, $68
million in new residential loans were originated in 1995, of which $39 million
were adjustable rate and $29 million were fixed. The Company generally sells
all of the 30-year fixed rate loan originations while retaining a portion of
15-year fixed rate residential loans. During 1996 the Company sold $30.7
million in fixed rate residential loans. Loans secured by residential
properties having fixed rates totalled approximately $99 million at December
31, 1996, of which 15- and 30-year mortgages totalled approximately $53 million
and $26 million, respectively. Remaining fixed rate balances were comprised of
home improvement loans with short maturities less than 15 years. In
comparison, fixed rate residential loans totalled $83 million at December 31,
1995, of which 15- and 30-year mortgages totalled approximately $45 million and
$23 million, respectively.
<PAGE> 39
The Company's historical charge off rates for residential loans has been very
low, with only $84,000 in charge offs for the year 1996. The Company expects
that the 1997 residential loan demand will be comprised of mostly fixed rate
mortgages as a low interest rate environment is anticipated by economists, at
least to mid-1997.
Fixed rate and adjustable rate loans secured by commercial real estate total
approximately $37 million and $76 million, respectively, at December 31, 1996.
Of the $76 million, $41 million of commercial real estate loans adjust annually
based on the one-year constant maturity United States Treasury Index plus a
margin. Remaining adjustable rate commercial real estate loans are comprised
of 3- and 5-year balloon mortgages tied to United States Treasury Indices plus
a margin or loans tied to prime rate which adjust accordingly. The term for
fixed rate lending involving commercial real estate is generally seven to ten
years.
Commercial lending activities are directed principally towards businesses whose
demand for funds are within the Company's lending limits, such as small to
medium sized professional firms, retail and wholesale outlets, and light
industrial and manufacturing concerns. Such businesses typically are smaller,
often have short operating histories and do not have the sophisticated record
keeping systems of larger entities. Most of such loans are secured by real
estate used by such businesses, although certain lines are unsecured. Such
loans are subject to the risks inherent to lending to small to medium sized
businesses including the effects of a sluggish local economy, possible business
failure, and insufficient cash flows. The Company's commercial loan portfolio
totalled $22,857,000 at December 31, 1996 compared to $17,205,000 at December
31, 1995.
The Company makes a variety of consumer loans, including installment loans,
loans for automobiles, boats, home improvements, and other personal, family and
household purposes, and indirect loans through dealers, to finance automobiles.
Most consumer loans are secured. The Company's indirect automobile lending
risks have been reduced through screening and monitoring of a smaller number of
dealers with whom the Company does business. Management believes its present
practices have substantially reduced such risk. Its delinquencies and losses
in this area were much better than that experienced by the banking industry.
Second mortgage loans and home equity lines are extended by the Company. No
negative amortization loans or lines are offered at the present time. Terms of
second mortgage loans include fixed rates for up to 10 years on smaller loans
of $30,000 or less. Such loans are sometimes made for larger amounts, with
fixed rates, but with balloon payments upon maturities, not exceeding five
years. In 1992, the Company began offering variable rate second mortgage loans
with terms of up to 10 years. Loan to value ratios for these loans do not
exceed 80 percent of appraised value. Home equity lines are offered on a
variable rate basis only and the maximum loan to value ratio for such loans is
75 percent of the appraised value when the loan is extended. Home equity line
accounts may be requested to submit annual updated financial information and
are subject to an annual review by the bank to limit the Company's exposure to
possible decreases in the borrower's income or in the collateral value of the
residence.
Commercial real estate loans are subject to many of the same risks as other
commercial loans. To reduce the risks from loans dependent upon cash flows
from the sale or rental of commercial real estate, the Company primarily makes
such loans on owner occupied properties. Real estate construction loans during
1992 and through 1996 have averaged approximately $7,508,000 and totalled
$11,880,000 at December 31, 1996. The Company generally requires a binding
take-out commitment confirmed to the Company before it will make a real estate
construction or development loan, unless the Company has determined to make the
permanent loan. This reduces the risk that the Company will inadvertently
become the permanent lender.
The Company had commitments to make loans (excluding unused home equity lines
of credit and credit card lines) of $24,724,000 at December 31, 1996, compared
to $17,687,000 at the end of 1995.
ALLOWANCE FOR LOAN LOSSES
Table 11 provides certain information concerning the Company's allowance for
loan losses for the years indicated.
<PAGE> 40
TABLE 11
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995 1994
- -----------------------------------------------------------
<S> <C> <C> <C>
Allowance for loan losses
Beginning balance $ 4,066 $ 3,373 $ 3,622
Provision for loan losses 450 250 145
Allowance applicable to 0 556 0
loans of purchased
company
Charge offs:
Commercial and 15 53 89
financial
Consumer 447 395 442
Commercial real estate 36 54 288
Residential real 84 31 0
estate
------------------------------
TOTAL CHARGE OFFS 582 533 819
Recoveries:
Commercial and 58 67 166
financial
Consumer 203 205 206
Commercial real estate 91 146 39
Residential real 0 2 14
estate
------------------------------
TOTAL RECOVERIES 352 420 425
------------------------------
Net loan charge offs 230 113 394
------------------------------
ENDING BALANCE $ 4,286 $ 4,066 $ 3,373
==============================
Loans outstanding at end $471,597 $414,964 $292,790
of year*
Ratio of allowance for 0.91% .98% 1.15%
loan losses to loans
outstanding at end of year
Daily average loans $441,313 $355,885 $270,172
outstanding*
Ratio of net charge offs to 0.05% 0.03% 0.15%
average loans outstanding
</TABLE>
<PAGE> 41
TABLE 11 (CONT'D)
SUMMARY OF LOAN LOSS EXPERIENCE
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31 1993 1992
- ------------------------------------------------------
<S> <C> <C>
Allowance for loan losses
Beginning balance $ 4,091 $ 3,846
Provision for loan losses 150 1,103
Allowance applicable to loans 0 0
of purchased company
Charge offs:
Commercial and financial 52 109
Consumer 501 788
Commercial real estate 378 413
Residential real estate 25 96
-------------------
TOTAL CHARGE OFFS 956 1,406
Recoveries:
Commercial and financial 64 151
Consumer 253 288
Commercial real estate 14 103
Residential real estate 6 6
-------------------
TOTAL RECOVERIES 337 548
-------------------
Net loan charge offs 619 858
-------------------
ENDING BALANCE $ 3,622 $ 4,091
===================
Loans outstanding at end of year* $259,617 $251,845
Ratio of allowance for loan
losses to loans outstanding at 1.40% 1.62%
end of year
Daily average loans outstanding* $255,289 $262,924
Ratio of net charge offs to
average loans outstanding 0.24% 0.33%
</TABLE>
* Net of unearned income.
The allowance for loan losses was $4,286,000 at December 31, 1996, $220,000
higher than one year earlier. The ratio of the allowance for loan losses to
total loans outstanding (net of unearned income) was 0.91 percent at December
31, 1996. The ratio was 0.98 percent at December 31, 1995. The allowance for
loan losses as a percentage of nonaccrual loans was 279.2 percent at December
31, 1996, compared to 79.6 percent at December 31, 1995. Nonaccrual loans at
December 31, 1996, were $1,535,000 or 0.33 percent compared to $5,105,000 or
1.23 percent of outstanding loans at December 31, 1995. The model utilized to
analyze the adequacy of the allowance for loan and lease losses takes into
account such factors as credit quality, internal controls, audit results, staff
turnover, local market economics and loan growth. The resulting lower allowance
level is also reflective of the bank's favorable and consistent delinquency
trends and historical loss performance. These performance results are
attributed to conservative, long-standing and consistently applied loan credit
policies and to a knowledgeable, experienced and stable staff.
During 1996, the Company experienced net charge offs of $230,000, compared to
$113,000 one year earlier. Net charge offs as a percentage of average loans
outstanding were 0.05 percent for 1996, slightly higher than in 1995 when the
percentage was 0.03 percent, the lowest percentage the Company had experienced
since its inception in 1983. A peer group of banks of similar size experienced
a net charge off ratio of 0.20 percent through September 30, 1996. Net
consumer loan losses, primarily related to indirect automobile lending, were
$244,000 in 1996, versus $190,000 in 1995. Real estate net charge-offs of
$29,000 in 1996 compared to net recoveries of $63,000 in 1995. Net commercial
and financial loan recoveries were $43,000 in 1996 compared to $14,000 in 1995.
<PAGE> 42
Table 12 summarizes the Company's allocation of the allowance for loan losses
and information regarding the composition of the loan portfolio at the dates
indicated.
TABLE 12
ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
ALLOWANCE AMOUNT
December 31 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial and financial $ 322 $ 275 $ 233
loans
Real estate loans 2,972 3,108 2,486
Installment loans 992 683 654
----------------------
TOTAL $4,286 $4,066 $3,373
======================
================================================================================
</TABLE>
TABLE 12 (CONT'D)
ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
ALLOWANCE AMOUNT
December 31 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial and financial $ 295 $ 287
loans
Real estate loans 2,812 2,908
Installment loans 515 896
----------------
TOTAL $3,622 $4,091
================
================================================================================
</TABLE>
TABLE 12 (CONT'D)
ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
PERCENT OF LOANS IN EACH
CATEGORY TO TOTAL LOANS
December 31 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial and financial 5.0% 4.2% 3.9%
loans
Real estate loans 82.7 83.3 81.4
Installment loans 12.3 12.5 14.7
-------------------------
TOTAL 100.0% 100.0% 100.0%
=========================
===============================================================================
</TABLE>
TABLE 12 (CONT'D)
ALLOWANCE FOR LOAN LOSSES
(Dollars in thousands)
<TABLE>
<CAPTION>
PERCENT OF LOANS IN EACH
CATEGORY TO TOTAL LOANS
December 31 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Commercial and financial
loans 3.8% 3.6%
Real estate loans 80.0 79.9
Installment loans 16.2 16.5
-------------------
TOTAL 100.0% 100.0%
===================
</TABLE>
<PAGE> 43
The allowance for loan losses represents management's estimate of an amount
adequate in relation to the risk of future losses inherent in the loan
portfolio. In its continuing evaluation of the allowance and its adequacy,
management considers, among other factors, the Company's loan loss experience,
the amount of past due and nonperforming loans, current and anticipated
economic conditions, and the values of certain loan collateral, and other
assets. The size of the allowance also reflects the large amount of permanent
residential loans held by the Company whose historical charge offs and
delinquencies have been superior by any comparison.
While it is the Company's policy to charge off in the current period loans in
which a loss is considered probable, there are additional risks of future
losses which cannot be quantified precisely or attributed to particular loans
or classes of loans. Because these risks include the state of economy as well
as conditions affecting individual borrowers, management's judgment of the
allowance is necessarily approximate and imprecise. It is also subject to
regulatory examinations and determinations as to adequacy, which may take into
account such factors as the methodology used to calculate the allowance for
loan losses and the size of the allowance for loan losses in comparison to a
group of peer companies identified by the regulatory agencies.
In assessing the adequacy of the allowance, management relies predominantly on
its ongoing review of the loan portfolio, which is undertaken both to ascertain
whether there are probable losses which must be charged off and to assess the
risk characteristics of the portfolio in the aggregate. This review considers
the judgments of management, and also those of bank regulatory agencies that
review the loan portfolio as part of their regular examination process. An
examination by the Office of the Comptroller of the Currency during the year
revealed no major differences in judgments or methodology related to the
allowance for loan losses.
On December 31, 1995, the allowance for loan losses was $4,066,000, $693,000
higher than one year earlier. Of this increase, $556,000 was allowance
applicable to loans of American, acquired in April of 1995. The ratio of the
allowance for loan losses to net loans outstanding was 0.98 percent at December
31, 1995, compared to 1.15 percent at December 31, 1994.
For 1995, the Company had net charge offs of $113,000 compared to $394,000 for
the same period in 1994. Real estate loan net recoveries were $64,000 for 1995
compared to net charge offs of $235,000 for the comparable period in 1994.
Consumer loan losses were $190,000 for 1995, compared to $236,000 for 1994.
Commercial and financial loan recoveries were $14,000 for 1995 versus $77,000
for 1994. Since 1991, the Company's policy has been to transfer foreclosed
loans to other real estate owned and to record such other assets at the lower
of (i) the loans carrying value or (ii) 90 percent of the real estate
collateral's current appraised value.
<PAGE> 44
NONPERFORMING ASSETS
At December 31, 1996, the Company's ratio of nonperforming assets to loans
outstanding plus other real estate owned was 0.54 percent, compared to 1.44
percent at December 31, 1995. Nonperforming assets (other real estate owned
and nonaccrual loans) at December 31, 1996, were $2,546,000, a decrease of
$3,448,000 compared to December 31, 1995. Other real estate owned increased
$122,000 while nonaccrual loans decreased $3,570,000 over the past twelve
months. Nonaccrual loans totalled $5,105,000 at December 31, 1995, compared to
a balance of $2,235,000 at year end 1994.
Nonaccrual loans totalling $953,000 at December 31, 1996 were performing, but
because the Company has determined that the collection of principal or interest
in accordance with the original terms of such loans is uncertain, it has placed
such loans on nonaccrual status. Of the amount reported in nonaccrual loans at
December 31, 1996, 86.8 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.
Nonperforming assets are subject to changes in the economy, both nationally and
locally, changes in monetary and fiscal policies, and changes in conditions
affecting various borrowers from the Company's subsidiary bank. No assurance
can be given that nonperforming assets will not in fact increase or otherwise
change. A similar judgmental process is involved in the methodology used to
estimate and establish the Company's allowance for loan losses.
- --------------------------------------------------------------------------------
TABLE 13
NONPERFORMING ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Nonaccrual loans (1) $ 1,535 $ 5,105 $ 2,235
Renegotiated loans 0 0 0
Other real estate owned 1,011 889 165
------------------------------
TOTAL NONPERFORMING $ 2,546 $ 5,994 $ 2,400
ASSETS
==============================
Amount of loans outstanding $471,597 $414,964 $292,790
at end of year (2)
Ratio of total nonperforming 0.54% 1.44% 0.82%
assets to loans outstanding
and other real estate owned
at end of period
Accruing loans past due $ 59 $ 134 $ 0
90 days or more
</TABLE>
TABLE 13 (CONT'D)
NONPERFORMING ASSETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31 1993 1992
- -----------------------------------------------
<S> <C> <C>
Nonaccrual loans (1) $ 3,107 $ 4,359
Renegotiated loans 0 0
Other real estate owned 4,116 5,898
-------- --------
TOTAL NONPERFORMING $ 7,223 $ 10,257
ASSETS
======== ========
Amount of loans outstanding $259,617 $251,845
at end of year (2)
Ratio of total nonperforming 2.74% 3.98%
assets to loans outstanding
and other real estate owned
at end of period
Accruing loans past due 90 $ 15 $ 9
days or more
</TABLE>
(1) Interest income that could have been recorded during 1996 related to
nonaccrual loans was $60,000, none of which was included in interest
income or net income. All nonaccrual loans are secured.
(2) Net of unearned income.
<PAGE> 45
Nonperforming assets (other real estate owned and nonaccrual loans) at December
31, 1995, were $5,994,000, an increase of $3,594,000 from December 31, 1994.
At December 31, 1995, the Company's ratio of nonperforming assets to loans
outstanding plus other real estate owned was 1.44 percent, compared to 0.82
percent at December 31, 1994. The majority of the increase in the ratio in
1995 can be attributed to nonperforming loans of American. The ratio at
December 31, 1995 would have been 0.89 percent without the acquired problem
loans. The increase in nonperforming assets from December 31, 1994 to December
31, 1995 included increases in other real estate owned of $724,000 and
nonaccrual loans of $2,870,000.
SECURITIES
Information relating to yields, maturities, carrying values, market values and
unrealized gains (losses) of the Company's securities is set forth in Table 14.
At December 31, 1996, the Company had $159,133,000 of securities held for sale
or 76.2 percent of total securities compared to $159,480,000 or 74.6 percent at
December 31, 1995 and $131,288,000 or 51.5 percent at December 31, 1994. The
increase in the held for sale portfolio at December 31, 1995 is directly
related to regulatory authorities permitting a 45-day window (November 15, 1995
to December 31, 1995) for financial institutions to reclassify securities from
held to maturity to available for sale without the reclassification creating a
"tainting" of the portfolio which would require reclassification of all held to
maturity securities to held for sale. The 45-day window to reclassify
securities was made available as a result of financial institutions not having
guidance with respect to the inclusion or exclusion of unrealized gains or
losses in capital ratio calculations at December 31, 1993, when SFAS No. 115
was adopted. The Company reclassified approximately $69 million from held to
maturity to held for sale on December 1, 1995.
Total securities declined $4,838,000 or 2.3 percent in 1996, compared to prior
year, and decreased $45,023,000 or 17.4 percent in 1995, compared to 1994.
These declines are directly related to growth in the loan portfolio and changes
in the portfolio mix.
Since 1994, management has lowered the total portfolio's interest rate risk by
reducing the average life of the portfolio from 3.8 years at December 31, 1994
to 3.1 years at December 31, 1995 to 2.1 years at December 31, 1996. The
percentage of adjustable and floating rate securities in the securities
portfolio is 21.9 percent, compared to 25.3 percent last year and 29.6 percent
in 1994. Likewise, the held for sale portfolio decreased to an average life of
2.2 years from 3.7 years in 1995 and 5.9 years in 1994.
A total of $2,871,000 in securities will mature along with approximately $32
million of periodic principal payments from mortgage back securities in 1997.
Management believes most of these funds will be used to fund increases in its
consumer and commercial loan portfolio.
At December 31, 1996, the Company had unrealized net losses of $951,000 or 0.5
percent of amortized cost. At December 31, 1995, unrealized net gains of
$1,056,000 or 0.5 percent were available. While rates have remained low in
1996, a shifting U.S. Treasury yield curve caused an increase in unrealized
depreciation of $2,107,000. Conversely, lower interest rates caused an
increase in unrealized appreciation of $9,777,000 at December 31, 1995,
compared to 1994.
Company management considers the overall quality of the securities portfolio to
be high. No securities are held which are not traded in liquid markets or that
meet the FFIEC definition of a high risk investment.
<PAGE> 46
TABLE 14
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------
U.S. TREASURY AND U.S.
GOVERNMENT AGENCIES
- -----------------------------------------------------------
AMORTIZED MARKET WEIGHTED
COST VALUE YIELD
- -----------------------------------------------------------
<S> <C> <C> <C>
MATURITY AT DECEMBER 31, 1996
HELD FOR SALE
WITHIN ONE YEAR
ONE TO FIVE YEARS $44,749 $44,417 5.64%
FIVE TO TEN YEARS 5,027 5,188 6.93
OVER TEN YEARS
NO CONTRACTUAL MATURITY
-------------------------
TOTAL VALUE $49,776 $49,605 5.77%
=========================
Held for Investment
Within one year $ 996 998 5.17%
One to five years 9,738 9,882 5.31
Five to ten years
Over ten years 4,862 4,983 7.32
-------------------------
TOTAL VALUE $15,596 15,863 5.93%
=========================
Maturity at December 31, 1995
Held for Sale $34,512 $35,120 5.97%
=========================
Held for Investment $17,329 $17,998 6.04%
=========================
</TABLE>
<PAGE> 47
TABLE 14 (CONT'D)
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE
(Dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Mortgage Backed Securities
(Fixed)
- -------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- -------------------------------------------------------------
<S> <C> <C> <C>
Maturity at December 31, 1996
Held for Sale
Within one year $26,581 $26,568 5.67%
One to five years 32,307 31,853 6.00
Five to ten years 5,154 5,138 6.89
Over ten years 4,928 4,788 6.73
No contractual maturity
----------------------------
TOTAL VALUE $68,970 $68,347 5.99%
============================
Held for Investment
Within one year $ 667 $ 685 5.40%
One to five years 18,496 18,642 6.91
Five to ten years
Over ten years
----------------------------
TOTAL VALUE $19,163 $19,327 6.86%
============================
Maturity at December 31, 1995
Held for Sale $77,270 $77,216 6.13%
============================
Held for Investment $19,335 $19,469 6.60%
============================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Mortgage Backed Securities
(Adjustable)
- -------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- -------------------------------------------------------------
<S> <C> <C> <C>
Maturity at December 31, 1996
Held for Sale
Within one year $ 438 $ 438 6.09%
One to five years 4,090 4,088 6.44
Five to ten years
Over ten years
No contractual maturity
----------------------------
TOTAL VALUE $ 4,528 $ 4,526 6.40%
============================
Held for Investment
Within one year
One to five years $ 3,901 $ 3,902 6.42%
Five to ten years
Over ten years
----------------------------
TOTAL VALUE $ 3,901 $ 3,902 6.42%
============================
Maturity at December 31, 1995
Held for Sale $10,638 $10,789 6.84%
============================
Held for Investment $ 4,502 $ 4,525 6.51%
============================
</TABLE>
TABLE 14 (CONT'D)
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE
(Dollars in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Obligations of States and
Political Subdivisions (1)
- -------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- -------------------------------------------------------------
<S> <C> <C> <C>
Maturity at December 31, 1996
Held for Sale
Within one year
One to five years
Five to ten years
Over ten years
No contractual maturity
------------------------
TOTAL VALUE $ 0 $ 0 $ 0
========================
Held for Investment
Within one year $ 1,875 $ 1,887 7.82%
One to five years 6,301 6,594 9.36
Five to ten years 2,276 2,399 8.46
Over ten years 455 483 8.71
------------------------
TOTAL VALUE $10,907 $11,363 8.88%
========================
Maturity at December 31, 1995
Held for Sale $ 0 $ 0 0.00%
========================
Held for Investment $12,892 $13,433 8.68%
========================
</TABLE>
(1) On a fully taxable equivalent basis.
<PAGE> 48
TABLE 14 (CONT'D)
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE
(Dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Mutual Funds
- ------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ------------------------------------------------------------
<S> <C> <C> <C>
Maturity at December 31, 1996
Held for Sale
Within one year
One to five years
Five to ten years
Over ten years
No contractual maturity $35,377 $34,333 6.05%
--------------------------
TOTAL VALUE $35,377 $34,333 6.05%
==========================
Held for Investment
Within one year
One to five years
Five to ten years
Over ten years
--------------------------
TOTAL VALUE $ 0 $ 0
==========================
Maturity at December 31, 1995
Held for Sale $35,577 $34,547 6.12%
==========================
Held for Investment $ 0 $ 0
==========================
</TABLE>
Table 14 (cont'd)
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE (Dollars in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Other (1)
- ------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ------------------------------------------------------------
<S> <C> <C> <C>
Maturity at December 31, 1996
Held for Sale
Within one year
One to five years
Five to ten years
Over ten years
No contractual maturity $2,321 $2,322 5.70%
-------------------------
TOTAL VALUE $2,321 $2,322 5.70%
=========================
Held for Investment
Within one year
One to five years $ 100 $ 100 8.13%
Five to ten years
Over ten years
-------------------------
TOTAL VALUE $ 100 $ 100 8.13%
=========================
Maturity at December 31, 1995
Held for Sale $1,794 $1,808 5.30%
=========================
Held for Investment $ 100 $ 100 7.50%
=========================
</TABLE>
<PAGE> 49
TABLE 14 (CONT'D)
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE
(Dollars in thousands)
<TABLE>
<CAPTION>
TOTAL
- ------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ------------------------------------------------------------
<S> <C> <C> <C>
Maturity at December 31, 1996
Held for Sale
Within one year $ 27,019 $ 27,006 5.68%
One to five years 81,146 80,358 5.82
Five to ten years 10,181 10,326 6.91
Over ten years 4,928 4,788 6.73
No contractual maturity 37,698 36,655 6.03
---------------------------
TOTAL VALUE $160,972 $159,133 5.94%
===========================
Held for Investment
Within one year $ 3,538 $ 3,570 6.62%
One to five years 38,536 39,120 6.86
Five to ten years 2,276 2,399 8.46
Over ten years 5,317 5,466 7.43
---------------------------
TOTAL VALUE $ 49,667 $ 50,555 6.98%
===========================
Maturity at December 31, 1995
Held for Sale $159,791 $159,480 6.13%
===========================
Held for Investment $ 54,158 $ 55,525 6.91%
===========================
</TABLE>
(1) On a fully taxable equivalent basis.
TABLE 14 (CONT'D)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
December 31, 1996 Cost Gains Losses
- ----------------------------------------------------------------
<S> <C> <C> <C>
Held for Sale:
U.S.Treasury and $ 49,776 $290 $ (461)
U.S.Government Agencies
Mortgage Backed Securities:
Fixed 68,970 90 (713)
Adjustable 4,528 36 (38)
Mutual Funds 35,377 (1,044)
Other securities 2,321 1
-------------------------------
Total Value $160,972 $417 $(2,256)
===============================
Held for Investment:
U.S. Treasury and $ 15,596 $267 $
U.S. Government Agencies
Mortgage Backed Securities:
Fixed 19,163 250 (86)
Adjustable 3,901 15 (14)
Obligations of States and 10,907 459 (3)
Political Subdivisions
Other Securities 100
-------------------------------
Total Value $ 49,667 $991 $ (103)
===============================
</TABLE>
<PAGE> 50
TABLE 14 (CONT'D)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Average Years to
Market Value Maturity
December 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Held for Sale:
U.S.Treasury and $ 49,605 2.83
U.S.Government Agencies
Mortgage Backed Securities:
Fixed 68,347 2.63
Adjustable 4,526 2.46
Mutual Funds 34,333
Other securities 2.322 *
--------------------------
Total Value $159,133 2.10
==========================
Held for Investment:
U.S. Treasury and $ 15,863 1.15
U.S. Government Agencies
Mortgage Backed Securities:
Fixed 19,327 2.44
Adjustable 3,902 3.64
Obligations of States 11,363 2.90
and Political Subdivisions
Other Securities 100 *
--------------------------
Total Value $ 50,555 2.23
==========================
</TABLE>
TABLE 14 (CONT'D)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized
December 31, 1995 Cost Gains Losses
- ----------------------------------------------------------------
<S> <C> <C> <C>
Held for Sale:
U.S.Treasury and $ 34,512 $ 645 $ (37)
U.S.Government Agencies
Mortgage Backed Securities:
Fixed 77,270 387 (441)
Adjustable 10,638 164 (13)
Mutual Funds 35,577 (1,030)
Other securities 1,794 14
-------------------------------
Total Value $159,791 $1,210 $(1,521)
===============================
Held for Investment:
U.S. Treasury and $ 17,329 $ 669 $
U.S. Government Agencies
Mortgage Backed Securities:
Fixed 19,335 236 (102)
Adjustable 4,502 23
Obligations of States 12,892 544 (3)
and Political Subdivisions
Other Securities 100
-------------------------------
Total Value $ 54,158 $1,472 $ (105)
===============================
</TABLE>
<PAGE> 51
TABLE 14 (CONT'D)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Average Years to
Market Value Maturity
December 31, 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Held for Sale:
U.S.Treasury and $ 35,120 3.58
U.S.Government Agencies
Mortgage Backed Securities:
Fixed 77,216 3.27
Adjustable 10,789 7.40
Mutual Funds 34,547
Other securities 1,808 *
--------------------------
TOTAL $159,480 2.91
==========================
Held for Investment:
U.S. Treasury and $ 17,998 2.11
U.S. Government Agencies
Mortgage Backed Securities:
Fixed 19,469 3.75
Adjustable 4,525 7.52
Obligations of States 13,433 4.35
and Political Subdivisions
Other Securities 100 *
--------------------------
TOTAL $ 55,525 3.67
==========================
</TABLE>
DEPOSITS
Total deposits increased $31,790,000 or 4.8 percent to $692,757,000 at December
31, 1996, compared to one year earlier. The increase was due to growth in
noninterest bearing demand deposits of $22,188,000 or 23.1 percent, an increase
in certificates of deposit of $100,000 or more of $5,564,000 or 13.5 percent,
and a rise in certificates of deposit under $100,000 of $1,471,000 or 0.6
percent. Savings deposits (including NOW and money market deposit accounts)
increased $2,567,000 or 0.9 percent.
Total deposits increased $101,338,000 or 18.1 percent to $660,967,000 at
December 31, 1995, compared to one year earlier. Approximately $62 million of
the increase was attributable to the American acquisition. The commercial bank
deposits acquired are primarily core deposits with interest rates paid and
characteristics very similar to the Company's existing customer accounts.
Certificates of deposit under $100,000 increased $57,556,000 or 30.1 percent
and certificates of deposit of $100,000 or more increased $14,966,000 or 56.8
percent at December 31, 1995 compared to December 31, 1994, while lower cost
savings deposits (including NOW and money market deposits) increased $9,641,000
or 3.6 percent. Noninterest bearing demand deposits grew $19,175,000 or 24.9
percent in 1995. The increase in certificates of deposits in 1995 was directly
related to higher interest rates offered on certificates, reflecting the
general rise in interest rates during 1994, and resulting renewed interest by
customers in investing in certificates of deposit.
<PAGE> 52
In part, the increase in demand deposits was related to a $17,930,000 and
$5,268,000 increase in public deposits at December 31, 1996 and December 31,
1995, respectively, primarily related to tax receipts collected by the local
tax collector. Average noninterest bearing demand deposits comprised 13.4
percent of average deposits for the year ended December 31, 1996, 1.6 percent
higher than the 11.8 percent recorded for the same period one year earlier.
The Company remains the largest commercial bank in its primary market.
TABLE 15
MATURITY OF CERTIFICATES OF DEPOSIT
OF $100,000 OR MORE
(Dollars in thousands)
<TABLE>
<CAPTION>
% OF % of
December 31 1996 TOTAL 1995 Total
- -------------------------------------------------
<S> <C> <C> <C> <C>
Maturity Group:
Under 3 months $15,715 33.4% $15,249 36.9%
3 to 6 months 10,064 21.4 11,867 28.7
6 to 12 months 11,905 25.7 8,309 20.1
Over 12 months 9,209 19.5 5,904 14.3
-------------------------------
TOTAL $46,893 100.0% $41,329 100.0%
===============================
- --------------------------------------------------------------------------------
</TABLE>
SHORT TERM BORROWINGS
At December 31, 1996, $45,088,000 in securities sold under agreements to
repurchase were outstanding, an increase of $1,181,000 compared to year end
1995. At year end 1996 and 1995, approximately $40 million in funds were
maintained by the local tax collector and approximately $3 million in funds
were maintained by the local school board.
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. This 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 December 31, 1996, 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 22.5 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 earnings
<PAGE> 53
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.
TABLE 16
INTEREST RATE SENSITIVITY ANALYSIS (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
0-3 4-12 1-5
December 31, 1996 Months Months Years
- ------------------------------------------------------
<S> <C> <C> <C>
Federal funds sold $ 76,250 $ 0 $ 0
Securities (2) 52,900 18,658 108,670
Loans (3) 114,292 115,529 108,692
--------------------------------
Earning assets 243,442 134,187 217,362
Savings deposits (4) 277,184 0 0
Certificates of 91,270 134,436 71,425
deposit
Federal funds 45,088 0 0
purchased and other
short term
borrowings
--------------------------------
Interest bearing 413,542 134,436 71,425
liabilities
--------------------------------
Interest sensitivity $(170,100) $ (249) $145,937
gap
================================
Cumulative gap $(170,100) $(170,349) $(24,412)
================================
Cumulative gap to
earning assets (%) (22.5) (22.5) (3.2)
Earning assets to
interest bearing
liabilities (%) 58.9 99.8 304.3
- ------------------------------------------------------
</TABLE>
TABLE 16 (CONT'D)
INTEREST RATE SENSITIVITY ANALYSIS (1)
(Dollars in thousands)
<TABLE>
<CAPTION>
Over 5
December 31, 1996 Years Total
- ----------------------------------------
<S> <C> <C>
Federal funds sold $ 0 $ 76,250
Securities (2) 30,411 210,639
Loans (3) 131,549 470,062
------------------
Earning assets 161,960 756,951
Savings deposits (4) 0 277,184
Certificates of 1 297,132
deposit
Federal funds 0 45,088
purchased and other
short term
borrowings
------------------
Interest bearing
liabilities 1 619,404
------------------
Interest sensitivity
gap $161,959 $137,547
==================
Cumulative gap $137,547
==================
Cumulative gap to
earning assets (%) 18.2
Earning assets to N/M
interest bearing
liabilities (%)
- ----------------------------------------
</TABLE>
(1) The repricing dates may differ from maturity dates for certain assets due
to prepayment assumptions.
(2) Securities are stated at amortized cost.
(3) Excludes nonaccrual loans.
(4) This category is comprised of NOW, savings, and money market deposits. If
NOW and savings deposits (totalling $126,705,000) were deemed to be
repriceable in "4-12 months", the interest sensitivity gap and cumulative
gap would be $43,395,000 indicating 5.7% of total earning assets and 84.9%
of earning assets to interest bearing liabilities for the "0-3 months"
category.
N/M Not meaningful.
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 simulations to estimate and manage 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.
<PAGE> 54
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. Liquidity management addresses the
Company's ability to meet deposit withdrawals either on demand or at
contractual maturity and to make new loans and investments as opportunities
arise.
Contractual maturities for assets and liabilities are reviewed to meet current
and 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, investment securities, 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
agreement to repurchase, United States Treasury securities and securities of
United States Government agencies and corporations not pledged to secure
public deposits or trust funds. At December 31, 1996, the Company had
available federal funds lines of credit of $45,500,000. At December 31, 1996,
the Company had $87,445,000 of United States Treasury and Government agency
securities and mortgage backed securities not pledged and available for use
under repurchase agreements. At December 31, 1995, the amount of securities
available and unpledged was $93,352,000.
Liquidity, as measured in the form of cash and cash equivalents, totalled
$100,590,000 at December 31, 1996, compared to $115,018,000 at December 31,
1995. Cash and 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 occurring in the Company's investment securities portfolio
and loan portfolio.
As is typical of financial institutions, cash flows from investing (primarily
in loans and securities) and from financing (primarily through deposit
generation and short term borrowings) are greatly in excess of cash flows from
operations. In 1996, the cash flow from operations of $10,073,000 was 8.8
percent lower than during the same period of 1995. Cash flows from investing
and financing activities reflect the increase in loan and deposit balances
experienced in 1996. In 1995, the cash flow from operations of $11,050,000 was
33.0 percent higher than in 1994.
EFFECTS ON INFLATION AND CHANGING PRICES
The financial statements and related financial data 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
stockholders' 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.
FASB 107 DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has calculated and reported the fair value of its financial
instruments in accordance with the Statement of Financial Accounting Standards
(SFAS) No. 107. While market value information has been reported for its
investment securities portfolio in prior years based on quoted market prices,
this statement also requires the estimating of fair values for financial
instruments with no quoted market prices. For most instruments with no quoted
market values, there are a variety of judgements which must be applied with a
wide variation in reported results. Management has followed the requirements
of the statement and used an acceptable method to estimate fair value for these
instruments. However, various other values could result if different
assumptions were used. Therefore, management believes it is not relevant and
potentially misleading to compare the amount of appreciation or depreciation of
financial instruments with no quoted values to any other financial institution.
Also, although the statement does not prohibit estimating and reporting the
fair value of deposits, management has elected not to estimate a value for its
core deposit portfolio because of reliability and comparability issues.
<PAGE> 55
Selected Quarterly Information
- --------------------------------------------------------------------------------
Consolidated Quarterly Average Balances, Yields and Rates (1)
<TABLE>
<CAPTION>
1996 QUARTERS
- --------------------------------------------------------------------------------
FOURTH Third
- --------------------------------------------------------------------------------
AVERAGE YIELD/ Average Yield/
BALANCE RATE Balance Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets
Securities
Taxable $191,394 6.10% $191,491 5.97%
Nontaxable 11,665 8.64 11,675 8.63
------------------------------------
TOTAL SECURITIES 203,059 6.25 203,166 6.13
Federal funds sold and
other short term investments 33,382 5.29 5,023 5.31
Loans (2) 462,803 8.46 445,700 8.46
------------------------------------
TOTAL EARNING ASSETS 699,244 7.66 653,889 7.71
Allowance for loan losses (4,290) (4,305)
Cash and due from banks 21,657 17,483
Bank premises and equipment 16,121 15,968
Other assets 15,283 14,514
------------------------------------
$748,015 $697,549
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
NOW (including Super NOW) $ 60,660 1.46% $ 51,774 1.39%
Savings deposits 54,646 1.79 55,023 1.76
Money market accounts 151,263 2.19 150,976 2.13
Time deposits 293,860 5.23 279,396 5.14
Federal funds purchased and
other short term borrowings 20,048 3.97 8,756 4.54
------------------------------------
TOTAL INTEREST BEARING LIABILITIES 580,477 3.68 545,925 3.60
Demand deposits 94,581 80,447
Other liabilities 4,945 4,151
------------------------------------
TOTAL 680,003 630,523
Shareholders' equity 68,012 67,026
------------------------------------
$748,015 $697,549
====================================
Interest expense as % of earning assets 3.05% 3.01%
Net interest income as % of earning assets 4.61% 4.70%
</TABLE>
<PAGE> 56
SELECTED QUARTERLY INFORMATION (cont'd)
- --------------------------------------------------------------------------------
Consolidated Quarterly Average Balances, Yields and Rates (1)
<TABLE>
<CAPTION>
1996 QUARTERS
- --------------------------------------------------------------------------------
Second First
- --------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets
Securities
Taxable $213,636 6.02% $207,211 6.12%
Nontaxable 11,892 8.54 13,248 8.45
-----------------------------------
TOTAL SECURITIES 225,528 6.16 220,459 6.26
Federal funds sold and
other short term investments 8,389 5.37 50,047 5.38
Loans (2) 434,988 8.47 421,476 8.77
-----------------------------------
TOTAL EARNING ASSETS 668,905 7.65 691,982 7.73
Allowance for loan losses (4,218) (4,167)
Cash and due from banks 19,993 22,334
Bank premises and equipment 15,983 16,137
Other assets 14,481 14,817
-----------------------------------
$715,144 $741,103
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
NOW (including Super NOW) $ 58,444 1.25% $ 58,172 1.36%
Savings deposits 57,915 1.72 60,576 1.81
Money market accounts 155,348 2.02 158,205 2.16
Time deposits 275,880 5.23 283,283 5.47
Federal funds purchased and
other short term borrowings 14,566 4.50 28,617 3.95
-----------------------------------
TOTAL INTEREST BEARING LIABILITIES 562,153 3.55 588,853 3.72
Demand deposits 83,407 83,672
Other liabilities 3,942 4,180
-----------------------------------
TOTAL 649,502 676,705
Shareholders' equity 65,642 64,398
-----------------------------------
$715,144 $741,103
===================================
Interest expense as % of earning assets 2.98% 3.17%
Net interest income as % of earning assets 4.67% 4.56%
</TABLE>
<PAGE> 57
SELECTED QUARTERLY INFORMATION (cont'd)
- --------------------------------------------------------------------------------
Consolidated Quarterly Average Balances, Yields and Rates (1)
<TABLE>
<CAPTION>
1995 QUARTERS
- --------------------------------------------------------------------------------
Fourth Third
- --------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets
Securities
Taxable $206,519 6.20% $228,446 6.30%
Nontaxable 13,403 8.42 13,406 8.38
-----------------------------------
TOTAL SECURITIES 219,922 6.33 241,852 6.41
Federal funds sold and
other short term investments 40,207 5.83 22,964 5.82
Loans (2) 399,262 8.56 376,029 8.58
-----------------------------------
TOTAL EARNING ASSETS 659,391 7.65 640,845 7.66
Allowance for loan losses (4,032) (3,975)
Cash and due from banks 22,417 24,255
Bank premises and equipment 16,771 17,216
Other assets 14,876 14,782
-----------------------------------
$709,423 $693,123
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
NOW (including Super NOW) $ 77,393 1.49% $119,729 1.49%
Savings deposits 61,585 1.89 62,711 1.93
Money market accounts 126,229 2.40 78,615 3.04
Time deposits 293,508 5.64 291,049 5.66
Federal funds purchased and other
short term borrowings 6,419 4.20 2,710 4.39
-----------------------------------
TOTAL INTEREST BEARING LIABILITIES 565,134 3.92 554,814 3.96
Demand deposits 76,848 72,137
Other liabilities 4,871 3,644
-----------------------------------
TOTAL 646,853 630,595
Shareholders' equity 62,570 62,528
-----------------------------------
$709,423 $693,123
===================================
Interest expense as % of earning assets 3.36% 3.43%
Net interest income as % of earning
assets 4.29% 4.23%
</TABLE>
<PAGE> 58
SELECTED QUARTERLY INFORMATION (CONT'D)
- --------------------------------------------------------------------------------
Consolidated Quarterly Average Balances, Yields and Rates (1)
<TABLE>
<CAPTION>
1995 QUARTERS
- --------------------------------------------------------------------------------
Second First
- --------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Rate Balance Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Earning Assets
Securities
Taxable $231,882 6.44% $240,928 6.33%
Nontaxable 13,616 8.43 13,798 8.26
-----------------------------------
TOTAL SECURITIES 245,498 6.55 254,726 6.44
Federal funds sold and
other short term investments 49,489 6.05 44,550 5.94
Loans (2) 349,378 8.65 297,533 8.77
-----------------------------------
TOTAL EARNING ASSETS 644,365 7.65 596,809 7.57
Allowance for loan losses (3,933) (3,432)
Cash and due from banks 25,022 24,942
Bank premises and equipment 17,366 15,707
Other assets 14,379 8,791
-----------------------------------
$697,199 $642,817
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
NOW (including Super NOW) $122,990 1.61% $116,662 1.70%
Savings deposits 64,655 1.96 65,036 1.96
Money market accounts 79,690 3.12 74,363 3.12
Time deposits 283,124 5.53 240,630 5.00
Federal funds purchased and other
short term borrowings 5,972 4.63 16,328 4.77
-----------------------------------
TOTAL INTEREST BEARING LIABILITIES 556,431 3.89 513,019 3.58
Demand deposits 74,219 65,919
Other liabilities 5,055 3,453
-----------------------------------
TOTAL 635,705 582,391
Shareholders' equity 61,494 60,426
-----------------------------------
$697,199 $642,817
===================================
Interest expense as % of earning assets 3.36% 3.08%
Net interest income as % of earning assets 4.29% 4.49%
- -------------------------------------------------------------------------------
</TABLE>
(1) The tax equivalent adjustment is based on a 34% tax rate. All yields/rates
are calculated on an annualized basis.
(2) Nonaccrual loans are included in loan balances. Fees on loans are included
in interest on loans.
<PAGE> 59
SELECTED QUARTERLY INFORMATION
- --------------------------------------------------------------------------------
Quarterly Consolidated Income Statement
<TABLE>
<CAPTION>
1996 QUARTERS
- --------------------------------------------------------------------------------
(Dollars in thousands except per share data) FOURTH THIRD
- --------------------------------------------------------------------------------
<S> <C> <C>
Net interest income:
Interest income $13,384 $12,590
Interest expense 5,364 4,944
-----------------
Net interest income 8,020 7,646
Provision for loan losses 150 0
-----------------
Net interest income after provision for 7,870 7,646
losses
Noninterest income:
Service charges on deposit accounts 763 708
Trust fees 519 505
Other service charges and fees 318 279
Brokerage commissions and fees 534 432
Other 135 142
Securities gains (losses) 20 8
-----------------
Total noninterest income 2,289 2,074
Noninterest expenses:
Salaries and wages 2,845 2,708
Pension and other employee benefits 671 587
Occupancy 547 582
Furniture and equipment 443 451
Marketing 516 360
Legal and professional fees 215 172
FDIC assessments (37) 554
Foreclosed and repossessed asset
management and dispositions 73 91
Amortization of intangibles 166 165
Other 1,638 1,548
-----------------
Total noninterest expenses 7,077 7,218
-----------------
Income before income taxes 3,082 2,502
Provision for income taxes 1,128 916
-----------------
Net income $ 1,954 $ 1,586
=================
PER COMMON SHARE DATA
Net income $ 0.45 $ 0.37
=================
Cash dividends declared:
Class A common stock $ 0.20 $ 0.15
Market price Class A common stock:
Low close 23 1/4 21 3/4
High close 26 1/2 24
Bid price at end of period 26 23 1/2
</TABLE>
<PAGE> 60
SELECTED QUARTERLY INFORMATION (cont'd)
- --------------------------------------------------------------------------------
Quarterly Consolidated Income Statement
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 QUARTERS
(Dollars in thousands except per share data) SECOND FIRST
- --------------------------------------------------------------------------------
<S> <C> <C>
Net interest income:
Interest income $12,642 $13,206
Interest expense 4,962 5,450
-----------------
Net interest income 7,680 7,756
Provision for loan losses 150 150
-----------------
Net interest income after provision for 7,530 7,606
losses
Noninterest income:
Service charges on deposit accounts 678 663
Trust fees 513 532
Other service charges and fees 305 291
Brokerage commissions and fees 569 511
Other 159 158
Securities gains (losses) 20 24
-----------------
Total noninterest income 2,244 2,179
Noninterest expenses:
Salaries and wages 2,576 2,609
Pension and other employee benefits 604 669
Occupancy 598 577
Furniture and equipment 458 429
Marketing 388 368
Legal and professional fees 276 181
FDIC assessments 58 57
Foreclosed and repossessed asset
management and dispositions (32) 33
Amortization of intangibles 165 165
Other 1,497 1,546
-----------------
Total noninterest expenses 6,588 6,634
-----------------
Income before income taxes 3,186 3,151
Provision for income taxes 1,128 1,140
-----------------
Net income $ 2,058 $ 2,011
=================
PER COMMON SHARE DATA
Net income $ 0.48 $ 0.47
=================
Cash dividends declared:
Class A common stock $ 0.15 $ 0.15
Market price Class A common stock:
Low close 21 20 1/4
High close 22 3/4 22 3/4
Bid price at end of period 22 22 1/4
</TABLE>
<PAGE> 61
SELECTED QUARTERLY INFORMATION (cont'd)
- --------------------------------------------------------------------------------
Quarterly Consolidated Income Statement
<TABLE>
<CAPTION>
1995 QUARTERS
(Dollars in thousands except per share data) FOURTH THIRD
- --------------------------------------------------------------------------------
<S> <C> <C>
Net interest income:
Interest income $12,622 $12,284
Interest expense 5,588 5,537
----------------
Net interest income 7,034 6,747
Provision for loan losses 125 125
----------------
Net interest income after provision for 6,909 6,622
losses
Noninterest income:
Service charges on deposit accounts 667 655
Trust fees 513 525
Other service charges and fees 281 291
Brokerage commissions and fees 475 369
Other 139 123
Securities gains (losses) 218 269
----------------
Total noninterest income 2,293 2,232
Noninterest expenses:
Salaries and wages 2,430 2,455
Pension and other employee benefits 509 493
Occupancy 576 604
Furniture and equipment 436 495
Marketing 324 328
Legal and professional fees 192 228
FDIC assessments 102 176
Foreclosed and repossessed asset
management and dispositions 46 14
Amortization of intangibles 165 146
Other 1,357 1,198
----------------
Total noninterest expenses 6,137 6,137
----------------
Income before income taxes 3,065 2,717
Provision for income taxes 1,172 961
----------------
Net income $ 1,893 $ 1,756
================
PER COMMON SHARE DATA
Net income $ 0.44 $ 0.40
================
Cash dividends declared:
Class A common stock $ 0.15 $ 0.13
Market price Class A common stock:
Low close 21 5/8 18
High close 25 1/4 22 1/2
Bid price at end of period 21 3/4 22
</TABLE>
<PAGE> 62
SELECTED QUARTERLY INFORMATION (cont'd)
- --------------------------------------------------------------------------------
Quarterly Consolidated Income Statement
<TABLE>
<CAPTION>
1995 QUARTERS
- ---------------------------------------------------------------
(Dollars in thousands except per share data) SECOND FIRST
- ---------------------------------------------------------------
<S> <C> <C>
Net interest income:
Interest income $12,203 $11,042
Interest expense 5,402 4,534
----------------
Net interest income 6,801 6,508
Provision for loan losses 0 0
----------------
Net interest income after provision 6,801 6,508
for losses
Noninterest income:
Service charges on deposit accounts 633 499
Trust fees 455 415
Other service charges and fees 259 267
Brokerage commissions and fees 412 299
Other 121 119
Securities gains (losses) 46 (53)
----------------
Total noninterest income 1,926 1,546
Noninterest expenses:
Salaries and wages 2,442 2,323
Pension and other employee benefits 497 452
Occupancy 576 575
Furniture and equipment 485 484
Marketing 351 364
Legal and professional fees 175 147
FDIC assessments 225 225
Foreclosed and repossessed asset
management and dispositions 31 (27)
Amortization of intangibles 86 21
Other 1,239 1,301
----------------
Total noninterest expenses 6,107 5,865
----------------
Income before income taxes 2,620 2,189
Provision for income taxes 906 726
----------------
Net income $ 1,714 $ 1,463
================
PER COMMON SHARE DATA
Net income $ 0.40 $ 0.34
================
Cash dividends declared:
Class A common stock $ 0.13 $ 0.13
Market price Class A common stock:
Low close 17 3/4 16 1/4
High close 19 1/2 19 1/4
Bid price at end of period 18 1/2 18 5/16
</TABLE>
<PAGE> 63
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Management's Report on Responsibilities for Financial Reporting
Management is responsible for the preparation and content of the accompanying
financial statements and the other information contained in this report.
Management believes that the financial statements have been prepared in
conformity with appropriate, generally accepted accounting principles applied
on a consistent basis and present fairly Seacoast Banking Corporation of
Florida's consolidated financial condition and results of operations. Where
amounts must be based on estimates and judgments, they represent the best
estimates of management.
Management maintains and relies upon an accounting system and related internal
accounting controls to provide reasonable assurance that transactions are
properly executed and recorded and that the company's assets are safeguarded.
Emphasis is placed on proper segregation of duties and authorities, the
development and dissemination of written policies and procedures and a complete
program of internal audits and management follow-up. In recognition of
cost-benefit relationships and inherent control limitations, some features of
the control systems are designed to detect rather than prevent errors,
irregularities and departures from approved policies and practices. Management
believes the system of controls has prevented or detected on a timely basis any
occurrences that could be material to the financial statements and that timely
corrective actions have been initiated when appropriate.
The accompanying 1996 financial statements have been audited by Arthur Andersen
LLP certified public accountants. As part of their audit, Arthur Andersen LLP
evaluated the accounting systems and related internal accounting controls only
to the extent they deemed necessary to determine their auditing procedures.
Their audit would not necessarily disclose all internal accounting control
weaknesses because of the limited purpose of their evaluation. Although the
scope of Arthur Andersen LLP's audit did not encompass a complete review of and
they have not expressed an opinion on the overall system of internal accounting
control, they reported that their evaluation disclosed no conditions which they
consider to be material internal accounting control weaknesses.
The Board of Directors pursues its oversight role for accounting and internal
accounting control matters through an Audit Committee of the Board of Directors
comprised entirely of outside Directors. The Audit Committee meets
periodically with management, internal auditors and independent accountants.
The independent accountants and internal auditors have full and free access to
the Audit Committee and meet with it privately, as well as with management
present, to discuss internal control accounting and auditing matters.
DALE M. HUDSON,
PRESIDENT and
CHIEF EXECUTIVE OFFICER
WILLIAM R. HAHL
SENIOR VICE PRESIDENT and
CHIEF FINANCIAL OFFICER
JOHN R. TURGEON
CONTROLLER
<PAGE> 64
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Certified Public Accountants
Board of Directors and Shareholders
Seacoast Banking Corporation of Florida
Stuart, Florida
We have audited the accompanying consolidated balance sheets of Seacoast
Banking Corporation of Florida and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Seacoast Banking Corporation
of Florida and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Miami, Florida,
January 16, 1997.
<PAGE> 65
CONSOLIDATED STATEMENTS OF INCOME
================================================================================
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
---------------------------------------------
Year Ended December 31 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest on securities
Taxable $ 12,164 $ 14,337 $ 15,818
Nontaxable 711 780 812
Interest and fees on loans 37,655 30,707 21,782
Interest on federal funds 1,292 2,327 629
sold
----------------------------------------------------
TOTAL INTEREST INCOME 51,822 48,151 39,041
Interest on deposits 5,060 5,507 5,500
Interest on time 14,916 15,195 8,072
certificates
Interest on borrowed money 744 359 269
----------------------------------------------------
TOTAL INTEREST EXPENSE 20,720 21,061 13,841
----------------------------------------------------
NET INTEREST INCOME 31,102 27,090 25,200
Provision for loan losses 450 250 145
----------------------------------------------------
NET INTEREST INCOME
AFTER PROVISION FOR 30,652 26,840 25,055
LOAN LOSSES
----------------------------------------------------
Noninterest income
Securities gains 72 480 752
Other 8,714 7,517 6,475
Noninterest expenses 27,517 24,246 23,005
----------------------------------------------------
INCOME BEFORE INCOME 11,921 10,591 9,277
TAXES
Provision for income taxes 4,312 3,765 3,091
----------------------------------------------------
NET INCOME $ 7,609 $ 6,826 $ 6,186
====================================================
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Per share common stock
NET INCOME $ 1.77 $ 1.58 $ 1.44
====================================================
Average shares outstanding 4,304,962 4,309,590 4,305,592
</TABLE>
- --------------------------------------------------------------------------------
See notes to consolidated financial statements.
<PAGE> 66
CONSOLIDATED BALANCE SHEETS
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS)
---------------------------
December 31 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 24,340 $ 56,618
Federal funds sold 76,250 58,400
Securities:
Securities held for sale (at market) 159,133 159,480
Securities held for investment (market
values:
1996 - $50,555 and 1995 - $55,525) 49,667 54,158
---------------------------
TOTAL SECURITIES 208,800 213,638
Loans 471,597 414,964
Less: Allowance for loan losses 4,286 4,066
------------ ------------
NET LOANS 467,311 410,898
Bank premises and equipment 16,110 16,104
Other real estate owned 1,011 889
Core deposit 1,975 2,310
Goodwill 3,882 4,409
Other assets 8,729 8,082
---------------------------
TOTAL ASSETS $808,408 $771,348
===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Demand deposits (noninterest bearing) $118,441 $ 96,253
Savings deposits 277,184 274,617
Other time deposits 250,239 248,768
Time certificates of $100,000 or more 46,893 41,329
---------------------------
TOTAL DEPOSITS 692,757 660,967
Federal funds purchased and securities sold
under agreement to repurchase, maturing
within 30 days 45,088 43,907
Other liabilities 3,794 4,274
---------------------------
$741,639 709,148
Commitments and Contingent Liabilities
(Notes I and P)
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00 per share
- - authorized 1,000,000 shares, none issued
or outstanding 0 0
Class A common stock, par value $.10 per
share (liquidation preference of $2.50 per
share)authorized 10,000,000 shares, issued
3,795,501 and outstanding 3,765,301
shares in 1996, and 3,770,819 issued and
outstanding 3,700,013 shares in 1995 380 377
Class B common stock, par value $.10 per
share authorized 810,000 shares, issued
and outstanding 492,529 shares in 1996 and
517,211 shares in 1995 49 52
Additional paid-in capital 18,612 18,612
Retained earnings 50,121 45,540
Less: Treasury Stock (30,200 shares in 1996 (911) (1,676)
and 70,806 shares in 1995), at cost
---------------------------
68,251 62,905
Securities valuation allowance (1,482) (705)
---------------------------
TOTAL SHAREHOLDERS' EQUITY 66,769 62,200
---------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $808,408 $771,348
===========================
</TABLE>
- ------------------------------------------------------------------------
See notes to consolidated financial statements
<PAGE> 67
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<CAPTION>
(In thousands of dollars)
----------------------------
Year Ended December 31 1996 1995 1994
- -------------------------------------------------------------------
<S> <C> <C> <C>
Increase (Decrease) in Cash and
Cash Equivalents
Cash flows from operating
activities
Interest received $ 51,683 $ 49,180 $ 39,869
Fees and commissions received 8,714 7,515 6,431
Interest paid (20,945) (20,815) (13,723)
Cash paid to suppliers and (24,758) (21,598) (21,037)
employees
Income taxes paid (4,621) (3,232) (3,108)
-------------------------------
Net cash provided by operating 10,073 11,050 8,432
activities
Cash flows from investing
activities
Maturities of securities held 44,257 36,827 20,200
for sale
Maturities of investment 9,669 25,759 12,797
securities held for investment
Proceeds from sale of 49,892 115,107 72,521
securities held for sale
Proceeds from sale of
investment securities held for 0 0 0
investment
Purchase of securities held for (65,605) (109,132) (83,358)
sale
Purchase of securities held for (5,011) (5,112) (11,292)
investment
Proceeds from sale of loans 0 0 24,699
Net new loans and principal (87,609) (77,011) (44,643)
repayments
Proceeds from the sale of other 1,081 239 4,143
real estate owned
Deletions (additions) to bank (1,640) 43 (1,030)
premises and equipment
Purchase of American Bank 0 (4,659) 0
Capital Corporation of
Florida, net of cash
Net change in other assets (251) (87) (299)
-------------------------------
Net cash used in investing (55,217) (18,026) (6,262)
activities
Cash flows from financing
activities
Net increase (decrease) in 31,798 39,042 26,146
deposits
Net increase (decrease) in 1,181 (732) 4,106
federal funds purchased and
repurchase agreements
Issuance of common stock -
Employee Stock Purchase 0 115 181
and Profit Sharing Plans
Exercise of stock options 336 (58) 88
Treasury stock acquired 131 (1,676) 0
Dividends paid (2,730) (2,277) (2,070)
-------------------------------
Net cash provided by financing 30,716 34,414 28,451
activities
-------------------------------
Net increase (decrease) in cash (14,428) 27,438 30,621
and cash equivalents
Cash and cash equivalents at 115,018 87,580 56,959
beginning of year
-------------------------------
Cash and cash equivalents at end $100,590 $ 115,018 $ 87,580
of year ================================
</TABLE>
- -------------------------------------------------------------------
<PAGE> 68
Consolidated Statements of Shareholders' Equity
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<CAPTION>
Common Stock
------------------------------------
Class A Class B
------------------------------------
(In thousands of dollars)
Shares Amount Shares Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31,
1993 3,692,414 $369 571,325 $57
Exchange of Class B
common stock for
Class A common stock 7,971 1 (7,971) (1)
Issuance of Class A
common stock for
Employee Stock
Purchase and Profit
Sharing Plan 10,339 1
Exercise of stock
options 8,000 1
Net income
Cash dividends declared
Net change in
securities valuation
equity (allowance)
------------------------------------
Balance at December 31,
1994 3,718,724 372 563,354 56
Exchange of Class B
common stock for Class
A common stock 46,143 4 (46,143) (4)
Issuance of Class A
common stock for
Employee Stock
Purchase and Profit
Sharing Plan 5,952 1
Treasury stock acquired (71,500)
Treasury stock issued 694
for Employee Stock
Purchase and Profit
Sharing Plan
Exercise of stock
options
Net income
Cash dividends declared
Net change in
securities valuation
equity (allowance)
------------------------------------
Balance at December 31,
1995 3,700,013 377 517,211 52
Exchange of Class B
common stock for
Class A common stock 24,682 3 (24,682) (3)
Treasury stock acquired (736)
Treasury stock issued
for Employee 2,842
Stock Purchase and Profit Sharing Plan
Treasury stock issued
for exercise of stock
options 28,500
Treasury stock issued for stock awards 10,000
Net income
Cash dividends declared
Net change in
securities
valuation equity (allowance)
------------------------------------
Balance at December 31,
1996 3,765,301 $380 492,529 $49
</TABLE>
================================================================================
See notes to consolidated financial statements.
<PAGE> 69
Consolidated Statements of Shareholders' Equity (cont'd)
- --------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<CAPTION>
Additional
Paid-in Retained Restricted/
(In thousands of dollars) Capital Earnings Treasury Stock
- --------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1993 $18,231 $36,933 $ 0
Exchange of Class B
common stock for Class
A common stock
Issuance of Class A
common stock for
Employee Stock
Purchase and Profit
Sharing Plan 180
Exercise of stock
options 87
Net income 6,186
Cash dividends declared (2,070)
Net change in
securities valuation
equity (allowance)
----------------------------------
Balance at December 31,
1994 18,498 41,049 0
Exchange of Class B
common stock for
Class A common stock
Issuance of Class A
common stock for
Employee Stock
Purchase and Profit
Sharing Plan 114
Treasury stock acquired (1,692)
Treasury stock issued
for Employee Stock
Purchase and Profit
Sharing Plan 16
Exercise of stock
options (58)
Net income 6,826
Cash dividends declared (2,277)
Net change in
securities valuation
equity (allowance)
----------------------------------
Balance at December 31,
1995 18,612 45,540 (1,676)
Exchange of Class B
common stock for
Class A common stock
Treasury stock acquired (16)
Treasury stock issued
for Employee Stock
Purchase and Profit
Sharing Plan (1) 62
Treasury stock issued
for exercise of stock
options (10) (298) 644
Treasury stock issued
for stock awards 11 75
Net income 7,609
Cash dividends declared (2,730)
Net change in
securities
valuation equity (allowance)
----------------------------------
Balance at December 31,
1996 $18,314 $50,419 $ (911)
===================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 70
Consolidated Statements of Shareholders' Equity (cont'd)
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
<TABLE>
<CAPTION>
Securities
Valuation Equity
(In thousands of dollars) (Allowance) Total
- --------------------------------------------------------------------------------
<S> <C> <C>
Balance at December 31, $ 4,667 $60,257
1993
Exchange of Class B
common stock for
Class A common stock
Issuance of Class A
common stock for
Employee Stock
Purchase and Profit
Sharing Plan 181
Exercise of stock
options 88
Net income 6,186
Cash dividends declared (2,070)
Net change in
securities
valuation equity (allowance) (9,058) (9,058)
-----------------
Balance at December 31, (4,391) 55,584
1994
Exchange of Class B
common stock for Class
A common stock
Issuance of Class A
common stock for
Employee Stock
Purchase and
Profit Sharing Plan 115
Treasury stock acquired (1,692)
Treasury stock issued
for Employee Stock Purchase and Profit Sharing Plan 16
Exercise of stock
options (58)
Net income 6,826
Cash dividends declared (2,277)
Net change in
securities valuation
equity (allowance) 3,686 3,686
-----------------
Balance at December 31, (705) 62,200
1995
Exchange of Class B
common stock for Class
A common stock
Treasury stock acquired (16)
Treasury stock issued
for Employee Stock Purchase and Profit Sharing Plan 61
Treasury stock issued
for exercise of stock
options 336
Treasury stock issued
for stock awards 86
Net income 7,609
Cash dividends declared (2,730)
Net change in
securities (777) (777)
valuation equity (allowance) -----------------
Balance at December 31,
1996 $(1,482) $66,769
===============================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. Intercompany transactions and balances have been eliminated in
consolidation.
NATURE OF OPERATIONS: The Company is one bank holding company whose operations
and locations are more fully described under the heading "Corporate Profile"
and "Markets Served" on the inside of the front cover and on page 1 of this
annual report.
USE OF ESTIMATES: The preparation of these financial statements required the
use of certain estimates by management in determining the Company's assets,
liabilities, revenues and expenses. Actual results could differ from those
estimates.
SECURITIES: Securities that may be sold as part of the Company's
asset/liability management or in response to, or in anticipation of changes in
interest rates and resulting prepayment risk, or for other factors are stated
at market value. Such securities are held for sale with unrealized gains of
losses reflected as a component of Shareholders' Equity net of tax. Debt
securities that the Company has the ability and intent to hold to maturity are
carried at amortized cost. Interest income on securities, including
amortization of premiums and accretion of discounts is recognized using the
interest method.
The Company generally anticipates prepayments of principal in the calculation
of the effective yield for collateralized mortgage obligations and mortgage
backed securities. The adjusted cost of each specific security sold is used to
compute gains or losses on the sale of securities.
OTHER REAL ESTATE OWNED: Other real estate owned consists of real estate
acquired in lieu of unpaid loan balances. These assets are carried at an
amount equal to the loan balance prior to foreclosure plus costs incurred for
improvements to the property, but no more than the estimated fair value of the
property.
BANK PREMISES AND EQUIPMENT: Bank premises and equipment are stated at cost,
less accumulated depreciation and amortization. Depreciation is computed
principally by the straight line method, over the estimated useful lives as
follows: building - 25-40 years, furniture and equipment - 4-12 years.
PURCHASE METHOD OF ACCOUNTING: Net assets of companies acquired in purchase
transactions are recorded at fair value at date of acquisition. Core deposit
intangibles are amortized on a straight line basis over estimated periods
benefited, not exceeding 10 years. Goodwill is amortized on a straight line
basis over 15 years.
MORTGAGE SERVICING RIGHTS: The Company adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights an
Amendment of SFAS No. 65," as of January 1, 1996. The Company acquires
mortgage servicing rights through the origination of mortgage loans, and the
Company sells or securitizes those loans with servicing rights retained. Under
Statement of Financial Accounting Standards No. 122, the Company allocates the
total cost of the mortgage loans to the mortgage servicing rights and the loans
(without the mortgage servicing rights) based on their relative fair values.
The Company assesses its capitalized mortgage servicing rights for impairment
based on the fair value of those rights. The portfolio is stratified by two
predominant risk characteristics: loan type and fixed versus variable interest
rate. Impairment, if any, is recognized through a valuation allowance for each
impaired stratum. Mortgage servicing rights are amortized in proportion to,
and over the period of, the estimated net future servicing income.
<PAGE> 72
For years prior to 1996, the Company had not purchased the rights to service
loans and consequently, had not recognized mortgage servicing rights as an
asset. The effect of adoption of this Statement in 1996 was not significant.
REVENUE RECOGNITION: Interest on loans is accrued based upon the principal
amount outstanding. The accrual of interest income is discontinued when a loan
becomes 90 days past due as to principal or interest.
When interest accruals are discontinued, interest credited to income in the
current year is reversed and interest accrued in the prior year is charged to
the allowance for loan losses.
Management may elect to continue the accrual of interest when the estimated net
realizable value of collateral is sufficient to cover the principal balance and
accrued interest.
PROVISION FOR LOAN LOSSES: The provision for loan losses is management's
judgement of the amount necessary to increase the allowance for loan losses to
a level sufficient to cover losses in the collection of loans.
NET INCOME PER SHARE: Net income per share is based upon the weighted average
number of shares of both Class A and Class B common stock and equivalents
outstanding during the respective years.
CASH FLOW INFORMATION: For the purposes of the consolidated statements of cash
flows, the Company considers cash and due from banks and federal funds sold as
cash and cash equivalents.
NOTE B - CASH, DIVIDEND AND LOAN RESTRICTIONS
In the normal course of business, the Company and its subsidiary bank enter
into agreements, or are subject to regulatory agreements, that result in cash,
debt and dividend restrictions. A summary of the most restrictive items
follows:
The Company's subsidiary bank is required to maintain average reserve balances
with the Federal Reserve Bank. The average amount of those reserve balances
for the year ended December 31, 1996 was approximately $2,000,000.
Under Federal Reserve regulation, the Company's subsidiary bank is limited as
to the amount it may loan to its affiliates, including the Company, unless such
loans are collateralized by specified obligations. At December 31, 1996, the
maximum amount available for transfer from the subsidiary bank to the Company
in the form of loans approximated 18 percent of consolidated net assets.
The approval of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds the bank's
profits, as defined, for that year combined with its retained net profits for
the preceding two calendar years. Under this restriction the Company's
subsidiary bank can distribute as dividends to the Company in 1997, without
prior approval of the Comptroller of the Currency, approximately $ 8,300,000.
NOTE C - SECURITIES
The amortized cost and market value of securities at December 31, 1996, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or repay
obligations with or without call or prepayment penalties.
<PAGE> 73
<TABLE>
<CAPTION>
Held for Investment Held for Sale
-----------------------------------------
Amortized Market Amortized Market
(In thousands of dollars) Cost Value Cost Value
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 2,871 $ 2,885 $ 0 $ 0
Due after one year 16,139 16,576 44,749 44,417
through five years
Due after five years 2,276 2,399 5,027 5,188
through ten years
Due after ten years 5,317 5,466 0 0
-------------------------------------------
26,603 27,326 49,776 49,605
Mortgage backed 23,064 23,229 73,498 72,873
securities
No contractual maturity 0 0 37,698 36,655
-------------------------------------------
$49,667 $50,555 $160,972 $159,133
======================================================================
</TABLE>
Proceeds from sales of securities during 1996 were $49,892,000 with gross gains
of $150,000 and gross losses of $78,000. During 1995, proceeds from sales of
securities were $115,107,000 with gross gains of $778,000 and gross losses of
$298,000. During 1994, proceeds from sales of securities were $72,521,000 with
gross gains of $1,178,000 and gross losses of $426,000.
Securities with a carrying value of $82,930,000 at December 31, 1996, were
pledged to secure United States Treasury deposits, other public deposits and
trust deposits.
The amortized cost and market value of securities follow:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
(In thousands of dollars) Cost Gains Losses Value
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996:
Securities Held for Sale:
U.S. Treasury and U.S.
Government agencies $ 49,776 $ 290 $ (461) $ 49,605
Mortgage backed securities 73,498 126 (751) 72,873
Mutual funds 35,377 0 (1,044) 34,333
Other securities 2,321 1 0 2,322
------------------------------------------
$160,972 $ 417 $(2,256) $159,133
==========================================
Securities Held for Investment:
U.S. Treasury and U.S.
Government agencies $ 15,596 $ 267 $ 0 $ 15,863
Mortgage backed securities 23,064 265 (100) 23,229
Tax exempt 10,907 459 (3) 11,363
Other securities 100 0 0 100
------------------------------------------
$ 49,667 $ 991 $ (103) $ 50,555
==========================================
DECEMBER 31, 1995:
Securities Held for Sale:
U.S. Treasury and U.S.
Government agencies $ 34,512 $ 645 $ (37) $ 35,120
Mortgage backed securities 87,908 551 (454) 88,005
Mutual funds 35,577 0 (1,030) 34,547
Other securities 1,794 14 0 1,808
------------------------------------------
$159,791 $1,210 $(1,521) $159,480
==========================================
Securities Held for Investment:
U.S. Treasury & U.S.
Government agencies $ 17,329 $ 669 $ 0 $ 17,998
Mortgage backed securities 23,837 259 (102) 23,994
Tax exempt 12,892 544 (3) 13,433
Other securities 100 0 0 100
------------------------------------------
$ 54,158 $1,472 $ (105) $ 55,525
==========================================
</TABLE>
<PAGE> 74
NOTE D - LOANS
An analysis of loans follows:
<TABLE>
<CAPTION>
December 31
(In thousands of dollars) 1996 1995
- ---------------------------------------------
<S> <C> <C>
Real estate $ 11,880 $ 10,540
construction
Real estate mortgage 378,227 335,031
Commercial and 22,857 17,205
financial
Installment loans to 58,187 51,959
individuals
Other 446 229
------------------
$471,597 $414,964
==================
</TABLE>
One of the sources of the Company's business is loans to directors, officers
and other members of management. These loans are made on the same terms as all
other loans and do not involve more than normal risk of collectibility. The
aggregate dollar amount of these loans was approximately $3,777,000 and
$3,786,000 at December 31, 1996 and 1995, respectively. During 1996,
$3,035,000 of new loans were made and repayments totalled $3,044,000.
See Page 26 of Management's Discussion and Analysis for information about
concentrations of credit risk of all financial instruments.
Note E - Impaired Loans and Allowance for Loan Losses
The Company adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures," as of January 1, 1995. These statements
require that certain impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's original effective interest
rate. As a practical expedient, impairment may be measured based on the loan's
observable market price or the fair value of collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance.
The Company had previously measured the allowance for loan losses using methods
similar to those described in Statement of Financial Accounting Standard No.
114. As a result of adopting these statements, no additional allowance for
loan losses was required as of January 1, 1995.
The Company's recorded investment in impaired loans and related valuation
allowance are as follows:
<TABLE>
December 31 1996 1995
RECORDED VALUATION Recorded Valuation
(In thousands of dollars) INVESTMENT ALLOWANCE Investment Allowance
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Impaired loans:
Valuation allowance $ 0 $0 $ 585 $14
required
No valuation allowance 161 0 681 0
required
--------------------------------------
$161 $0 $1,266 $14
======================================
</TABLE>
The valuation allowance is included in the allowance for loan losses. The
average recorded investment in impaired loans for the years ended December 31,
1996 and 1995 were $832,000 and $204,000, respectively.
<PAGE> 75
Interest payments received on impaired loans are recorded as interest income
unless collection of the remaining recorded investment is doubtful at which time
payments received are recorded as reductions to principal. The Company
recognized interest income on impaired loans of $22,000 and $37,000 for the year
ended December 31, 1995 and 1996.
Transactions in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31
(In thousands of dollars) 1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $4,066 $3,373 $3,622
Provision charged to operating expense 450 250 145
Allowance applicable to loans of purchased company 0 556 0
Charge offs (582) (533) (819)
Recoveries 352 420 425
------------------------
Balance, end of year $4,286 $4,066 $3,373
========================
</TABLE>
NOTE F - BANK PREMISES AND EQUIPMENT
Bank premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
Accumulated
(In thousands of dollars) Depreciation & Net Carrying
Amortization Value
Cost
- ---------------------------------------------------------------
<S> <C> <C> <C>
DECEMBER 31, 1996
Premises (including land of $18,025 $ 5,363 $12,662
$2,900)
Furniture and equipment 12,295 8,847 3,448
----------------------------------
$30,320 $14,210 $16,110
==================================
DECEMBER 31, 1995
Premises (including land of $17,428 $ 4,727 $12,701
$2,769)
Furniture and equipment 11,733 8,330 3,403
----------------------------------
$29,161 $13,057 $16,104
==================================
</TABLE>
NOTE G - SHORT TERM BORROWINGS
All of the Company's borrowings were comprised of federal funds purchased and
securities sold under agreements to repurchase with maturities primarily from
overnight to seven days:
<TABLE>
<CAPTION>
(In thousands of dollars) 1996 1995 1994
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum amount outstanding
at any month end $45,088 $43,907 $44,639
Average interest rate
outstanding at end of 3.92% 3.91% 4.56%
year
Average amount outstanding $17,978 $ 7,816 $ 7,949
Weighted average interest 4.14% 4.59% 3.38%
rate
- -------------------------------------------------------
</TABLE>
The Company's subsidiary bank has unused lines of credit to purchase federal
funds from its correspondent banks of $45,500,000 at December 31, 1996.
<PAGE> 76
NOTE H - EMPLOYEE BENEFITS
The Company's profit sharing plan which covers substantially all employees
after one year of service includes a matching benefit feature for employees
electing to defer the elective portion of their profit sharing compensation.
In addition, amounts of compensation contributed by employees are matched on a
percentage basis under the plan. The profit sharing contributions charged to
operations were $801,000 in 1996, $572,000 in 1995 and $539,000 in 1994.
The Company's stock option and stock appreciation rights plans were approved by
the Company's shareholders on April 25, 1991 and April 25, 1996. The number of
shares of Class A common stock that may be purchased pursuant to the 1991 and
1996 plans shall not exceed 300,000 shares for each plan. The Company has
granted options on 286,000 shares and 47,000 shares, respectively through
December 31, 1996. Under both plans the option exercise price equals the Class
A common stock's market price on the date of grant. All options have a four
year vesting period and a contractual life of ten years.
The following table presents a summary of stock option activity for 1995 and
1996:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Number Weighted Average Option Price Weighted Average
of Shares Fair Value Per Share Exercise Price
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options
outstanding,
January 1, 1995 205,500 $11.00-19.00 $15.93
Exercised (8,000) 11.00 11.00
Granted 60,000 $4.74 17.50 17.50
Cancelled (8,000) 19.75 19.75
--------------------------------------------------------------------
Options
outstanding,
December 31, 1995 249,500 11.00 - 19.75 16.34
Exercised (28,500) 11.00 - 19.00 11.78
Granted 47,000 $5.64 21.75 21.75
Cancelled (8,000) 17.50 17.50
--------------------------------------------------------------------
Options
outstanding,
December 31, 1996 260,000 11.00 - 21.75 17.78
--------------------------------------------------------------------
Options
exercisable,
December 31, 1995 96,000 14.38
December 31, 1996 122,000 16.11
========================================================================================
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted
Average
Number of Remaining Weighted Number of Weighted
Range of Shares Contractual Average Shares Average
Exercise Outstanding Life in Years Exercise Price Exercisable Exercise Price
Prices
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$11.00 10,000 4.42 $11.00 10,000 $11.00
11.75 33,500 5.17 11.75 33,500 11.75
17.50 52,000 8.17 17.50
17.75 35,000 6.92 17.75 23,333 17.75
19.00 82,500 6.17 19.00 55,000 19.00
21.75 47,000 9.50 21.75
- ----------------------------------------------------------------------------------------------------------------------------------
260,000 7.07 17.78 121,833 16.11
==================================================================================================================================
</TABLE>
<PAGE> 77
The two stock option plans are accounted for under APB Opinion No. 25, and
therefore no compensation cost has been recognized. Had compensation cost for
these plans been determined consistent with SFAS 123, the Company's net income
and earnings per share would have been reduced to the following pro forma
amounts:
<TABLE>
<CAPTION>
In Thousands 1996 1995
- -----------------------------------------
<S> <C> <C> <C>
Net Income: As Reported $7,609 $6,826
Pro Forma 7,526 6,786
Primary EPS: As Reported 1.77 1.58
Pro Forma 1.75 1.57
</TABLE>
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995; risk-free interest rates of 7.11
percent for 1996 and 7.59 percent for 1995; expected dividend yield of 3.3
percent; expected lives of 7 years; expected volatility of 20.8 percent.
The Company's defined benefit plan was terminated in 1996 and resulted in a
one-time charge of $607,000. The Company has received regulatory approval for
the termination and has no further obligation to the plan or its participants.
NOTE I - LEASE COMMITMENTS
The Company is obligated under various noncancelable operating leases for
equipment, buildings and land. At December 31, 1996, future minimum lease
payments under leases with initial or remaining terms in excess of one year are
as follows:
(In thousands of dollars)
<TABLE>
<S> <C>
- --------------------
1997 $ 1,141
1998 1,019
1999 918
2000 732
2001 729
Thereafter 6,942
-------
$11,481
=======
</TABLE>
Rent expense charged to operations was $1,066,000 in 1996, $995,000 in 1995,
and $1,033,000 in 1994. Certain leases contain provisions for renewal and
change with the consumer price index.
Certain property is leased from related parties of the Company at prevailing
rental rates. Lease payments to these individuals were $206,000 in 1996,
$185,000 in 1995, and $259,000 in 1994.
<PAGE> 78
NOTE J - INCOME TAXES
The provision for income taxes including tax effects of security transaction
gains (1996 - $27,000; 1995 - $175,000; 1994 - $267,000) are as follows:
<TABLE>
<CAPTION>
Year Ended December 31
(In thousands of dollars) 1996 1995 1994
- --------------------------------------------------
<S> <C> <C> <C>
Current
Federal $4,204 $3,311 $2,313
State 524 403 150
Deferred
Federal (372) 46 554
State (44) 5 74
-----------------------
$4,312 $3,765 $3,091
=======================
</TABLE>
- --------------------------------------------------------------------------------
Temporary differences in the recognition of revenue and expense for tax and
financial reporting purposes resulted in deferred income taxes as follows:
<TABLE>
<CAPTION>
(In thousands of dollars) 1996 1995 1994
- -------------------------------------------------
<S> <C> <C> <C>
Depreciation $(143) $(135) $(260)
Allowance for loan losses (93) 2 152
Interest and fee income 51 63 (126)
Other real estate owned (24) (4) 736
Tax accounting change 0 26 113
Pension (229) 53 46
Other 22 46 (33)
---------------------
$(416) $ 51 $ 628
=====================
</TABLE>
<PAGE> 79
The difference between the total expected tax expense (computed by applying the
U.S. Federal tax rate of 34 percent to pretax income) and the reported income
tax expense relating to income before income taxes is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
(In thousands of dollars) 1996 1995 1994
- ------------------------------------------------------
<S> <C> <C> <C>
34% of income before $4,077 $3,601 $3,154
income taxes
Increase (decrease)
resulting from the effects
of:
Tax-exempt interest on
obligations of states and
political subdivisions (216) (234) (253)
State income taxes (164) (139) (76)
Dividend exclusion (8) (7) (8)
Amortization of 198 108 0
intangibles
Other (55) 28 50
------------------------
Federal tax provision 3,832 3,357 2,867
State tax provision 480 408 224
------------------------
Applicable income taxes $4,312 $3,765 $3,091
========================
</TABLE>
The net deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
December 31 (In thousands of dollars) 1996 1995
- --------------------------------------------------------
<S> <C> <C>
Allowance for loan losses $ 1,303 $ 1,210
Other real estate owned 39 15
Net unrealized securities losses 880 402
Other 139 0
-----------------
Gross deferred tax assets 2,361 1,627
Depreciation (744) (887)
Interest and fee income (383) (332)
Other 0 (68)
-----------------
Gross deferred tax liabilities (1,127) (1,287)
Deferred tax asset valuation 0 0
allowance
-----------------
Net deferred tax assets $ 1,234 $ 340
=================
</TABLE>
<PAGE> 80
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value:
CASH AND CASH EQUIVALENTS
The carrying amount was used as a reasonable estimate of fair value.
SECURITIES
The fair value of U.S. Treasury and U.S. Government agency, mutual fund and
mortgage backed securities are estimated based on bid prices published in
financial newspapers or bid quotations received from securities dealers.
The fair value of many state and municipal securities are not readily available
through market sources, so fair value estimates are based on quoted market
price or prices of similar instruments.
LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, mortgage,
credit card, etc. Each loan category is further segmented into fixed and
adjustable rate interest terms and by performing and nonperforming categories.
The fair value of loans, except residential mortgage and credit card loans, is
calculated by discounting scheduled cash flows through the estimated maturity
using estimated market discount rates that reflect the credit and interest rate
risk inherent in the loan. For residential mortgage loans, fair value is
estimated by discounting contractual cash flows adjusting for prepayment
assumptions using discount rates based on secondary market sources adjusted to
reflect differences in servicing and credit costs. For credit card loans, cash
flows and maturities are based on contractual terms. The fair value estimate
for credit card loans is based on the carrying value of existing loans at
December 31, 1996 and 1995. This estimate does not include the value that
relates to estimated cash flows from new loans generated from existing
cardholders over the remaining life of the portfolio.
DEPOSIT LIABILITIES
The fair value of demand deposits, savings accounts and money market deposits
is the amount payable on demand at the reporting date. The fair value of fixed
maturity certificates of deposit is estimated using the rates currently offered
for deposits of similar remaining maturities.
<PAGE> 81
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
present creditworthiness of the counterparties.
<TABLE>
<CAPTION> 1996 1995
-------------------------------------------------
December 31 Carrying Fair Value Carrying Fair Value
(In thousands of dollars) Amount Amount
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial Assets
Cash and cash $100,590 $100,590 $115,018 $115,018
equivalents
Securities 208,800 209,688 213,638 215,005
Loans, net 467,311 467,865 410,898 415,647
Financial Liabilities
Deposits 692,757 693,523 660,967 662,141
Borrowings 45,088 45,088 43,907 43,907
Contingent Liabilities
Commitments to extend 0 425 0 335
credit
Standby letters of 0 6 0 11
credit
- -----------------------------------------------------------------------------
</TABLE>
NOTE L - NONINTEREST INCOME AND EXPENSES
Details of noninterest income and expenses follow:
<TABLE>
<CAPTION>
Year Ended December 31 1996 1995 1994
(In thousands of dollars)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Noninterest income
Service charges on deposit accounts $ 2,812 $ 2,454 $ 2,033
Trust fees 2,069 1,908 1,722
Other service charges and fees 1,193 1,098 1,028
Brokerage commissions and fees 2,046 1,555 1,190
Other 594 502 502
-------------------------
8,714 7,517 6,475
Securities gains 72 480 752
-------------------------
$ 8,786 $ 7,997 $ 7,227
=========================
Noninterest expenses
Salaries and wages $10,738 $ 9,650 $ 8,682
Pension and other employee benefits 2,531 1,951 1,815
Occupancy 2,304 2,331 2,230
Furniture and equipment 1,781 1,900 2,027
Marketing 1,632 1,367 1,262
Legal and professional fees 844 742 888
FDIC assessments 632 728 1,191
Foreclosed and repossessed asset
management and dispositions 165 64 20
Amortization of intangibles 661 418 88
Other 6,229 5,095 4,802
-------------------------
$27,517 $24,246 $23,005
======= ======= =======
</TABLE>
<PAGE> 82
NOTE M - SHAREHOLDERS' EQUITY
The Company has reserved 100,000 Class A common shares for issuance in
connection with an employee stock purchase plan and 150,000 Class A common
shares for issuance in connection with an employee profit sharing plan. At
December 31, 1996, an aggregate of 35,236 shares and 52,422 shares,
respectively, have been issued as a result of employee participation in these
plans.
Holders of Class A common stock are entitled to one vote per share on all
matters presented to shareholders. Holders of Class B common stock are
entitled to 10 votes per share on all matters presented to shareholders. Class
A and Class B common stock vote together as a single class on all matters,
except as required by law or as provided otherwise in the Company's Articles of
Incorporation. Each share of Class B common stock is convertible into one
share of Class A common stock at any time prior to a vote of shareholders
authorizing a liquidation or dissolution of the Company.
The Company is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional dicretionary, actions
by regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company's
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company's captial amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantiative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of total and Tier 1
capital (as defined in the regulations) to risk-weighted assets (as defined)
and of Tier 1 capital to average assets (as defined). Management believes, as
of December 31, 1996 that the Company meets all capital adequacy requirements
to which it is subject.
As of December 31, 1996, the most recent notification from the Company's
regulator categorized the Company as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Company must maintain minimum total risk-based, Tier 1 risk-based and Tier
1 leverage ratios as set forth below. There are no conditions or events since
that notification that management believes have changed the institution's
category.
<PAGE> 83
<TABLE>
<CAPTION>
MINIMUM FOR CAPITAL
ADEQUACY PURPOSES
----------------------
(IN THOUSANDS OF DOLLARS) AMOUNT RATIO AMOUNT RATIO
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996:
Total Capital (to risk- $66,023 15.00% $35,203 > 8.00%
weighted assets) -
Tier 1 Capital (to 61,737 14.03 17,602 > 4.00%
risk-weighted assets) -
Tier 1 Capital (to 61,737 8.32 29,692 > 4.00%
average assets) -
AT DECEMBER 31, 1995:
Total Capital (to risk- $59,838 14.86% $32,219 > 8.00%
weighted assets) -
Tier 1 Capital (to 55,772 13.85 16,109 > 4.00%
risk-weighted assets) -
Tier 1 Capital (to 55,772 7.93 28,117 > 4.00%
average assets) -
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MINIMUM TO BE WELL
CAPITALIZED UNDER
PROMPT CORRECTIVE
ACTION PROVISIONS
----------------------
(IN THOUSANDS OF DOLLARS) AMOUNT RATIO
<S> <C> <C>
AT DECEMBER 31, 1996:
Total Capital (to risk- $44,004 > 10.00%
weighted assets) -
Tier 1 Capital (to 26,402 > 6.00%
risk-weighted assets) -
Tier 1 Capital (to 37,115 > 5.00%
average assets) -
AT DECEMBER 31, 1995:
Total Capital (to risk- $40,274 > 10.00%
weighted assets) -
Tier 1 Capital (to 24,164 > 6.00%
risk-weighted assets) -
Tier 1 Capital (to 35,147 > 5.00%
average assets) -
</TABLE>
The above ratios are comparable for the Company's wholly owned banking
subsidiary.
<PAGE> 84
NOTE N - 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 unaudited proforma impact as of and for the year ended
December 31, 1994, assuming the acquisition occurred January 1, 1994:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS, EXCEPT PER
SHARE AMOUNTS)
FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<S> <C>
Net interest income $27,328
Noninterest income 7,771
Noninterest expense 24,330
Net income 6,910
Earnings per share 1.60
</TABLE>
NOTE O - SEACOAST BANKING CORPORATION OF FLORIDA
(PARENT COMPANY ONLY) FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
(In thousands of dollars) 1996 1995
- ------------------------------------------------------
<S> <C> <C>
ASSETS
Cash $ 10 $ 10
Securities purchased under 4,605 3,772
agreement to resell with
subsidiary bank, maturing
within 30 days
Securities held for sale 1,547 1,596
Investment in subsidiaries 60,613 56,875
Other assets 79 32
----------------
$66,854 $62,285
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Other liabilities $ 85 $ 85
Shareholders' Equity 66,769 62,200
----------------
$66,854 $62,285
================
</TABLE>
<PAGE> 85
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
(In thousands of dollars) 1996 1995 1994
- ---------------------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends
Subsidiary $3,219 $2,668 $2,378
Other 33 30 33
Interest 248 292 235
----------------------
3,500 2,990 2,646
EXPENSES 446 408 553
----------------------
Income before income tax credit
and equity in undistributed
income of subsidiaries 3,054 2,582 2,093
Income tax credit 69 38 109
----------------------
Income before equity in
undistributed income of
subsidiaries 3,123 2,620 2,202
Equity in undistributed income of
subsidiaries 4,486 4,206 3,984
----------------------
NET INCOME $7,609 $6,826 $6,186
======================
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
(In thousands of dollars) 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 253 $ 292 $ 235
Dividends received 3,251 2,701 2,414
Income taxes received 38 109 67
Cash paid to suppliers (446) (419) (563)
---------------------------
Net cash provided by operating
activities 3,096 2,683 2,153
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in securities
purchased under agreement to
resell, maturing in 30 days (833) 1,213 (352)
---------------------------
Net cash provided by (used in)
investing activity (833) 1,213 (352)
CASH FLOWS FROM FINANCING
Issuance of common stock -
Employee Stock Purchase and
Profit Sharing Plan 0 115 181
Exercise of Stock Options 336 (58) 88
Treasury Stock (Purchase) 131 (1,676) 0
Dividends paid (2,730) (2,277) (2,070)
---------------------------
Net cash used in financing (2,263) (3,896) (1,801)
---------------------------
Net change in cash 0 0 0
Cash at beginning of year 10 10 10
---------------------------
Cash at end of year $ 10 $ 10 $ 10
===========================
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
RECONCILIATION OF NET INCOME TO
CASH PROVIDED BY OPERATING
ACTIVITIES
<S> <C> <C> <C>
Net income $ 7,609 $ 6,826 $ 6,186
Adjustments to reconcile net
income to net cash provided by
operating activities:
Amortization 5 4 4
Equity in undistributed income (4,486) (4,206) (3,984)
of subsidiaries
Change in other assets (32) 70 (41)
Change in other liabilities 0 (11) (12)
---------------------------
Net cash provided by operating
activities $ 3,096 $ 2,683 $ 2,153
===========================
</TABLE>
NOTE P - CONTINGENT LIABILITIES AND COMMITMENTS WITH OFF BALANCE SHEET RISK
The Company and its subsidiary bank, because of the nature of their business,
are at all times subject to numerous legal actions, threatened or filed.
Management, based upon advice of legal counsel, does not expect that the final
outcome of threatened or filed suits will have a materially adverse effect on
its results of operations or financial condition.
The Company's subsidiary bank is a party to financial instruments with off
balance sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to extend
credit and standby letters of credit.
The subsidiary bank's exposure to credit loss in the event of non-performance
by the other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contract or notional amount
of those instruments. The subsidiary bank uses the same credit policies in
making commitments and standby letters of credit as it does for on balance
sheet instruments.
<TABLE>
<CAPTION>
Contract or
Notional Amount
December 31 (In thousands of dollars)
1996 1995
- -----------------------------------------------------------
<S> <C> <C>
Financial instruments whose
contract amounts represent credit
risk:
Commitments to extend credit $42,470 $33,502
Standby letters of credit and
financial guarantees written:
Secured 416 898
Unsecured 136 168
- -----------------------------------------------------------
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected
to expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The subsidiary bank evaluates
each customer's creditworthiness on a case-by-case basis.
<PAGE> 87
The amount of collateral obtained, if deemed necessary by the bank upon
extension of credit, is based on management's credit evaluation of the
counterparty. Collateral held varies but may include accounts receivable,
inventory, equipment, and commercial and residential real estate. Of the
$42,470,000 outstanding at December 31, 1996, $25,900,000 is secured by 1-4
family residential properties.
Standby letters of credit are conditional commitments issued by the subsidiary
bank to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The subsidiary bank holds collateral supporting those commitments
for which collateral is deemed necessary. The extent of collateral held for
the above secured standby letters of credit at December 31, 1996 and 1995
amounted to $872,000 and $1,228,000, respectively.
NOTE Q - SUPPLEMENTAL DISCLOSURES FOR CONSOLIDATED STATEMENT OF CASH FLOWS
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
<TABLE>
<CAPTION>
(In thousands of dollars)
-----------------------------
Year Ended December 31 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $ 7,609 $ 6,826 $ 6,186
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization 2,426 2,594 2,717
Provision for loan losses 450 250 145
Provision (credit) for deferred (416) 51 628
taxes
Gain on sale of securities (72) (480) (752)
Gain on sale of loans 0 0 (45)
(Gain) loss on sale and write 107 (18) (192)
down of foreclosed assets
Loss on disposition of 18 53 96
equipment
Change in interest receivable (288) 615 21
Change in interest payable (225) 247 118
Change in prepaid expenses 473 0 112
Change in accrued taxes 111 497 (686)
Change in other liabilities (120) 415 84
-----------------------------
Total adjustments 2,464 4,224 2,246
-----------------------------
Net cash provided by operating $10,073 $11,050 $ 8,432
activities
==============================
Supplemental disclosure of non
cash investing activities:
Market value adjustment to
securities $(1,528) $ 3,509 $(11,132)
Transfer from securities held
for sale to securities held for
investment 0 16,147 64,885
Transfer from securities held
for investment to securities
held for sale 0 68,764 0
Transfers from loans to other
real estate owned 1,310 945 0
==================================================================
</TABLE>
NOTE R - REASSESSMENT OF SECURITIES' CLASSIFICATIONS
The Company used the opportunity provided by an implementation guide on SFAS No.
115 to reclassify approximately $69 million from held for investment to the held
for sale portfolio in 1995.
In connection with this reclassification, gross unrealized gains of $785,000
and gross unrealized losses of $413,000 were recorded in held for sale
securities and in shareholders' equity (net of tax) in 1995.
<PAGE> 88
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants -- Arthur Andersen LLP
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
<PAGE> 89
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
<PAGE> 90
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors and executive officers of
Seacoast is set forth under the headings "Election of Directors - General," and
"- Executive Officers" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the 1997 Proxy Statement and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information set forth under the headings "Election of Directors -
Compensation of Executive Officers", "- Salary and Benefits Committee Report",
"- Summary Compensation Table", "- Grants of Options/SARs in 1996", Aggregated
Options/SAR Exercises in 1996 and 1996 Year-End Option/SAR Values", "- Profit
Sharing Plan", "- Employment and Severance Agreements", "Salary and Benefits
Committee Interlocks and Insider Participation"; "- Information About the
Board of Directors and its Committees", and in the 1997 Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information set forth under the headings, "Election of Directors -
General," "- Management Stock Ownership," and "Principal Shareholders" in the
1997 Proxy Statement, relating to the number of shares of Class A Common Stock
and Class B Common Stock beneficially owned by the directors of Seacoast, all
such directors and officers as a group and certain beneficial owners is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information set forth under the heading "Election of Directors -
Certain Transactions and Business Relationships" in the 1997 Proxy Statement is
incorporated herein by reference.
Salary and Benefits Committee Interlocks and Insider Participation" and
<PAGE> 91
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a) 1 List of all financial statements
The following consolidated financial statements and report of
independent certified public accountants of Seacoast are
included in Item 8 of this Annual Report on Form 10-K.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 1996
and 1995
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994 Consolidated
Statements of Shareholders' Equity for the years
ended December 31, 1996, 1995 and
1994
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 Notes to
Consolidated Financial Statements
a) 2 List of Financial Statement Schedules
Schedules to the consolidated financial statements required by
Article 9 of Regulation S-X are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
a) 3 Listing of Exhibits
The following Exhibits are filed as part of this report in
Item 14(c):
Exhibit 2 Agreement and Plan of Merger
Dated February 19, 1997, by and between the Registrant and Port St.
Lucie National Bank Holding Corp.
Exhibit 3.1 Articles of Incorporation, as amended
Incorporated herein by reference from registrant's Annual Report on
Form 10-K, File No. 0-13660, dated March 31, 1989
Exhibit 3.2 By-laws of the Corporation, as amended
Incorporated herein by reference from Exhibit 3.2 of Registrant's
Annual Report on Form 10-K, File No. 0-13660, dated March 17, 1992
Exhibit 4.1 Specimen Class A Common Stock Certificate
Incorporated herein by reference from Exhibit 4.1 of the Registrant's
Registration Statement on Form S-1, File No. 2-88829
Exhibit 4.2 Specimen Class B Common Stock Certificate
Incorporated herein by reference from Exhibit 4.2 of registrant's
Registration Statement on Form S-1, File No. 2-88829
Exhibit 10.1 Profit Sharing Plan
Incorporated herein by reference from registrant's Registration
Statement on Form S-8, File No. 33-22846, dated July 18, 1988
<PAGE> 92
Exhibit 10.2 Employee Stock Purchase Plan
Incorporated herein by reference from registrant's Registration
Statement on Form S-8 File No. 33-25267, dated November 18, 1988
Exhibit 10.3 Amendment #1 to the Employee Stock Purchase Plan
Incorporated herein by reference from registrant's Annual Reports on
Form 10-K, dated March 29, 1991
Exhibit 10.4 Executive Employment Agreement
Dated March 22, 1991 between A. Douglas Gilbert and the Bank,
incorporated herein by reference from registrant's Annual Reports on
Form 10-K, dated March 29, 1991
Exhibit 10.5 Executive Employment Agreement
Dated January 18, 1994 between Dennis S. Hudson, III and the Bank,
incorporated herein by reference from registrant's Annual Reports on
Form 10-K, dated March 28, 1995.
Exhibit 10.6 Executive Employment Agreement
Dated July 31, 1995 between C.William Curtis, Jr. and the Bank,
incorporated herein by reference from registrant's Annual Reports on
Form 10-K, dated March 28, 1996.
Exhibit 21 Subsidiaries of Registrant
Incorporated herein by reference from Exhibit 22 of Registrant's
Annual Report on Form 10-K, File No. 0-13660, dated March 17, 1992
Exhibit 23 Consent of Arthur Andersen LLP
Exhibit 27 Financial Data Schedule (for SEC use only)
b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 1996.
c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report.
d) Financial Statement Schedules
None
<PAGE> 93
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Stuart, State of Florida.
SEACOAST BANKING CORPORATION OF FLORIDA
(Registrant)
By: /s/ Dale M. Hudson
-------------------------------------
Dale M. Hudson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date
----
<S> <C>
/s/ Dennis S. Hudson, Jr. March 24, 1997
- ------------------------------------------------------------------
Dennis S. Hudson, Jr., Chairman of the Board and Director
/s/ Dale M. Hudson March 24, 1997
- ------------------------------------------------------------------
Dale M. Hudson, President, Chief Executive Officer and Director
/s/ Dennis S. Hudson, III March 24, 1997
- ------------------------------------------------------------------
Dennis S. Hudson, III Executive Vice President, Chief Operating
Officer and Director
/s/ William R. Hahl March 24, 1997
- ------------------------------------------------------------------
William R. Hahl, Senior Vice President and Chief Financial Officer
- ------------------------------------------------------------------
Jeffrey C. Bruner, Director
/s/ John H. Crane March 24, 1997
- ------------------------------------------------------------------
John H. Crane, Director
/s/ Evans Crary, Jr. March 24, 1997
- ------------------------------------------------------------------
Evans Crary, Jr., Director
/s/ John R. Santarsiero, Jr. March 24, 1997
- ------------------------------------------------------------------
John R. Santarsiero, Jr., Director
/s/ Thomas H. Thurlow, Jr. March 24, 1997
- ------------------------------------------------------------------
Thomas H. Thurlow, Jr., Director
</TABLE>
<PAGE> 94
EXHIBIT INDEX
Exhibit 2 Agreement and Plan of Merger
Dated February 19, 1997, by and between the Registrant and Port St.
Lucie National Bank Holding Corp.
Exhibit 3.1 Articles of Incorporation, as amended
Incorporated herein by reference from registrant's Annual Report on
Form 10-K, File No. 0-13660, dated March 31, 1989
Exhibit 3.2 By-laws of the Corporation, as amended
Incorporated herein by reference from Exhibit 3.2 of Registrant's
Annual Report on Form 10-K, File No. 0-13660, dated March 17, 1992
Exhibit 4.1 Specimen Class A Common Stock Certificate
Incorporated herein by reference from Exhibit 4.1 of the Registrant's
Registration Statement on Form S-1, File No. 2-88829
Exhibit 4.2 Specimen Class B Common Stock Certificate
Incorporated herein by reference from Exhibit 4.2 of registrant's
Registration Statement on Form S-1, File No. 2-88829
Exhibit 10.1 Profit Sharing Plan
Incorporated herein by reference from registrant's Registration
Statement on Form S-8, File No. 33-22846, dated July 18, 1988
Exhibit 10.2 Employee Stock Purchase Plan
Incorporated herein by reference from registrant's Registration
Statement on Form S-8 File No. 33-25267, dated November 18, 1988
Exhibit 10.3 Amendment #1 to the Employee Stock Purchase Plan
Incorporated herein by reference from registrant's Annual Reports on
Form 10-K, dated March 29, 1991
Exhibit 10.4 Executive Employment Agreement
Dated March 22, 1991 between A. Douglas Gilbert and the Bank,
incorporated herein by reference from registrant's Annual Reports on
Form 10-K, dated March 29, 1991
Exhibit 10.5 Executive Employment Agreement
Dated January 18, 1994 between Dennis S. Hudson, III and the Bank,
incorporated herein by reference from registrant's Annual Reports on
Form 10-K, dated March 28, 1995.
Exhibit 10.6 Executive Employment Agreement
Dated July 31, 1995 between C.William Curtis, Jr. and the Bank,
incorporated herein by reference from registrant's Annual Reports on
Form 10-K, dated March 28, 1996.
Exhibit 21 Subsidiaries of Registrant
Incorporated herein by reference from Exhibit 22 of Registrant's
Annual Report on Form 10-K, File No. 0-13660, dated March 17, 1992
Exhibit 23 Consent of Arthur Andersen LLP
Exhibit 27 Financial Data Schedule (for SEC use only)
<PAGE> 1
EXHIBIT 2
Agreement and Plan of Merger by and between Seacoast Banking
Corporation of Florida and Port St. Lucie National
Bank Holding Corp. dated February 19, 1997
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SEACOAST BANKING CORPORATION OF FLORIDA
AND
PORT ST. LUCIE NATIONAL BANK HOLDING CORP.
Dated as of February 19, 1997
<PAGE> 3
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into as of February 19, 1997, by and between SEACOAST BANKING
CORPORATION OF FLORIDA ("Seacoast"), a Florida corporation, and PORT ST. LUCIE
NATIONAL BANK HOLDING CORP. ("PSHC"), a Florida corporation.
PREAMBLE
The respective Boards of Directors of PSHC and Seacoast are of
the opinion that the transactions described herein are in the best interests of
the parties to this Agreement and their respective shareholders. This
Agreement provides for the acquisition of PSHC by Seacoast pursuant to the
merger of PSHC with and into Seacoast. At the effective time of such merger,
the outstanding shares of the capital stock of PSHC shall be converted into the
right to receive shares of the common stock of Seacoast (except as provided
herein). As a result, shareholders of PSHC shall become shareholders of
Seacoast and Seacoast shall continue to conduct the business and operations of
PSHC. The transactions described in this Agreement are subject to the
approvals of the shareholders of PSHC, the shareholders of Seacoast, the Board
of Governors of the Federal Reserve System, and the Office of the Comptroller
of the Currency, and the satisfaction of certain other conditions described in
this Agreement. It is the intention of the parties to this Agreement that the
Merger for federal income tax purposes shall qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code, and for
accounting purposes shall qualify for treatment as a pooling of interests.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, PSHC shall be merged with and into Seacoast
in accordance with the provisions of, and with the effect provided in Sections
607.1101, 607.1103, 607.1105, 607.1106 and 607.1107 of the FBCA (the "Merger").
Seacoast shall be the Surviving Corporation resulting from the Merger and shall
continue to be governed by the Laws of the State of Florida. The Merger shall
be consummated pursuant to the terms of this Agreement, which has been approved
and adopted by the respective Boards of Directors of PSHC and Seacoast.
1.2 TIME AND PLACE OF CLOSING. The closing of the
transactions contemplated hereby (the "Closing") will take place at 9:00 A.M.
on the date that the Effective Time occurs (or the immediately preceding day if
the Effective Time is earlier than 9:00 A.M.), or at such other time as the
Parties, acting through their authorized officers, may mutually agree. The
Closing shall be held at such location as may be mutually agreed upon by the
Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time the Articles of Merger reflecting the Merger shall become effective with
the Secretary of State of the State of Florida (the "Effective Time").
Subject to the terms and conditions hereof, unless otherwise mutually agreed
upon in writing by the authorized officers of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on the first
business day following the last to occur of (i) the effective date (including
expiration of any applicable waiting period) of the last required Consent of
any Regulatory Authority having authority over and approving or exempting the
Merger, and (ii) the
<PAGE> 4
date on which the shareholders of PSHC and Seacoast approve this Agreement to
the extent such approval is required by applicable Law; or such later date
within 30 days thereof as may be mutually agreed upon by Seacoast and PSHC.
1.4 BANK MERGER. After consummation of the Merger, PSN
Bank shall (at Seacoast's discretion) be merged with and into First National
(the "Bank Merger") in accordance with the provisions of and with the effect
provided in 12 U.S.C. 215a on terms and subject to the provisions of the Bank
Plan of Merger ("Bank Plan"), attached hereto as Exhibit 1. The Bank Plan
shall be executed and the transactions contemplated therein shall be
consummated at such time as Seacoast directs. PSHC shall vote all shares of
capital stock of PSN Bank in favor of the Bank Plan and the Bank Merger
provided therein.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. The Articles of Incorporation of Seacoast
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 BYLAWS. The Bylaws of Seacoast in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until duly amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Seacoast in
office immediately prior to the Effective Time, together with two such
additional persons from PSHC's Board of Directors as may thereafter be elected,
shall serve as the directors of the Surviving Corporation from and after the
Effective Time in accordance with the Bylaws of the Surviving Corporation. The
officers of Seacoast in office immediately prior to the Effective Time,
together with such additional persons as may thereafter be elected, shall serve
as the officers of the Surviving Corporation from and after the Effective Time
in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of
this Article 3, at the Effective Time, by virtue of the Merger and without any
action on the part of Seacoast, PSHC, or the shareholders of either of the
foregoing, the shares of the constituent corporations shall be converted as
follows:
(a) Each share of capital stock of Seacoast issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
(b) Each share of PSHC Common Stock, excluding shares
held by any PSHC Entity or any Seacoast Entity, in each case other than
in a fiduciary capacity or as a result of debts previously contracted,
and excluding shares held by shareholders who perfect their statutory
dissenters' rights as provided in Section 3.4 issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding
and shall be converted into and exchanged for the right to receive
shares of Seacoast Common Stock in an amount equal to the Purchase Price
Per Share divided by the Seacoast Stock Price (the "Exchange Ratio");
provided, that, in the event that the Purchase Price Per Share shall be
less than $24.62 (the "Lower Threshold Price") then PSHC shall have the
right to terminate the Agreement.
(c) Each issued and outstanding PSHC Warrant shall be
converted into and exchanged for shares of Seacoast Common Stock based
upon the exchange ratio (the "Warrant Exchange Ratio") obtained by
dividing (i) the difference between the Purchase Price Per Share and
$8.26 by (ii) the Seacoast Stock Price.
<PAGE> 5
3.2 ANTI-DILUTION PROVISIONS. In the event Seacoast
changes the number of shares of Seacoast Common Stock issued and outstanding
prior to the Effective Time as a result of a stock split, stock dividend, or
similar recapitalization with respect to such stock and the record date
therefor (in the case of a stock dividend) or the effective date thereof (in
the case of a stock split or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the Exchange Ratio
and the Warrant Exchange Ratio shall be proportionately adjusted. In the event
Seacoast changes the number of shares of Seacoast Common Stock issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, or similar recapitalization with respect to such stock and the record
date therefor (in the case of a stock dividend) or the effective date thereof
(in the case of a stock split or similar recapitalization for which a record
date is not established) shall be after the Exchange Ratio and the Warrant
Exchange Ratio have been determined in accordance with Sections 3.1(b) and (c)
and prior to the Effective Time, the Exchange Ratio and Warrant Exchange Ratio
shall be proportionately adjusted. In the event Seacoast changes the number of
shares of Seacoast Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, or similar recapitalization
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or
similar recapitalization for which a record date is not established) shall be
prior to date on which the Exchange Ratio and the Warrant Exchange Ratio is
determined in accordance with Sections 3.1(b) and (c), (i) the Threshold Prices
shall be adjusted appropriately, and (ii) if necessary, the anticipated
Effective Time shall be postponed for an appropriate period of time agreed upon
by the parties in order for the Seacoast Stock Price to reflect the market
effect of such stock split, stock dividend, or similar recapitalization.
3.3 SHARES HELD BY PSHC OR SEACOAST. Each of the shares
of PSHC Common Stock held by any PSHC Entity or by any Seacoast Entity, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.4 DISSENTING SHAREHOLDERS. Any holder of shares of
PSHC Common Stock who perfects his dissenters' rights in accordance with and as
contemplated by Section 607.1301 et seq. of the FBCA shall be entitled to
receive the value of such shares in cash as determined pursuant to such
provision of Law; provided, that no such payment shall be made to any
dissenting shareholder unless and until such dissenting shareholder has
complied with the applicable provisions of the FBCA and surrendered to PSHC the
certificate or certificates representing the shares for which payment is being
made. In the event that after the Effective Time a dissenting shareholder of
PSHC fails to perfect, or effectively withdraws or loses, his right to
appraisal and of payment for his shares subject to Seacoast's consent in its
sole discretion, Seacoast shall issue and deliver the consideration to which
such holder of shares of PSHC Common Stock is entitled under this Article 3
(without interest) upon surrender by such holder of the certificate or
certificates representing shares of PSHC Common Stock held by him.
3.5 FRACTIONAL SHARES. Notwithstanding any other
provision of this Agreement, each holder of shares of PSHC Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Seacoast Common Stock (after taking into
account all certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of
a share of Seacoast Common Stock multiplied by the Seacoast Stock Price. No
such holder will be entitled to dividends, voting rights, or any other rights
as a shareholder in respect of any fractional shares.
3.6 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
(a) At the Effective Time, each option or other
Equity Right (excluding PSHC Warrants) to purchase shares of PSHC Common Stock
pursuant to stock options or stock appreciation rights ("PSHC Options") granted
by PSHC under the PSHC Stock Plan[s], which are outstanding at the Effective
Time, whether or not exercisable, shall be converted into and become rights
with respect to Seacoast Common Stock, and Seacoast shall assume each PSHC
Option, in accordance with the terms of the PSHC Stock Plan and stock option
agreement by which it is evidenced, except that from and after the Effective
Time, (i) Seacoast and its Compensation Committee shall be substituted for PSHC
and the Committee of PSHC's Board of Directors
<PAGE> 6
(including, if applicable, the entire Board of Directors of PSHC) administering
such PSHC Stock Plan, (ii) each PSHC Option assumed by Seacoast may be
exercised solely for shares of Seacoast Common Stock (or cash, if so provided
under the terms of such PSHC Option), (iii) the number of shares of Seacoast
Common Stock subject to such PSHC Option shall be equal to the number of shares
of PSHC Common Stock subject to such PSHC Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, and (iv) the per share
exercise price under each such PSHC Option shall be adjusted by dividing the
per share exercise price under each such PSHC Option by the Exchange Ratio and
rounding up to the nearest cent. Notwithstanding the provisions of clause
(iii) of the preceding sentence, Seacoast shall not be obligated to issue any
fraction of a share of Seacoast Common Stock upon exercise of PSHC Options and
any fraction of a share of Seacoast Common Stock that otherwise would be
subject to a converted PSHC Option shall represent the right to receive a cash
payment upon exercise of such converted PSHC Option equal to the product of
such fraction and the difference between the market value of one share of
Seacoast Common Stock at the time of exercise of such Option and the per share
exercise price of such Option. The market value of one share of Seacoast
Common Stock at the time of exercise of an Option shall be the last sale price
of such common stock on the Nasdaq National Market (as reported by The Wall
Street Journal or, if not reported thereby, any other authoritative source
selected by Seacoast) on the last trading day preceding the date of exercise.
In addition, notwithstanding the provisions of clauses (iii) and (iv) of the
first sentence of this Section 3.6(a), each PSHC Option which is an "incentive
stock option" shall be adjusted as required by Section 424 of the Internal
Revenue Code, and the regulations promulgated thereunder, so as not to
constitute a modification, extension or renewal of the option, within the
meaning of Section 424(h) of the Internal Revenue Code. Each of PSHC and
Seacoast agrees to take all necessary steps to effectuate the foregoing
provisions of this Section 3.6, including using its reasonable efforts to
obtain from each holder of a PSHC Option any Consent or Contract that may be
deemed necessary or advisable in order to effect the transactions contemplated
by this Section 3.6. Anything in this Agreement to the contrary
notwithstanding, Seacoast shall have the right, in its sole discretion, not to
deliver the consideration provided in this Section 3.6 to a former holder of a
PSHC Option who has not delivered such Consent or Contract.
(b) As soon as practicable after the Effective
Time, Seacoast shall deliver to the participants in each PSHC Stock Plan an
appropriate notice setting forth such participant's rights pursuant thereto and
the grants subject to such PSHC Stock Plan shall continue in effect on the same
terms and conditions (subject to the adjustments required by Section 3.6(a)
after giving effect to the Merger), and Seacoast shall comply with the terms of
each PSHC Stock Plan to ensure, to the extent required by, and subject to the
provisions of, such PSHC Stock Plan, that PSHC Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time. At or prior to the Effective
Time, Seacoast shall take all corporate action necessary to reserve for
issuance sufficient shares of Seacoast Common Stock for delivery upon exercise
of PSHC Options assumed by it in accordance with this Section 3.6. As soon as
practicable after the Effective Time, Seacoast shall file a registration
statement on Form S-3 or Form S-8, as the case may be (or any successor or
other appropriate forms), with respect to the shares of Seacoast Common Stock
subject to such options and shall use its reasonable efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding. With respect to those individuals who subsequent
to the Merger will be subject to the reporting requirements under Section 16(a)
of the Exchange Act, where applicable, Seacoast shall administer the PSHC Stock
Plan assumed pursuant to this Section 3.6 in a manner that complies with Rule
16b-3 promulgated under the Exchange Act to the extent the PSHC Stock Plan
complied with such rule prior to the Effective Time.
(c) All contractual restrictions or limitations
on transfer with respect to PSHC Common Stock awarded under the PSHC Stock
Plans or any other plan, program, Contract or arrangement of any PSHC Entity,
to the extent that such restrictions or limitations shall not have already
lapsed (whether as a result of the Merger or otherwise), and except as
otherwise expressly provided in such plan, program, Contract or arrangement,
shall remain in full force and effect with respect to shares of Seacoast Common
Stock into which such restricted stock is converted pursuant to Section 3.1.
<PAGE> 7
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective
Time, Seacoast and PSHC shall cause the exchange agent selected by Seacoast
(the "Exchange Agent") to mail to each holder of record of a certificate or
certificates which represented shares of PSHC Common Stock immediately prior to
the Effective Time (the "Certificates") appropriate transmittal materials and
instructions (which shall specify that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon proper delivery of
such Certificates to the Exchange Agent). The Certificate or Certificates of
PSHC Common Stock so delivered shall be duly endorsed as the Exchange Agent may
require. In the event of a transfer of ownership of shares of PSHC Common
Stock represented by Certificates that are not registered in the transfer
records of PSHC, the consideration provided in Section 3.1 may be issued to a
transferee if the Certificates representing such shares are delivered to the
Exchange Agent, accompanied by all documents required to evidence such transfer
and by evidence satisfactory to the Exchange Agent that any applicable stock
transfer taxes have been paid. If any Certificate shall have been lost,
stolen, mislaid or destroyed, upon receipt of (i) an affidavit of that fact
from the holder claiming such Certificate to be lost, mislaid, stolen or
destroyed, (ii) such bond, security or indemnity as Seacoast and the Exchange
Agent may reasonably require and (iii) any other documents necessary to
evidence and effect the bona fide exchange thereof, the Exchange Agent shall
issue to such holder the consideration into which the shares represented by
such lost, stolen, mislaid or destroyed Certificate shall have been converted.
The Exchange Agent may establish such other reasonable and customary rules and
procedures in connection with its duties as it may deem appropriate. After the
Effective Time, each holder of shares of PSHC Common Stock (other than shares
to be canceled pursuant to Section 3.3 or as to which statutory dissenters'
rights have been perfected as provided in Section 3.4) issued and outstanding
at the Effective Time shall surrender the Certificate or Certificates
representing such shares to the Exchange Agent and shall promptly upon
surrender thereof receive in exchange therefor the consideration provided in
Section 3.1, together with all undelivered dividends or distributions in
respect of such shares (without interest thereon) pursuant to Section 4.2. To
the extent required by Section 3.5, each holder of shares of PSHC Common Stock
issued and outstanding at the Effective Time also shall receive, upon surrender
of the Certificate or Certificates, cash in lieu of any fractional share of
Seacoast Common Stock to which such holder may be otherwise entitled (without
interest). Seacoast shall not be obligated to deliver the consideration to
which any former holder of PSHC Common Stock is entitled as a result of the
Merger until such holder surrenders such holder's Certificate or Certificates
for exchange as provided in this Section 4.1. Any other provision of this
Agreement notwithstanding, neither Seacoast nor the Exchange Agent shall be
liable to a holder of PSHC Common Stock for any amounts paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar Law. Adoption of this Agreement by the
shareholders of PSHC shall constitute ratification of the appointment of the
Exchange Agent.
4.2 RIGHTS OF FORMER PSHC SHAREHOLDERS. At the Effective
Time, the stock transfer books of PSHC shall be closed as to holders of PSHC
Common Stock immediately prior to the Effective Time and no transfer of PSHC
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1, each
Certificate theretofore representing shares of PSHC Common Stock (other than
shares to be canceled pursuant to Sections 3.3 and 3.4) shall from and after
the Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 and 3.5 in exchange therefor, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which
have been declared or made by PSHC in respect of such shares of PSHC Common
Stock in accordance with the terms of this Agreement and which remain unpaid at
the Effective Time. Whenever a dividend or other distribution is declared by
Seacoast on the Seacoast Common Stock, the record date for which is at or after
the Effective Time, the declaration shall include dividends or other
distributions on all shares of Seacoast Common Stock issuable pursuant to this
Agreement, but beginning 45 days after the Effective Time, no dividend or other
distribution payable to the holders of record of Seacoast Common Stock as of
any time subsequent to the Effective Time shall be delivered to the holder of
any Certificate until such holder surrenders such Certificate for exchange as
provided in Section 4.1. However, upon surrender of such Certificate, both the
Seacoast Common Stock certificate (together with all such undelivered
<PAGE> 8
dividends or other distributions, without interest) and any undelivered
dividends and cash payments payable hereunder (without interest) shall be
delivered and paid with respect to each share represented by such Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PSHC
PSHC hereby represents and warrants to Seacoast as follows:
5.1 ORGANIZATION, STANDING, AND POWER. PSHC is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Florida, and has the corporate power and authority to
carry on its business as now conducted and to own, lease and operate its
Assets. PSHC is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a PSHC Material
Adverse Effect. The minute books and other organizational documents and
corporate records for PSHC have been made available to Seacoast for its review
and, except as disclosed in Section 5.1 of the PSHC Disclosure Memorandum, are
true and complete in all material respects as in effect as of the date of this
Agreement and accurately reflect in all material respects all amendments
thereto and all proceedings of the Board of Directors and shareholders thereof.
5.2 AUTHORITY OF PSHC; NO BREACH BY AGREEMENT.
(a) PSHC has the corporate power and authority
necessary to execute, deliver, and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of PSHC, subject to the approval of this Agreement by the holders of a
majority of the outstanding shares of PSHC Common Stock, which is the only
shareholder vote required for approval of this Agreement and consummation of
the Merger by PSHC. Subject to such requisite shareholder approval, this
Agreement represents a legal, valid, and binding obligation of PSHC,
enforceable against PSHC in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
may be brought).
(b) Neither the execution and delivery of this
Agreement by PSHC, nor the consummation by PSHC of the transactions
contemplated hereby, nor compliance by PSHC with any of the provisions hereof,
will (i) conflict with or result in a breach of any provision of PSHC's
Articles of Incorporation or Bylaws or the certificate or articles of
incorporation or bylaws of any PSHC Subsidiary or any resolution adopted by the
board of directors or the shareholders of any PSHC Entity, or (ii) except as
disclosed in Section 5.2 of the PSHC Disclosure Memorandum, constitute or
result in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any PSHC Entity under, any Contract or
Permit of any PSHC Entity, where such Default or Lien, or any failure to obtain
such Consent, is reasonably likely to have, individually or in the aggregate, a
PSHC Material Adverse Effect or where such event would cause a breach hereof or
a Default hereunder, or, (iii) subject to receipt of the requisite Consents
referred to in Section 9.1(b), constitute or result in a Default under, or
require any Consent pursuant to, any Law or Order applicable to any PSHC Entity
or any of their respective material Assets (including any Seacoast Entity or
any PSHC Entity becoming subject to or liable for the payment of any Tax or any
of the Assets owned by any Seacoast Entity or any PSHC Entity being reassessed
or revalued by any Taxing authority).
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corporate and
securities Laws, and rules of the NASD, and other than Consents required
<PAGE> 9
from Regulatory Authorities, and other than notices to or filings with the
Internal Revenue Service or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, and other than
Consents, filings, or notifications which, if not obtained or made, are not
reasonably likely to have, individually or in the aggregate, a PSHC Material
Adverse Effect, no notice to, filing with, or Consent of, any public body or
authority is necessary for the consummation by PSHC of the Merger and the other
transactions contemplated in this Agreement.
5.3 CAPITAL STOCK.
(a) The authorized capital stock of PSHC consists
of (i) 10,000,000 shares of PSHC Common Stock, of which 744,655 shares are
issued and outstanding as of the date of this Agreement and assuming the issue
and exercise of all issued and outstanding warrants and options to purchase
201,298.625 shares of PSHC Common Stock, not more than 945,954 shares will be
issued and outstanding at the Effective Time, and (ii) no shares of preferred
stock are authorized, issued or outstanding. All of the issued and outstanding
shares of capital stock of PSHC are duly and validly issued and outstanding and
are fully paid and nonassessable under the FBCA. None of the outstanding
shares of capital stock of PSHC has been issued in violation of any preemptive
rights of the current or past shareholders of PSHC.
(b) Except as set forth in Section 5.3(a), or as
disclosed in Section 5.3(b) of the PSHC Disclosure Memorandum, there are no
shares of capital stock or other equity securities of PSHC outstanding and no
outstanding Equity Rights relating to the capital stock of PSHC.
5.4 PSHC SUBSIDIARIES. PSHC has disclosed in Section 5.4
of the PSHC Disclosure Memorandum all of the PSHC Subsidiaries that are
corporations (identifying its jurisdiction of incorporation, each jurisdiction
in which it is qualified and/or licensed to transact business, and the number of
shares owned and percentage ownership interest represented by such share
ownership) and all of the PSHC Subsidiaries that are general or limited
partnerships, limited liability companies, trusts or other non-corporate
entities (identifying the Law under which such entity is organized, each
jurisdiction in which it is qualified and/or licensed to transact business, the
type of entity and the amount and nature of the ownership interest therein).
Except as disclosed in Section 5.4 of the PSHC Disclosure Memorandum, PSHC or
one of its wholly-owned Subsidiaries owns all of the issued and outstanding
shares of capital stock (or other equity interests) of each PSHC Subsidiary. No
capital stock (or other equity interest) of any PSHC Subsidiary is or may become
required to be issued (other than to another PSHC Entity) by reason of any
Equity Rights, and there are no Contracts by which any PSHC Subsidiary is bound
to issue (other than to another PSHC Entity) additional shares of its capital
stock (or other equity interests) or Equity Rights or by which any PSHC Entity
is or may be bound to transfer any shares of the capital stock (or other equity
interests) of any PSHC Subsidiary (other than to another PSHC Entity). There
are no Contracts relating to the rights of any PSHC Entity to vote or to dispose
of any shares of the capital stock (or other equity interests) of any PSHC
Subsidiary. All of the shares of capital stock (or other equity interests) of
each PSHC Subsidiary held by a PSHC Entity are fully paid and (except pursuant
to 12 USC Section 55 in the case of national banks and comparable, applicable
state Law, if any, in the case of state depository institutions) nonassessable
under the applicable corporation Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by the PSHC Entity free
and clear of any Lien. Except as disclosed in Section 5.4 of the PSHC
Disclosure Memorandum, each PSHC Subsidiary is either a bank, a savings
association, or a corporation, and each such Subsidiary is duly organized,
validly existing, and (as to corporations) in good standing under the Laws of
the jurisdiction in which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate its Assets and
to carry on its business as now conducted. Each PSHC Subsidiary is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a PSHC Material Adverse Effect. Each PSHC Subsidiary that is
a depository institution is an "insured institution" as defined in the Federal
Deposit Insurance Act and applicable regulations thereunder, and the deposits in
which are insured by the Bank Insurance Fund. The minute books, and other
organizational and corporate documents for each PSHC Subsidiary have been made
<PAGE> 10
available to Seacoast for its review, and, except as disclosed in Section 5.4
of the PSHC Disclosure Memorandum, are true and complete in all material
respects as in effect as of the date of this Agreement and accurately reflect
in all material respects all amendments thereto and all proceedings of the
Board of Directors, all committees of the Board of Directors and shareholders
thereof.
5.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) PSHC has timely filed and made available to
Seacoast, all SEC Documents required to be filed by PSHC since December 31,
1992 (the "PSHC SEC Reports"). The PSHC SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Laws and other applicable Laws and (ii) did not, at the time they
were filed (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
PSHC SEC Reports or necessary in order to make the statements in such PSHC SEC
Reports, in light of the circumstances under which they were made, not
misleading. No PSHC Subsidiary is required to file any SEC Documents.
(b) Each of the PSHC Financial Statements
(including, in each case, any related notes) contained in the PSHC SEC Reports,
including any PSHC SEC Reports filed after the date of this Agreement until the
Effective Time, complied as to form in all material respects with the
applicable published rules and regulations of the SEC with respect thereto, was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited interim statements, as permitted by
Form 10-Q of the SEC), and fairly presented in all material respects the
consolidated financial position of PSHC and its Subsidiaries as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not
or are not expected to be material in amount or effect.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No PSHC Entity
has any Liabilities that are reasonably likely to have, individually or in the
aggregate, a PSHC Material Adverse Effect, except Liabilities which are accrued
or reserved against in the consolidated balance sheets of PSHC as of December
31, 1995 and September 30, 1996, included in the PSHC Financial Statements
delivered prior to the date of this Agreement or reflected in the notes
thereto. Except as set forth in Section 5.6 of the PSHC Disclosure Memorandum,
no PSHC Entity has incurred or paid any Liability since September 30, 1996,
except for such Liabilities incurred or paid (i) in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a PSHC Material Adverse
Effect or (ii) in connection with the transactions contemplated by this
Agreement.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 1995, except as disclosed in the PSHC Financial Statements delivered prior
to the date of this Agreement or as disclosed in Section 5.7 of the PSHC
Disclosure Memorandum, (i) there have been no events, changes, or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a PSHC Material Adverse Effect, and (ii) the PSHC Entities have not
taken any action, or failed to take any action, prior to the date of this
Agreement, which action or failure, if taken after the date of this Agreement,
would represent or result in a material breach or violation of any of the
covenants and agreements of PSHC provided in Article 7.
5.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on
behalf of any of the PSHC Entities have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1995, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file, taken together, are not reasonably
likely to have a PSHC Material Adverse Effect, and all Tax Returns filed are
complete and accurate in all material respects. All Taxes shown on filed Tax
Returns have been paid. As of the date of this Agreement, there is no
<PAGE> 11
audit examination, deficiency, or refund Litigation with respect to any Taxes,
except as reserved against in the PSHC Financial Statements delivered prior to
the date of this Agreement or as disclosed in Section 5.8 of the PSHC
Disclosure Memorandum. PSHC's federal income Tax Returns have not been audited
by the IRS. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid. There are no
Liens with respect to Taxes upon any of the Assets of the PSHC Entities, except
for any such Liens which are not reasonably likely to have a PSHC Material
Adverse Effect.
(b) None of the PSHC Entities has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due (excluding such statutes that relate to years
currently under examination by the Internal Revenue Service or other applicable
taxing authorities) that is currently in effect.
(c) The provision for any Taxes due or to become
due for any of the PSHC Entities for the period or periods through and
including the date of the respective PSHC Financial Statements that has been
made and is reflected on such PSHC Financial Statements is sufficient to cover
all such Taxes.
(d) Deferred Taxes of the PSHC Entities have
been provided for in accordance with GAAP.
(e) Except as disclosed in Section 5.8(e) of the
PSHC Disclosure Memorandum, none of the PSHC Entities is a party to any Tax
allocation or Tax sharing agreement and none of the PSHC Entities has been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was PSHC) has any Liability for
Taxes of any Person (other than PSHC and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or
foreign Law) as a transferee or successor or by Contract or otherwise.
(f) Except as disclosed in Section 5.8(f) of the
PSHC Disclosure Memorandum, each of the PSHC Entities is in compliance with,
and its records contain all information and documents (including properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws, and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for such
instances of noncompliance and such omissions as are not reasonably likely to
have, individually or in the aggregate, a PSHC Material Adverse Effect.
(g) Except as disclosed in Section 5.8 of the
PSHC Disclosure Memorandum, none of the PSHC Entities has made any payments, is
obligated to make any payments, or is a party to any Contract that could
obligate it to make any payments that would be disallowed as a deduction under
Section 280G or 162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as
defined in Internal Revenue Code Section 382(g), of the PSHC Entities that
occurred during or after any Taxable Period in which the PSHC Entities incurred
a net operating loss that carries over to any Taxable Period ending after
December 31, 1995.
(i) No PSHC Entity has or has had in any foreign
country a permanent establishment, as defined in any applicable tax treaty or
convention between the United States and such foreign country.
5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. In the opinion
of management of PSHC, the allowances for possible loan, credit or securities
losses (collectively, the "Allowance") shown on the consolidated balance sheets
of PSHC included in the most recent PSHC Financial Statements dated prior to
the date of this Agreement was, and the Allowance shown on the consolidated
balance sheets of PSHC included in the PSHC Financial Statements as of dates
subsequent to the execution of this Agreement will be, as of the dates thereof,
adequate (within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for all
<PAGE> 12
known or reasonably anticipated losses relating to or inherent in the loan,
lease and securities portfolios (including accrued interest receivables) of the
PSHC Entities and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the PSHC Entities as of the
dates thereof.
5.10 ASSETS.
(a) Except as disclosed in Section 5.10 of the
PSHC Disclosure Memorandum or as disclosed or reserved against in the PSHC
Financial Statements delivered prior to the date of this Agreement, the PSHC
Entities have good and marketable title, free and clear of all Liens, to all of
their respective Assets, except for any such Liens or other defects of title
which are not reasonably likely to have a PSHC Material Adverse Effect. Except
as set forth in Section 5.10 of the PSHC Disclosure Memorandum, all tangible
properties used in the businesses of the PSHC Entities are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with PSHC's past practices.
(b) All Assets which are material to PSHC's
business on a consolidated basis, held under leases or subleases by any of the
PSHC Entities, are held under valid Contracts enforceable as to the PSHC Entity
and to the Knowledge of PSHC as to the counter-party to such Contracts in
accordance with their respective terms (except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect.
(c) The PSHC Entities currently maintain
insurance similar in amounts, scope, and coverage to that maintained by other
peer banking organizations. None of the PSHC Entities has received notice from
any insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There
are presently no claims for amounts exceeding in any individual case $5,000, or
in the aggregate $100,000, pending under such policies of insurance and no
notices of claims in excess of such amounts have been given by any PSHC Entity
under such policies.
(d) The Assets of the PSHC Entities include all
Assets required to operate the business of the PSHC Entities as presently
conducted.
5.11 INTELLECTUAL PROPERTY. Except as disclosed in
Section 5.11 of the PSHC Disclosure Memorandum, each PSHC Entity owns or has a
license to use all of the Intellectual Property used by such PSHC Entity in the
course of its business. Each PSHC Entity is the owner of or has a license to
any Intellectual Property sold or licensed to a third party by such PSHC Entity
in connection with such PSHC Entity's business operations, and such PSHC Entity
has the right to convey by sale or license any Intellectual Property so
conveyed. No PSHC Entity is in Default under any of its Intellectual Property
licenses. No proceedings have been instituted, or are pending or to the
Knowledge of PSHC threatened, which challenge the rights of any PSHC Entity
with respect to Intellectual Property used, sold or licensed by such PSHC
Entity in the course of its business, nor has any person claimed or alleged any
rights to such Intellectual Property. The conduct of the business of the PSHC
Entities does not infringe any Intellectual Property of any other person.
Except as disclosed in Section 5.11 of the PSHC Disclosure Memorandum, no PSHC
Entity is obligated to pay any recurring royalties to any Person with respect
to any such Intellectual Property. Except as disclosed in Section 5.11 of the
PSHC Disclosure Memorandum, every officer, director, or employee of any PSHC
Entity is a party to a Contract which requires such officer, director or
employee to assign any interest in any Intellectual Property to a PSHC Entity
and to keep confidential any trade secrets, proprietary data, customer
information, or other business information of a PSHC Entity, and no such
officer, director or employee is party to any
<PAGE> 13
Contract with any Person other than a PSHC Entity which requires such officer,
director or employee to assign any interest in any Intellectual Property to any
Person other than a PSHC Entity or to keep confidential any trade secrets,
proprietary data, customer information, or other business information of any
Person other than a PSHC Entity. Except as disclosed in Section 5.11 of the
PSHC Disclosure Memorandum, no officer, director or to the Knowledge of PSHC
any employee of any PSHC Entity is party to any Contract which restricts or
prohibits such officer, director or employee from engaging in activities
competitive with any Person, including any PSHC Entity.
5.12 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of PSHC, each PSHC Entity,
its Participation Facilities, and its Operating Properties are, and have been,
in compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, a PSHC Material
Adverse Effect.
(b) There is no Litigation pending or, to the
Knowledge of PSHC, threatened before any court, governmental agency, or
authority or other forum in which any PSHC Entity or any of its Operating
Properties or Participation Facilities (or PSHC in respect of such Operating
Property or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release, discharge, spillage, or disposal into the environment of any
Hazardous Material, whether or not occurring at, on, under, adjacent to, or
affecting (or potentially affecting) a site owned, leased, or operated by any
PSHC Entity or any of its Operating Properties or Participation Facilities, nor
is there any reasonable basis for any Litigation of a type described in this
sentence.
(c) During the period of (i) any PSHC Entity's
ownership or operation of any of their respective current properties, (ii) any
PSHC Entity's participation in the management of any Participation Facility, or
(iii) any PSHC Entity's holding of a security interest in a Operating Property,
there have been no releases, discharges, spillages, or disposals of Hazardous
Material in, on, under, adjacent to, or affecting (or potentially affecting)
such properties; provided that with respect to the period set forth in (iii)
above, this representation shall be made to the Knowledge of PSHC. Prior to
the period of (i) any PSHC Entity's ownership or operation of any of their
respective current properties, (ii) any PSHC Entity's participation in the
management of any Participation Facility, or (iii) any PSHC Entity's holding of
a security interest in a Operating Property, to the Knowledge of PSHC, there
were no releases, discharges, spillages, or disposals of Hazardous Material in,
on, under, or affecting any such property, Participation Facility or Operating
Property.
5.13 COMPLIANCE WITH LAWS. PSHC is duly registered as a
bank holding company under the BHC Act. Each PSHC Entity has in effect all
Permits necessary for it to own, lease, or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, a
PSHC Material Adverse Effect, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a PSHC Material Adverse Effect. Except as
disclosed in Section 5.13 of the PSHC Disclosure Memorandum, none of the PSHC
Entities:
(a) is in Default under any of the provisions of its
Articles of Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits
applicable to its business or employees conducting its business, except
for Defaults which are not reasonably likely to have, individually or in
the aggregate, a PSHC Material Adverse Effect; or
(c) since January 1, 1993, has received any notification
or communication from any agency or department of federal, state, or
local government or any Regulatory Authority or the staff thereof (i)
asserting that any PSHC Entity is not in compliance with any of the Laws
or Orders which such governmental authority or Regulatory Authority
enforces, (ii) threatening to revoke any Permits, or (iii) requiring any
PSHC Entity to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment, or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
<PAGE> 14
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to
Seacoast.
5.14 LABOR RELATIONS. No PSHC Entity is the subject of
any Litigation asserting that it or any other PSHC Entity has committed an
unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state law) or seeking to compel it or any other PSHC Entity to
bargain with any labor organization as to wages or conditions of employment,
nor is any PSHC Entity party to any collective bargaining agreement, nor is
there any strike or other labor dispute involving any PSHC Entity, pending or
to the Knowledge of PSHC is (i) any such strike or dispute threatened or (ii)
there any activity involving any PSHC Entity's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.15 EMPLOYEE BENEFIT PLANS.
(a) PSHC has disclosed in Section 5.15 of the
PSHC Disclosure Memorandum, and has delivered or made available to Seacoast
prior to the execution of this Agreement copies in each case of, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan, all other
written employee programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including "employee benefit plans" as
that term is defined in Section 3(3) of ERISA, currently adopted, maintained
by, sponsored in whole or in part by, or contributed to by any PSHC Entity or
ERISA Affiliate thereof for the benefit of employees, retirees, dependents,
spouses, directors, independent contractors, or other beneficiaries and under
which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "PSHC Benefit Plans"). Any of the PSHC Benefit Plans which is an "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, is
referred to herein as a "PSHC ERISA Plan." Each PSHC ERISA Plan which is also
a "defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) is referred to herein as a "PSHC Pension Plan." No PSHC Pension Plan is
or has been a multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All PSHC Benefit Plans are in compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a PSHC Material Adverse Effect. Each PSHC
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and PSHC is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. No PSHC
Entity has engaged in a transaction with respect to any PSHC Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any PSHC Entity to a Tax imposed by either Section 4975 of the
Internal Revenue Code or Section 502(i) of ERISA.
(c) No PSHC Pension Plan has any "unfunded
current liability," as that term is defined in Section 302(d)(8)(A) of ERISA,
and the fair market value of the assets of any such plan exceeds the plan's
"benefit liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if the plan terminated
in accordance with all applicable legal requirements. Since the date of the
most recent actuarial valuation, there has been (i) no material change in the
financial position of any PSHC Pension Plan, (ii) no change in the actuarial
assumptions with respect to any PSHC Pension Plan, and (iii) no increase in
benefits under any PSHC Pension Plan as a result of plan amendments or changes
in applicable Law which is reasonably likely to have, individually or in the
aggregate, a PSHC Material Adverse Effect or materially adversely affect the
funding status of any such plan. Neither any PSHC Pension Plan nor any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any PSHC Entity, or the single-employer
plan of any entity which is considered one employer with PSHC under Section
4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated
funding deficiency" within the meaning of Section 412 of the Internal Revenue
Code or Section 302 of ERISA. No PSHC Entity has provided, or is required to
provide, security
<PAGE> 15
to a PSHC Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) Within the six-year period preceding the
Effective Time, no Liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by any PSHC Entity with respect to any
ongoing, frozen, or terminated single-employer plan or the single-employer plan
of any ERISA Affiliate. No PSHC Entity has incurred any withdrawal Liability
with respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate. No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any PSHC Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.15 of the
PSHC Disclosure Memorandum, no PSHC Entity has any Liability for retiree health
and life benefits under any of the PSHC Benefit Plans and there are no
restrictions on the rights of such PSHC Entity to amend or terminate any such
retiree health or benefit Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 5.15 of the
PSHC Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in any payment (including severance, unemployment compensation, golden
parachute, or otherwise) becoming due to any director or any employee of any
PSHC Entity from any PSHC Entity under any PSHC Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any PSHC Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit.
(g) The actuarial present values of all accrued
deferred compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any PSHC Entity and their respective beneficiaries,
other than entitlements accrued pursuant to funded retirement plans subject to
the provisions of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, have been fully reflected on the PSHC Financial Statements to the extent
required by and in accordance with GAAP.
(h) PSHC (including its subsidiaries and
successors) may satisfy its current and future liabilities under the Port St.
Lucie National Bank Deferred Compensation Plan (the "Deferred Plan") by making,
as soon as administratively feasible after the date on which it terminates the
Deferred Plan, single lump sum payments (which in the aggregate are equal to or
less than the fair market value of the life insurance policy or policies
purchased to fund the benefits under the Deferred Plan) to each participant or
his beneficiary, which payments are equal to each such participant's respective
accrued benefit under the Deferred Plan as of the date on which the Deferred
Plan is terminated. In the case of a life insurance policy held in the trust,
"fair market value" shall mean the net cash surrender value of the policy,
after deducting any cancellation, liquidation or surrender charges or fees.
There are no restrictions on PSHC's (including its subsidiaries and successors)
ability to obtain such cash surrender value as of or immediately following the
Closing Date (other than applicable surrender charges). Neither Seacoast nor
any PSHC Entity shall be obligated to contribute cash or other property to fund
such benefits under the Deferred Plan. There are no restrictions on the PSHC's
(including its subsidiaries and successors) right to terminate the Deferred
Plan as to benefits which have not accrued as of the Closing Date.
5.16 MATERIAL CONTRACTS. Except as disclosed in Section
5.16 of the PSHC Disclosure Memorandum or otherwise reflected in the PSHC
Financial Statements, none of the PSHC Entities, nor any of their respective
Assets, businesses, or operations, is a party to, or is bound or affected by,
or receives benefits under, (i) any employment, severance, termination,
consulting, or retirement Contract providing for aggregate payments to any
Person in any calendar year in excess of $50,000, (ii) any Contract relating to
the borrowing of money by any PSHC Entity or the guarantee by any PSHC Entity
of any such obligation (other than Contracts evidencing deposit liabilities,
purchases of federal funds, fully-secured repurchase agreements, and Federal
Home Loan Bank advances of depository institution Subsidiaries, trade payables
and Contracts relating to borrowings or
<PAGE> 16
guarantees made in the ordinary course of business), (iii) any Contract which
prohibits or restricts any PSHC Entity from engaging in any business activities
in any geographic area, line of business or otherwise in competition with any
other Person, (iv) any Contract between or among PSHC Entities, (v) any
Contract involving Intellectual Property (other than Contracts entered into in
the ordinary course with customers and commercial "shrink-wrap" software
licenses), (vi) any Contract relating to the provision of data processing,
network communication, or other technical services to or by any PSHC Entity,
(vii) any Contract relating to the purchase or sale of any goods or services
(other than Contracts entered into in the ordinary course of business and
involving payments under any individual Contract not in excess of $100,000),
(viii) any exchange-traded or over-the-counter swap, forward, future, option,
cap, floor, or collar financial Contract, or any other interest rate or foreign
currency protection Contract not included on its balance sheet which is a
financial derivative Contract, and (ix) any other Contract or amendment thereto
that would be required to be filed as an exhibit to a Form 10-K filed by PSHC
with the SEC as of the date of this Agreement (together with all Contracts
referred to in Sections 5.10 and 5.15(a), the "PSHC Contracts"). With respect
to each PSHC Contract and except as disclosed in Section 5.16 of the PSHC
Disclosure Memorandum: (i) the Contract is in full force and effect; (ii) no
PSHC Entity is in Default thereunder or would be in Default thereunder as a
result of this Agreement or the transaction contemplated herein; (iii) no PSHC
Entity has repudiated or waived any material provision of any such Contract;
and (iv) no other party to any such Contract is, to the Knowledge of PSHC, in
Default in any respect or has repudiated or waived any material provision
thereunder. All of the indebtedness of any PSHC Entity for money borrowed is
prepayable at any time by such PSHC Entity without penalty or premium. None of
PSHC nor any of the PSHC Entities has any obligation or liability to any
wholesale mortgage business ("Wholesale Mortgage Business") or to any Affiliate
of such Persons to purchase, fund or extend credit with respect to any loans,
extensions of credit, mortgages, or any participation or other interest therein
originated, brokered or referred by or through such Persons, and the only
outstanding balances under any such arrangements whereby PSNB is obligated to
provide funding aggregate not more than $212,000, all of which will be repaid
in full by not later than April 30, 1997. Except as described in Section 5.16
of the PSHC Disclosure Memorandum, all Contracts to which PSHC and/or its
Subsidiaries are parties may be terminated by such PSHC Entity and its
successors and assigns without penalty, charge, liability or further
obligation.
5.17 LEGAL PROCEEDINGS. There is no Litigation instituted
or pending, or, to the Knowledge of PSHC, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any PSHC Entity or
any employee benefit plan of any PSHC Entity, or against any director or
employee of any PSHC Entity, in their capacity as such, or against any Asset,
interest, or right of any of them, nor are there any Orders of any Regulatory
Authorities, other governmental authorities, or arbitrators outstanding against
any PSHC Entity. Section 5.17 of the PSHC Disclosure Memorandum contains a
summary of all Litigation as of the date of this Agreement to which any PSHC
Entity is a party and which names a PSHC Entity as a defendant or
cross-defendant or for which any PSHC Entity has any potential Liability.
5.18 REPORTS. Except as set forth in Section 5.18 of the
PSHC Disclosure Memorandum, since January 1, 1993, or the date of organization
if later, each PSHC Entity has timely filed all reports and statements,
together with any amendments required to be made with respect thereto, that it
was required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a PSHC Material Adverse Effect). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
5.19 STATEMENTS TRUE AND CORRECT. No statement,
certificate, instrument, or other writing furnished or to be furnished by any
PSHC Entity or any Affiliate thereof to Seacoast pursuant to this Agreement or
any other document, agreement, or instrument referred to herein contains or
will contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
<PAGE> 17
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any PSHC Entity or any Affiliate
thereof for inclusion in the Registration Statement to be filed by Seacoast
with the SEC will, when the Registration Statement becomes effective, be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein not misleading. None of the
information supplied or to be supplied by any PSHC Entity or any Affiliate
thereof for inclusion in the Joint Proxy Statement to be mailed to each Party's
shareholders in connection with the Shareholders' Meetings, and any other
documents to be filed by a PSHC Entity or any Affiliate thereof with the SEC or
any other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Joint Proxy Statement, when first mailed to the shareholders of PSHC and
Seacoast, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case
of the Joint Proxy Statement or any amendment thereof or supplement thereto, at
the time of the Shareholders' Meetings, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meetings. All documents that any PSHC Entity or
any Affiliate thereof is responsible for filing with any Regulatory Authority
in connection with the transactions contemplated hereby will comply as to form
in all material respects with the provisions of applicable Law.
5.20 ACCOUNTING, TAX AND REGULATORY MATTERS. No PSHC
Entity or any Affiliate thereof has taken or agreed to take any action or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Merger from qualifying for pooling-of-interests accounting
treatment or as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) or result in
the imposition of a condition or restriction of the type referred to in the
last sentence of such Section.
5.21 STATE TAKEOVER LAWS. Each PSHC Entity has taken all
necessary action to exempt the transactions contemplated by this Agreement
from, or if necessary to challenge the validity or applicability of, any
applicable "moratorium," "fair price," "business combination," "control share,"
or other anti-takeover Laws (collectively, "Takeover Laws").
5.22 CHARTER PROVISIONS. Each PSHC Entity has taken all
action so that the entering into of this Agreement and the consummation of the
Merger and the other transactions contemplated by this Agreement do not and
will not result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of any PSHC Entity or
restrict or impair the ability of Seacoast or any of its Subsidiaries to vote,
or otherwise to exercise the rights of a shareholder with respect to, shares of
any PSHC Entity that may be directly or indirectly acquired or controlled by
them. This Agreement and the transactions contemplated herein will not trigger
any supermajority voting provisions under the Articles of Incorporation,
Bylaws, or other governing instruments of any PSHC Entity.
5.23 OPINION OF FINANCIAL ADVISOR. PSHC has received the
opinion of Austin Associates, Inc., dated the date of this Agreement, to the
effect that the consideration to be received in the Merger by the holders of
PSHC Common Stock is fair, from a financial point of view, to such holders, a
signed copy of which has been delivered to Seacoast.
5.24 BOARD RECOMMENDATION. The Board of Directors of
PSHC, at a meeting duly called and held, has by unanimous vote of the directors
present (who constituted all of the directors then in office) (i) determined
that this Agreement and the transactions contemplated hereby, including the
Merger, taken together, are fair to and in the best interests of the
shareholders and (ii) resolved to recommend that the holders of the shares of
PSHC Common Stock approve this Agreement.
<PAGE> 18
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SEACOAST
Seacoast hereby represents and warrants to PSHC as follows:
6.1 ORGANIZATION, STANDING, AND POWER. Seacoast is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Florida, and has the corporate power and authority to
carry on its business as now conducted and to own, lease and operate its
material Assets. Seacoast is duly qualified or licensed to transact business
as a foreign corporation in good standing in the States of the United States
and foreign jurisdictions where the character of its Assets or the nature or
conduct of its business requires it to be so qualified or licensed, except for
such jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Seacoast
Material Adverse Effect.
6.2 AUTHORITY OF SEACOAST; NO BREACH BY AGREEMENT.
(a) Seacoast has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Seacoast, subject to the approval of the issuance of the shares of
Seacoast Common Stock pursuant to the Merger by sixty-six and two-thirds
percent (66-2/3%) of all and each class of the votes cast at the Seacoast
Shareholders' Meeting (assuming for such purpose that the votes cast in respect
of such proposal represent sixty-six and two-thirds percent (66-2/3%) of all
and each class of the outstanding Seacoast Common Stock eligible to vote at the
Seacoast Shareholders' Meeting), which is the only shareholder vote required
for approval of this Agreement and consummation of the merger by Seacoast.
Subject to such requisite shareholder approval, this Agreement represents a
legal, valid, and binding obligation of Seacoast, enforceable against Seacoast
in accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this
Agreement by Seacoast, nor the consummation by Seacoast of the transactions
contemplated hereby, nor compliance by Seacoast with any of the provisions
hereof, will (i) conflict with or result in a breach of any provision of
Seacoast's Articles of Incorporation or Bylaws, or (ii) constitute or result in
a Default under, or require any Consent pursuant to, or result in the creation
of any Lien on any Asset of any Seacoast Entity under, any Contract or Permit
of any Seacoast Entity, where such Default or Lien, or any failure to obtain
such Consent, is reasonably likely to have, individually or in the aggregate, a
Seacoast Material Adverse Effect, or, (iii) subject to receipt of the requisite
Consents referred to in Section 9.1(b), constitute or result in a Default
under, or require any Consent pursuant to, any Law or Order applicable to any
Seacoast Entity or any of their respective material Assets (including any
Seacoast Entity or any PSHC Entity becoming subject to or liable for the
payment of any Tax or any of the Assets owned by any Seacoast Entity or any
PSHC Entity being reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corporate and
securities Laws, and rules of the NASD, and other than Consents required from
Regulatory Authorities, and other than notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, or under the HSR Act, and other than Consents, filings,
or notifications which, if not obtained or made, are not reasonably likely to
have, individually or in the aggregate, a Seacoast Material Adverse Effect, no
notice to, filing with, or Consent of, any public body or authority is
necessary for the consummation by Seacoast of the Merger and the other
transactions contemplated in this Agreement.
<PAGE> 19
6.3 CAPITAL STOCK.
(a) The authorized capital stock of Seacoast
consists of (i) 10,000,000 shares of Seacoast Class A Common Stock, of which
3,903,392 shares are issued and 3,872,500 outstanding as of the date of this
Agreement, (ii) 810,000 shares of $.10 par value Class B Common Stock, of which
384,638 shares are issued and outstanding as of the date of this Agreement, and
(iii) 1,000,000 shares of Seacoast Preferred Stock, none of which are issued
and outstanding. All of the issued and outstanding shares of Seacoast Capital
Stock are, and all of the shares of Seacoast Common Stock to be issued in
exchange for shares of PSHC Common Stock upon consummation of the Merger, when
issued in accordance with the terms of this Agreement, will be, duly and
validly issued and outstanding and fully paid and nonassessable. None of the
outstanding shares of Seacoast Capital Stock has been, and none of the shares
of Seacoast Common Stock to be issued in exchange for shares of PSHC Common
Stock upon consummation of the Merger will be, issued in violation of any
preemptive rights of the current or past shareholders of Seacoast.
(b) Except as set forth in Section 6.3(a), or as
disclosed in Section 6.3 of the Seacoast Disclosure Memorandum, there are no
shares of capital stock or other equity securities of Seacoast outstanding and
no outstanding Equity Rights relating to the capital stock of Seacoast.
6.4 SEACOAST SUBSIDIARIES. Seacoast has disclosed in
Section 6.4 of the Seacoast Disclosure Memorandum all of the Seacoast
Subsidiaries as of the date of this Agreement that are corporations
(identifying its jurisdiction of incorporation, each jurisdiction in which the
character of its Assets or the nature or conduct of its business requires it to
be qualified and/or licensed to transact business, and the number of shares
owned and percentage ownership interest represented by such share ownership)
and all of the Seacoast Subsidiaries that are general or limited partnerships
or other non-corporate entities (identifying the Law under which such entity is
organized, each jurisdiction in which the character of its Assets or the nature
or conduct of its business requires it to be qualified and/or licensed to
transact business, and the amount and nature of the ownership interest
therein). Except as disclosed in Section 6.4 of the Seacoast Disclosure
Memorandum, Seacoast or one of its wholly-owned Subsidiaries owns all of the
issued and outstanding shares of capital stock (or other equity interests) of
each Seacoast Subsidiary. No capital stock (or other equity interest) of any
Seacoast Subsidiary are or may become required to be issued (other than to
another Seacoast Entity) by reason of any Equity Rights, and there are no
Contracts by which any Seacoast Subsidiary is bound to issue (other than to
another Seacoast Entity) additional shares of its capital stock (or other
equity interests) or Equity Rights or by which any Seacoast Entity is or may be
bound to transfer any shares of the capital stock (or other equity interests)
of any Seacoast Subsidiary (other than to another Seacoast Entity). There are
no Contracts relating to the rights of any Seacoast Entity to vote or to
dispose of any shares of the capital stock (or other equity interests) of any
Seacoast Subsidiary. All of the shares of capital stock (or other equity
interests) of each Seacoast Subsidiary held by a Seacoast Entity are fully paid
and (except pursuant to 12 USC Section 55 in the case of national banks and
comparable, applicable state Law, if any, in the case of state depository
institutions) nonassessable and are owned by the Seacoast Entity free and clear
of any Lien. Each Seacoast Subsidiary is either a bank, a savings association,
or a corporation, and is duly organized, validly existing, and (as to
corporations) in good standing under the Laws of the jurisdiction in which it
is incorporated or organized, and has the corporate power and authority
necessary for it to own, lease and operate its Assets and to carry on its
business as now conducted. Each Seacoast Subsidiary is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, a Seacoast Material Adverse Effect. Each Seacoast Subsidiary
that is a depository institution is an "insured institution" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder, and the
deposits in which are insured by the Bank Insurance Fund or the Savings
Association Insurance Fund.
<PAGE> 20
6.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Seacoast has timely filed and made available
to PSHC all SEC Documents required to be filed by Seacoast since December 31,
1992 (the "Seacoast SEC Reports"). The Seacoast SEC Reports (i) at the time
filed, complied in all material respects with the applicable requirements of
the Securities Laws and other applicable Laws and (ii) did not, at the time
they were filed (or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated in
such Seacoast SEC Reports or necessary in order to make the statements in such
Seacoast SEC Reports, in light of the circumstances under which they were made,
not misleading. Except for Seacoast Subsidiaries that are registered as a
broker, dealer, or investment advisor, no Seacoast Subsidiary is required to
file any SEC Documents.
(b) Each of the Seacoast Financial Statements
(including, in each case, any related notes) contained in the Seacoast SEC
Reports, including any Seacoast SEC Reports filed after the date of this
Agreement until the Effective Time, complied as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited interim statements,
as permitted by Form 10-Q of the SEC), and fairly presented in all material
respects the consolidated financial position of Seacoast and its Subsidiaries
as at the respective dates and the consolidated results of operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Seacoast
Entity has any Liabilities that are reasonably likely to have, individually or
in the aggregate, a Seacoast Material Adverse Effect, except Liabilities which
are accrued or reserved against in the consolidated balance sheets of Seacoast
as of December 31, 1995 and September 30, 1996, included in the Seacoast
Financial Statements delivered prior to the date of this Agreement or reflected
in the notes thereto. No Seacoast Entity has incurred or paid any Liability
since September 30, 1996, except for such Liabilities incurred or paid (i) in
the ordinary course of business consistent with past business practice and
which are not reasonably likely to have, individually or in the aggregate, a
Seacoast Material Adverse Effect or (ii) in connection with the transactions
contemplated by this Agreement.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 1995, except as disclosed in the Seacoast Financial Statements delivered
prior to the date of this Agreement or as disclosed in Section 6.7 of the
Seacoast Disclosure Memorandum, (i) there have been no events, changes or
occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Seacoast Material Adverse Effect, and (ii) the Seacoast
Entities have not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of
this Agreement, would represent or result in a material breach or violation of
any of the covenants and agreements of Seacoast provided in Article 7.
6.8 CERTAIN ENVIRONMENTAL AND EMPLOYEE BENEFIT MATTERS.
(a) To the Knowledge of Seacoast, each Seacoast
Entity, its Participation Facilities and its Operating Properties, are, and
have been, in compliance with all environmental law, except for violations
which are not reasonably likely to have, individually or in the aggregate, a
Seacoast Material Adverse Effect.
(b) Seacoast has delivered or made available to
PSHC prior to the execution hereof, copies or summary plan descriptions of all
pension, retirement, profit/life insurance, deferred compensation, common stock
option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee programs, arrangements or
agreements, all medical, vision, dental and other health plans, all life
insurance plans, and all other employee benefit plans or fringe benefit plans,
including "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently adopted and maintained by, sponsored in whole or in part by,
or contributed to by any Seacoast Entity or ERISA Affiliate thereof for the
benefit of employees, retirees,
<PAGE> 21
dependents, spouses, directors, independent contractors or other beneficiaries
and under which such employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries are eligible to participate
(collectively, the "Seacoast Benefit Plans"). All Seacoast Benefit Plans are
in compliance with the applicable terms of ERISA, the Internal Revenue Code or
any other applicable Laws, except for such breaches or violations the which are
not reasonably likely to have individually or in the aggregate, a Seacoast
Material Adverse Effect.
6.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. In the opinion
of management of Seacoast, the Allowance shown on the consolidated balance
sheets of Seacoast included in the most recent Seacoast Financial Statements
dated prior to the date of this Agreement was, and the Allowance shown on the
consolidated balance sheets of Seacoast included in the Seacoast Financial
Statements as of dates subsequent to the execution of this Agreement will be,
as of the dates thereof, adequate (within the meaning of GAAP and applicable
regulatory requirements or guidelines) to provide for all known or reasonably
anticipated losses relating to or inherent in the loan, lease and securities
portfolios (including accrued interest receivables) of the Seacoast Entities
and other extensions of credit (including letters of credit and commitments to
make loans or extend credit) by the Seacoast Entities as of the dates thereof.
6.10 ASSETS.
(a) Except as disclosed in Section 6.10 of the
Seacoast Disclosure Memorandum or as disclosed or reserved against in the
Seacoast Financial Statements delivered prior to the date of this Agreement,
the Seacoast Entities have good and marketable title, free and clear of all
Liens, to all of their respective Assets, except for any such Liens or other
defects of title which are not reasonably likely to have a Seacoast Material
Adverse Effect. All tangible properties used in the businesses of the Seacoast
Entities are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with Seacoast's past
practices.
(b) All Assets which are material to Seacoast's
business on a consolidated basis, held under leases or subleases by any of the
Seacoast Entities, are held under valid Contracts enforceable in accordance
with their respective terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such Contract is in full force and effect.
(c) The Seacoast Entities currently maintain
insurance similar in amounts, scope and coverage to that maintained by other
peer banking organizations. None of the Seacoast Entities has received notice
from any insurance carrier that (i) such insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There
are presently no claims for amounts exceeding in any individual cases $5,000 or
in the aggregate $100,000 pending under such policies of insurance and no
notices have been given by any Seacoast Entity under such policies.
(d) The Assets of the Seacoast Entities include
all assets required to operate the business of the Seacoast Entities as
presently conducted.
6.11 INTELLECTUAL PROPERTY. Each Seacoast Entity owns or
has a license to use all of the Intellectual Property used by such Seacoast
Entity in the course of its business. Each Seacoast Entity is the owner of or
has a license to any Intellectual Property sold or licensed to a third party by
such Seacoast Entity in connection with such Seacoast Entity's business
operations, and such Seacoast Entity has the right to convey by sale or license
any Intellectual Property so conveyed. No Seacoast Entity is in Default under
any of its Intellectual Property licenses. No proceedings have been
instituted, or are pending or to the Knowledge of Seacoast threatened, which
challenge the rights of any Seacoast Entity with respect to Intellectual
Property used, sold or licensed by such Seacoast Entity in the course of its
business, nor has any person claimed or alleged any rights to
<PAGE> 22
such Intellectual Property. The conduct of the business of the Seacoast
Entities does not infringe any Intellectual Property of any other person.
Except as disclosed in Section 6.11 of the Seacoast Disclosure Memorandum, no
Seacoast Entity is obligated to pay any recurring royalties to any Person with
respect to any such Intellectual Property. Except as disclosed in Section 6.11
of the Seacoast Disclosure Memorandum, every officer, director, or employee of
any Seacoast Entity is a party to a Contract which requires such officer,
director or employee to assign any interest in any Intellectual Property to a
Seacoast Entity and to keep confidential any trade secrets, proprietary data,
customer information, or other business information of a Seacoast Entity, and
no such officer, director or employee is party to any Contract with any Person
other than a Seacoast Entity which requires such officer, director or employee
to assign any interest in any Intellectual Property to any Person other than a
Seacoast Entity or to keep confidential any trade secrets, proprietary data,
customer information, or other business information of any Person other than a
Seacoast Entity. Except as disclosed in Section 6.11 of the Seacoast
Disclosure Memorandum, no officer, director or employee of any Seacoast Entity
is party to any Contract which restricts or prohibits such officer, director or
employee from engaging in activities competitive with any Person, including any
Seacoast Entity.
6.12 [RESERVED].
6.13 COMPLIANCE WITH LAWS. Seacoast is duly registered as
a bank holding company under the BHC Act. Each Seacoast Entity has in effect
all Permits necessary for it to own, lease or operate its material Assets and
to carry on its business as now conducted, except for those Permits the absence
of which are not reasonably likely to have, individually or in the aggregate, a
Seacoast Material Adverse Effect, and there has occurred no Default under any
such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Seacoast Material Adverse Effect. Except
as disclosed in Section 6.13 of the Seacoast Disclosure Memorandum, none of the
Seacoast Entities:
(a) is in Default under its Articles of Incorporation or
Bylaws (or other governing instruments); or
(b) is in Default under any Laws, Orders or Permits
applicable to its business or employees conducting its business, except
for Defaults which are not reasonably likely to have, individually or in
the aggregate, a Seacoast Material Adverse Effect; or
(c) since January 1, 1993, has received any notification
or communication from any agency or department of federal, state, or
local government or any Regulatory Authority or the staff thereof (i)
asserting that any Seacoast Entity is not in compliance with any of the
Laws or Orders which such governmental authority or Regulatory Authority
enforces, (ii) threatening to revoke any Permits or (iii) requiring any
Seacoast Entity to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
6.14 LEGAL PROCEEDINGS. There is no Litigation instituted
or pending, or, to the Knowledge of Seacoast, threatened (or unasserted but
considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any Seacoast Entity
or employee benefit plan of any Seacoast Entity, or against any director or
employee of any Seacoast Entity, in their capacity as such, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Seacoast Material Adverse Effect, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Seacoast Entity.
6.15 REPORTS. Since January 1, 1993, or the date of
organization if later, each Seacoast Entity has filed all reports and
statements, together with any amendments required to be made with respect
thereto, that it was required to file with Regulatory Authorities (except, in
the case of state securities authorities, failures to file which are not
reasonably likely to have, individually or in the aggregate, a Seacoast
Material Adverse Effect).
<PAGE> 23
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6.16 STATEMENTS TRUE AND CORRECT. No statement,
certificate, instrument or other writing furnished or to be furnished by any
Seacoast Entity or any Affiliate thereof to PSHC pursuant to this Agreement or
any other document, agreement or instrument referred to herein contains or will
contain any untrue statement of material fact or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the information supplied
or to be supplied by any Seacoast Entity or any Affiliate thereof for inclusion
in the Registration Statement to be filed by Seacoast with the SEC, will, when
the Registration Statement becomes effective, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein not misleading. None of the information supplied
or to be supplied by any Seacoast Entity or any Affiliate thereof for inclusion
in the Joint Proxy Statement to be mailed to each Party's shareholders in
connection with the Shareholders' Meetings, and any other documents to be filed
by any Seacoast Entity or any Affiliate thereof with the SEC or any other
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and with respect to the
Joint Proxy Statement, when first mailed to the shareholders of PSHC and
Seacoast, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or, in the case
of the Joint Proxy Statement or any amendment thereof or supplement thereto, at
the time of the Shareholders' Meetings, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meetings. All documents that any Seacoast Entity
or any Affiliate thereof is responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply
as to form in all material respects with the provisions of applicable Law.
6.17 ACCOUNTING, TAX AND REGULATORY MATTERS. No Seacoast
Entity or any Affiliate thereof has taken or agreed to take any action or has
any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Merger from qualifying for pooling-of-interests accounting
treatment or as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 9.1(b) or result in
the imposition of a condition or restriction of the type referred to in the
last sentence of such Section. All Tax Returns required to be filed by or on
behalf of any of the Seacoast Entities have been timely filed or requests for
extensions have been timely filed, granted and have not expired for periods on
or before December 31, 1995 and on or before the day of the most recent fiscal
year end immediately preceding the Effective Time, except to the extent that
all such failures to file, taken together, are not reasonably likely to have a
Seacoast Material Adverse Effect and all such Tax Returns filed are complete
and accurate in all material respects. All Taxes shown on Tax Returns have
been paid. As of the date of this Agreement, there is no audit examination,
deficiency, or refund Litigation with respect to any Taxes, except as reserved
against any Seacoast Financial Statements delivered prior to the date of this
Agreement or as disclosed in Section 6.17 of the Seacoast Disclosure
Memorandum. The provision for Taxes due or to become due for any of the
Seacoast Entities for the period or periods through and including the day of
the respective Seacoast Financial Statements has been made and is reflected on
such Seacoast Financial Statements is sufficient to cover all such Taxes.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 AFFIRMATIVE COVENANTS OF PSHC. Except as disclosed
in Section 7.1 of the PSHC Disclosure Memorandum with respect to PSNB's
proposed Ft. Pierce branch office, the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of
<PAGE> 24
Seacoast shall have been obtained, and except as otherwise expressly
contemplated herein, PSHC shall and shall cause each of its Subsidiaries to
operate its business only in the usual, regular, and ordinary course, and in a
manner designed to preserve intact its business organization and Assets and
maintain its rights and franchises, and shall take no action which would (i)
adversely affect the ability of any Party to obtain any Consents required for
the transactions contemplated hereby without imposition of a condition or
restriction of the type referred to in the last sentences of Section 9.1(b) or
9.1(c), or (ii) adversely affect the ability of any Party to perform its
covenants and agreements under this Agreement. Furthermore, except for the up
to $212,000 of credit, heretofore committed by PSNB and described in the fourth
sentence of Section 5.16 hereof, any loans, leases or extensions of credit
secured by real property originated, purchased or funded in whole or in part by
any PSHC Entity, where the obligor thereon and the real property related
thereto are not both located in St. Lucie, Martin and/or Indian River Counties,
Florida (collectively, the "Counties") shall conform to the FNMA or FHLMC
seller/servicer guidelines applicable to such Loans and shall be immediately
saleable to FNMA and/or FHLMC. PSHC and each PSHC Entity shall immediately
terminate and discontinue purchasing, funding or otherwise extending credit or
committing or agreeing to any of the foregoing with respect to any loans,
extensions of credit, leases and/or mortgages or any participations or other
interests therein from any Wholesale Mortgage Business and/or any Affiliate of
such Wholesale Mortgage Business, except to meet PSNB's contractual obligations
under the existing commitments described in the fourth sentence of Section 5.16
hereof, and except to purchase and hold as temporary investments, up to $2.5
million at any time of fully-approved FHA and VA Loans at any time through
April 30, 1997.
7.2 NEGATIVE COVENANTS OF PSHC. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of Seacoast shall have been
obtained, and except as otherwise expressly contemplated herein, PSHC covenants
and agrees that it will not do or agree or commit to do, or permit any of its
Subsidiaries to do or agree or commit to do, any of the following:
(a) amend the Articles of Incorporation, Bylaws or other
governing instruments of any PSHC Entity or, except as expressly
contemplated by this Agreement, or
(b) incur any additional debt obligation or other
obligation for borrowed money (other than indebtedness of a PSHC Entity
to another PSHC Entity) in excess of an aggregate of $50,000 (for the
PSHC Entities on a consolidated basis) except in the ordinary course of
the business of PSHC Subsidiaries consistent with past practices (which
shall include, for PSHC Subsidiaries that are depository institutions,
creation of deposit liabilities, purchases of federal funds, advances
from the Federal Reserve Bank or Federal Home Loan Bank, and entry into
repurchase agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition, on any Asset of any
PSHC Entity of any Lien or permit any such Lien to exist (other than in
connection with deposits, repurchase agreements, bankers acceptances,
"treasury tax and loan" accounts established in the ordinary course of
business, the satisfaction of legal requirements in the exercise of
trust powers, and Liens in effect as of the date hereof that are
disclosed in the PSHC Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange
(other than exchanges in the ordinary course under employee benefit
plans), directly or indirectly, any shares, or any securities
convertible into any shares, of the capital stock of any PSHC Entity, or
declare or pay any dividend or make any other distribution in respect of
PSHC's capital stock; or
(d) except for this Agreement, or pursuant to the
exercise of stock options or warrants or warrants outstanding as of the
date hereof and pursuant to the terms thereof in existence on the date
hereof, or as disclosed in Section 7.2(d) of the PSHC Disclosure
Memorandum, issue, sell, pledge, encumber, authorize the issuance of,
enter into any Contract to issue, sell, pledge, encumber, or authorize
the issuance of, or otherwise permit to become outstanding, any
additional shares of PSHC Common Stock or any other capital stock of any
PSHC Entity, or any stock appreciation rights, or any option, warrant,
or other Equity Right; or
<PAGE> 25
(e) adjust, split, combine or reclassify any capital
stock of any PSHC Entity or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of PSHC Common
Stock, or sell, lease, mortgage or otherwise dispose of or otherwise
encumber (x) any shares of capital stock of any PSHC Subsidiary (unless
any such shares of stock are sold or otherwise transferred to another
PSHC Entity) or (y) any Asset having a book value in excess of $50,000
other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) (1) except for purchases of U.S. Treasury securities
or U.S. Government agency securities, which in either case have
maturities of one year or less, purchase any securities or make any
material investment, either by purchase of stock or securities,
contributions to capital, Asset transfers, or purchase of any Assets, in
any Person other than a wholly owned PSHC Subsidiary, or otherwise
acquire direct or indirect control over any Person, other than in
connection with (i) foreclosures in the ordinary course of business,
(ii) acquisitions of control by a depository institution subsidiary
solely in its fiduciary capacity, or (iii) the creation of new wholly
owned Subsidiaries organized to conduct or continue activities otherwise
permitted by this Agreement; (2) make any new loans or extensions of
credit or renew, extend or renegotiate any existing loans or extensions
of credit (i) with respect to properties or businesses outside of the
Counties or to borrowers whose principal residence is outside of the
Counties, (ii) that are unsecured in excess of $100,000, or (iii) that
are secured in excess of $250,000; (3) purchase or sell (except for
sales of single family residential first mortgage loans in the ordinary
course of PSHC's business for fair market value) any whole loans,
leases, mortgages or any loan participations or agented credits or other
interest therein, (4) renew or renegotiate any loans or credits that are
on any watch list and/or are classified or special mentioned or take any
similar actions with respect to collateral held with respect to debts
previously contracted or other real estate owned, except pursuant to
safe and sound banking practices and with prior disclosure to First
National; provided, however, that PSHC may, without the prior notice to
or written consent of First National, renew or extend existing credits
on substantially similar terms and conditions as present at the time
such credit was made or last extended, renewed or modified, for a period
not to exceed one year and at rates not less than market rates for
comparable credits and transactions and without any release of any
collateral except as any PSHC Entity is presently obligated under
existing written agreements kept as part of such PSHC Entity's official
records. If any PSHC Entity makes, extends, renews, renegotiates,
compromises or settles any loans or extensions of credit or releases any
collateral therefore that are subject to the prior disclosure to First
National hereunder and First National has objected thereto the Purchase
Price shall be reduced on a dollar for dollar basis in an amount equal
to all outstanding principal of, all accrued but unpaid interest and
other charges on such loan(s) as of the Closing Date; or
(g) grant any increase in compensation or benefits to the
employees or officers of any PSHC Entity, except in accordance with past
practice disclosed in Section 7.2(g) of the PSHC Disclosure Memorandum
or as required by Law; pay any severance or termination pay or any bonus
other than pursuant to written policies or written Contracts in effect
on the date of this Agreement and disclosed in Section 7.2(g) of the
PSHC Disclosure Memorandum; and enter into or amend any severance
agreements with officers of any PSHC Entity; grant any material increase
in fees or other increases in compensation or other benefits to
directors of any PSHC Entity except in accordance with past practice
disclosed in Section 7.2(g) of the PSHC Disclosure Memorandum; or
voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits or other Equity Rights; or
(h) enter into or amend any employment Contract between
any PSHC Entity and any Person (unless such amendment is required by
Law) that the PSHC Entity does not have the unconditional right to
terminate without Liability (other than Liability for services already
rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any PSHC
Entity or terminate or withdraw from, or make any material change in or
to, any existing employee benefit plans of any PSHC Entity other than
any such change that is required by Law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified status
of any such plan, or make any distributions from such employee benefit
plans, except as required by Law, the terms of such plans or consistent
with past practice; or
<PAGE> 26
(j) make any significant change in any Tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in Tax Laws or regulatory accounting
requirements or GAAP; or
(k) commence any Litigation other than in accordance with
past practice, settle any Litigation involving any Liability of any PSHC
Entity for material money damages or restrictions upon the operations of
any PSHC Entity; or
(l) except in the ordinary course of business and as
expressly permitted in Section 7.2(f), enter into, modify, amend or
terminate any material Contract (including any loan Contract with an
unpaid balance or any Contract calling for payments exceeding $100,000)
or waive, release, compromise or assign any material rights or claims.
7.3 COVENANTS OF SEACOAST. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of PSHC shall have been obtained,
and except as otherwise expressly contemplated herein, Seacoast covenants and
agrees that it shall (a) continue to conduct its business and the business of
its Subsidiaries in a manner designed in its reasonable judgment, to enhance
the long-term value of the Seacoast Capital Stock and the business prospects of
the Seacoast Entities and to the extent consistent therewith use all reasonable
efforts to preserve intact the Seacoast Entities' core businesses and goodwill
with their respective employees and the communities they serve, and (b) take no
action which would (i) materially adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 9.1(b) or 9.1(c), or (ii) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement; provided, that the foregoing shall not prevent any Seacoast Entity
from acquiring any Assets or other businesses or from discontinuing or
disposing of any of its Assets or business if such action is, in the judgment
of Seacoast, desirable in the conduct of the business of Seacoast and its
Subsidiaries. Seacoast further covenants and agrees that it will not, without
the prior written consent of PSHC, which consent shall not be unreasonably
withheld, amend the Articles of Incorporation or Bylaws of Seacoast, in each
case, in any manner adverse to the holders of PSHC Common Stock as compared to
rights of holders of Seacoast Common Stock generally as of the date of this
Agreement.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to
give written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
or any of its Subsidiaries which (i) is reasonably likely to have, individually
or in the aggregate, a PSHC Material Adverse Effect or a Seacoast Material
Adverse Effect, as applicable, or (ii) would cause or constitute a material
breach of any of its representations, warranties, or covenants contained
herein, and to use its reasonable efforts to prevent or promptly to remedy the
same.
7.5 REPORTS. Each Party and its Subsidiaries shall file
all reports required to be filed by it with Regulatory Authorities between the
date of this Agreement and the Effective Time and shall deliver to the other
Party copies of all such reports promptly after the same are filed. If
financial statements are contained in any such reports filed with the SEC, such
financial statements will fairly present in all material respects the
consolidated financial position of the entity filing such statements as of the
dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
recurring year-end adjustments that are not material). As of their respective
dates, such reports filed with the SEC will comply in all material respects
with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Any financial
statements contained in any other reports to another Regulatory Authority shall
be prepared in accordance with Laws applicable to such reports.
<PAGE> 27
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER
APPROVAL. As soon as reasonably practicable after execution of this Agreement,
at a date determined by Seacoast in its sole discretion, Seacoast shall prepare
and file the Registration Statement with the SEC, and shall use its reasonable
efforts to cause the Registration Statement to become effective under the 1933
Act and take any action required to be taken under the applicable state Blue
Sky or securities Laws in connection with the issuance of the shares of
Seacoast Common Stock upon consummation of the Merger. PSHC shall cooperate in
the preparation and filing of the Registration Statement and shall furnish all
information concerning it and the holders of its capital stock as Seacoast may
reasonably request in connection with such action. PSHC shall call a
Shareholders' Meeting, to be held as soon as reasonably practicable after the
Registration Statement is declared effective by the SEC, for the purpose of
voting upon approval of this Agreement and such other related matters as it
deems appropriate. Seacoast shall call a Shareholders' Meeting, to be held as
soon as reasonably practicable after the Registration Statement is declared
effective by the SEC, for the purpose of voting upon the issuance of shares of
Seacoast Common Stock pursuant to the Merger and such other related matters as
it deems appropriate. In connection with the Shareholders' Meetings, (i) PSHC
and Seacoast shall prepare and file with the SEC a Joint Proxy Statement and
mail such Joint Proxy Statement to their respective shareholders, (ii) the
Parties shall furnish to each other all information concerning them that they
may reasonably request in connection with such Joint Proxy Statement, (iii) the
Board of Directors of PSHC and Seacoast shall recommend to their respective
shareholders the approval of the matters submitted for approval, and (iv) the
Board of Directors and officers of PSHC and Seacoast shall use their reasonable
efforts to obtain such shareholders' approval. Seacoast and PSHC shall make
all necessary filings with respect to the Merger under the Securities Laws.
8.2 NASDAQ LISTING. Seacoast shall use its reasonable
efforts to list, prior to the Effective Time, on the Nasdaq National Market the
shares of Seacoast Common Stock to be issued to the holders of PSHC Common
Stock pursuant to the Merger, and Seacoast shall give all notices and make all
filings with the NASD required in connection with the transactions contemplated
herein.
8.3 APPLICATIONS. Seacoast shall promptly prepare and
file, and PSHC shall cooperate in the preparation and, where appropriate,
filing of, applications with all Regulatory Authorities having jurisdiction
over the transactions contemplated by this Agreement seeking the requisite
Consents necessary to consummate the transactions contemplated by this
Agreement. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and
subject to the conditions of this Agreement, Seacoast shall execute and file
the Articles of Merger with the Secretary of State of the State of Florida in
connection with the Closing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to
the terms and conditions of this Agreement, each Party agrees to use, and to
cause its Subsidiaries to use, its reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its reasonable
efforts to lift or rescind any Order adversely affecting its ability to
consummate the transactions contemplated herein and to cause to be satisfied
the conditions referred to in Article 9; provided, that nothing herein shall
preclude either Party from exercising its rights under this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its
reasonable efforts to obtain all Consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement.
<PAGE> 28
8.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Effective Time, each Party shall
keep the other Party advised of all material developments relevant to its
business and to consummation of the Merger and shall permit the other Party to
make or cause to be made such investigation of the business and properties of
it and its Subsidiaries and of their respective financial and legal conditions
as the other Party reasonably requests, provided that such investigation shall
be reasonably related to the transactions contemplated hereby and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(b) In addition to the Parties' respective
obligations under the Confidentiality Agreement, which are hereby reaffirmed
and adopted, and incorporated by reference herein each Party shall, and shall
cause its advisers and agents to, maintain the confidentiality of all
confidential information furnished to it by the other Party concerning its and
its Subsidiaries' businesses, operations, and financial positions and shall not
use such information for any purpose except in furtherance of the transactions
contemplated by this Agreement. In the event that a Party is required by
applicable law or valid court process to disclose any such confidential
information then such Party shall provide the other Party with prompt written
notice of any such requirement so that the other Party may seek a protective
order or other appropriate remedy and/or waive compliance with this Section
8.6. If in the absence of a protective order or other remedy or the receipt of
a waiver by the other Party, a Party is nonetheless, in the written opinion of
counsel, legally compelled to disclose any such confidential information to any
tribunal or else stand liable for contempt or suffer other censure or penalty,
a Party may, without liability hereunder, disclose to such tribunal only that
portion of the confidential information which such counsel advises such Party
is legally required to be disclosed, provided that such disclosing Party use
its best efforts to preserve the confidentiality of such confidential
information, including without limitation, by cooperating with the other Party
to obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded such confidential information by such
tribunal. If this Agreement is terminated prior to the Effective Time, each
Party shall promptly return or certify the destruction of all documents and
copies thereof, and all work papers containing confidential information
received from the other Party.
(c) PSHC shall use its reasonable efforts to
exercise its rights under confidentiality agreements entered into with Persons,
if any, which were considering an Acquisition Proposal with respect to PSHC to
preserve the confidentiality of the information relating to the PSHC Entities
provided to such Persons and their Affiliates and Representatives.
(d) Each Party agrees to give the other Party
notice as soon as practicable after any determination by it of any fact or
occurrence relating to the other Party which it has discovered through the
course of its investigation and which represents, or is reasonably likely to
represent, either a material breach of any representation, warranty, covenant
or agreement of the other Party or which has had or is reasonably likely to
have a PSHC Material Adverse Effect or a Seacoast Material Adverse Effect, as
applicable.
8.7 PRESS RELEASES. Prior to the Effective Time, PSHC
and Seacoast shall consult with each other as to the form and substance of any
press release or other public disclosure materially related to this Agreement
or any other transaction contemplated hereby; provided, that nothing in this
Section 8.7 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.8 CERTAIN ACTIONS. Except with respect to this
Agreement and the transactions contemplated hereby, no PSHC Entity nor any
Affiliate thereof nor any Representatives thereof retained by any PSHC Entity
shall directly or indirectly solicit any Acquisition Proposal by any Person.
Except to the extent the Board of Directors of PSHC, after having consulted
with and considered the advice of outside counsel, reasonably determines in
good faith that the failure to take such actions would constitute a breach of
fiduciary duties of the members of such Board of Directors to PSHC's
shareholder under applicable law, no PSHC Entity or any Affiliate or
Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but PSHC may
<PAGE> 29
communicate information about such an Acquisition Proposal to its shareholders
if and to the extent that it is required to do so in order to comply with its
legal obligations. PSHC shall promptly advise Seacoast following the receipt
of any Acquisition Proposal and the details thereof, and advise Seacoast of any
developments with respect to such Acquisition Proposal promptly upon the
occurrence thereof. PSHC shall (i) immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
Persons conducted heretofore with respect to any of the foregoing, and (ii)
direct and use its reasonable efforts to cause all of its Affiliates and
Representatives not to engage in any of the foregoing.
8.9 ACCOUNTING AND TAX TREATMENT. Each of the Parties
undertakes and agrees to use its reasonable efforts to cause the Merger, and to
use its reasonable efforts to take no action which would cause the Merger not,
to qualify for treatment as a pooling of interests for accounting purposes or
as a "reorganization" within the meaning of Section 368(a) of the Internal
Revenue Code for federal income tax purposes.
8.10 STATE TAKEOVER LAWS. Each PSHC Entity and each PSHC
shareholder shall take the necessary steps to exempt the transactions
contemplated by this Agreement from, or if necessary to challenge the validity
or applicability of, any applicable Takeover Law, including the FBCA.
8.11 CHARTER PROVISIONS. Except as required by applicable
Law or as otherwise provided in this Agreement, each PSHC Entity shall take all
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby do
not and will not result in the grant of any rights to any Person under the
Articles of Incorporation, Bylaws or other governing instruments of any PSHC
Entity or restrict or impair the ability of Seacoast or any of its Subsidiaries
to vote, or otherwise to exercise the rights of a shareholder with respect to,
shares of any PSHC Entity that may be directly or indirectly acquired or
controlled by them.
8.12 PSHC MEETINGS. Each PSHC Entity shall give prior
notice of each meeting or proposed action by any of their respective Boards of
Directors and/or committees, including a description of any matters to be
discussed and/or acted upon, and shall permit a representative of Seacoast to
attend each such meeting, except during discussions relating to the
transactions contemplated herein that present conflict of interest and/or
confidentiality issues.
8.13 AGREEMENT OF AFFILIATES. PSHC has disclosed in
Section 8.13 of the PSHC Disclosure Memorandum all Persons whom it reasonably
believes is an "affiliate" of PSHC for purposes of Rule 145 under the 1933 Act.
PSHC shall use its reasonable efforts to cause each such Person to deliver to
Seacoast upon the execution of this Agreement a written agreement,
substantially in the form of Exhibit 2, providing that such Person will not
sell, pledge, transfer, or otherwise dispose of the shares of PSHC Common Stock
held by such Person except as contemplated by such agreement or by this
Agreement and will not sell, pledge, transfer, or otherwise dispose of the
shares of Seacoast Common Stock to be received by such Person upon consummation
of the Merger except in compliance with applicable provisions of the 1933 Act
and the rules and regulations thereunder and, until such time as financial
results covering at least 30 days of combined operations of Seacoast and PSHC
have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. Shares of Seacoast Common Stock
issued to such affiliates of PSHC in exchange for shares of PSHC Common Stock
shall not be transferable until such time as financial results covering at
least 30 days of combined operations of Seacoast and PSHC have been published
within the meaning of Section 201.01 of the SEC's Codification of Financial
Reporting Policies, regardless of whether each such affiliate has provided the
written agreement referred to in this Section 8.13 (and Seacoast shall be
entitled to place restrictive legends upon certificates for shares of Seacoast
Common Stock issued to affiliates of PSHC pursuant to this Agreement to enforce
the provisions of this Section 8.13; provided that Seacoast removes such
legends at the appropriate time). Seacoast shall not be required to maintain
the effectiveness of the Registration Statement under the 1933 Act for the
purposes of resale of Seacoast Common Stock by such affiliates.
<PAGE> 30
8.14 EMPLOYEE BENEFITS AND CONTRACTS.
(a) Following the Effective Time, Seacoast shall provide
generally to officers and employees of the PSHC Entities employee benefits
under employee benefit and welfare plans (other than stock option or other
plans involving the potential issuance of Seacoast Common Stock), on terms and
conditions which when taken as a whole are substantially similar to those
currently provided by the Seacoast Entities to their similarly situated
officers and employees; provided, that, for a period of 12 months after the
Effective Time, Seacoast shall provide generally to officers and employees of
PSHC Entities severance benefits in accordance with the policies of either (i)
PSHC as disclosed in Section 8.14 of the PSHC Disclosure Memorandum, or (ii)
Seacoast, whichever of (i) or (ii) will provide the greater benefit to the
officer or employee. Seacoast shall waive any pre-existing condition exclusion
under any employee health plan for which any employees and/or officers and
dependents covered by PSHC plans as of Closing of the PSHC Entities shall
become eligible by virtue of the preceding sentence, to the extent (i) such
pre-existing condition was covered under the corresponding plan maintained by
the PSHC Entity and (ii) the individual affected by the pre- existing condition
was covered by the PSHC Entity's corresponding plan on the date which
immediately precedes the Effective Time, provided that PSHC has disclosed in
Section 8.14 of the PSHC Disclosure Memorandum and at Closing that none of its
employees, officers or other participants or their respective dependents, to
the best of PSHC and PSNB's knowledge and belief, have any long-term
disabilities or conditions, which in the reasonable judgment of Seacoast would
materially adversely affect the claims experience and/or costs of any employee
benefit plan or insurance maintained by or through any Seacoast Entity. For
purposes of participation, vesting and (except in the case of Seacoast
retirement plans) benefit accrual under Seacoast's employee benefit plans, the
service of the employees of the PSHC Entities prior to the Effective Time shall
be treated as service with a Seacoast Entity participating in such employee
benefit plans. Seacoast also shall cause the Surviving Corporation and its
Subsidiaries to honor in accordance with their terms all employment, severance,
consulting and other compensation Contracts disclosed in Section 8.14 of the
PSHC Disclosure Memorandum to Seacoast between any PSHC Entity and any current
or former director, officer, or employee thereof, and all provisions for vested
benefits or other vested amounts earned or accrued through the Effective Time
under the PSHC Benefit Plans.
(b) Upon the execution hereof, a mutually
acceptable employment agreement between J. Hal Roberts, Jr. and Seacoast or
First National shall be executed and delivered, and which shall become
effective at the Effective Time.
(c) Subject to compliance with applicable Laws
and the absence of any Material Adverse Effects upon Seacoast or any PSHC
Benefit Plans and/or Seacoast Benefit Plans, Seacoast intends to merge the PSHC
401(k) Plan with the Seacoast 401(k) Plan.
(d) Effective upon the Effective Time, PSHC and,
as applicable, its Subsidiaries shall terminate, their Employee Non-Qualified
Stock Investment Plan and Trust of Port St. Lucie National Bank and the
Deferred Compensation Plan offered to Directors. Such termination and the
effects thereof shall be in accordance with Section 5.15(h) hereof.
8.15 INDEMNIFICATION.
(a) With respect to all claims brought during the
period of four years after the Effective Time, Seacoast shall indemnify, defend
and hold harmless the present and former directors, officers, employees and
agents of the PSHC Entities (each, an "Indemnified Party") against all
Liabilities arising out of actions or omissions arising out of the Indemnified
Party's service or services as directors, officers, employees or agents of PSHC
or, at PSHC's request, of another corporation, partnership, joint venture,
trust or other enterprise occurring at or prior to the Effective Time
(including the transactions contemplated by this Agreement) to the fullest
extent permitted under Florida Law and by PSHC's Articles of Incorporation and
Bylaws as in effect on the date hereof, including provisions relating to
advances of expenses incurred in the defense of any Litigation and whether or
not any Seacoast Entity is insured against any such matter. Without limiting
the foregoing, in any case in which approval by the Surviving Corporation is
required to effectuate any indemnification, the Surviving
<PAGE> 31
Corporation shall direct, at the election of the Indemnified Party, that the
determination of any such approval shall be made by independent counsel
mutually agreed upon between Seacoast and the Indemnified Party.
(b) Seacoast shall, to the extent available, (and
PSHC shall cooperate prior to the Effective Time in these efforts) maintain in
effect for a period of two years after the Effective Time PSHC's existing
directors' and officers' liability insurance policy (provided that Seacoast may
substitute therefor (i) policies of at least the same coverage and amounts
containing terms and conditions which are substantially no less advantageous or
(ii) with the consent of PSHC given prior to the Effective Time, any other
policy) with respect to claims arising from facts or events which occurred
prior to the Effective Time and covering persons who are currently covered by
such insurance; provided, that Seacoast shall not be obligated to make
aggregate premium payments for such two-year period in respect of such policy
(or coverage replacing such policy) which exceed, for the portion related to
PSHC's directors and officers, 150% of the annual premium payments on PSHC's
current policy in effect as of the date of this Agreement (the "Maximum
Amount").
(c) Any Indemnified Party wishing to claim
indemnification under paragraph (a) of this Section 8.15, upon learning of any
such Liability or Litigation, shall promptly notify Seacoast thereof. In the
event of any such Litigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall have the right to assume the defense
thereof and the Surviving Corporation shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof, except that if the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
substantive issues which raise conflicts of interest between the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; provided, that the Surviving
Corporation shall be obligated pursuant to this paragraph (c) to pay for only
one firm of counsel for all Indemnified Parties in any jurisdiction, (ii) the
Indemnified Parties will cooperate in the defense of any such Litigation, and
(iii) the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent; and provided further that the Surviving
Corporation shall not have any obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
Law.
8.16 CERTAIN POLICIES OF PSHC. Seacoast and PSHC shall
consult with respect to their respective loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) and PSHC shall make such modification or changes to its policies and
practices, if any, prior to the Effective Time as may be mutually agreed upon.
Seacoast and PSHC also shall consult with respect to the character, amount and
timing of restructuring and Merger-related expense charges to be taken by each
of the Parties in connection with the transactions contemplated by this
Agreement and shall take such charges in accordance with GAAP, prior to the
Effective Time, as may be mutually agreed upon by the Parties. Neither Party's
representations, warranties, covenants or agreements contained in this
Agreement shall be deemed to be inaccurate or breached in any respect as a
consequence of any modifications or charges undertaken solely on account of
this Section 8.16.
8.17 NOMINATION AND ELECTION OF DIRECTORS. Seacoast shall
as soon as practicable following the Effective Time nominate and use its best
efforts to cause to be elected to the Seacoast and First National Board of
Directors two candidates from the current PSHC Board of Directors. In
addition, Seacoast shall cause First National to amend its Bylaws as soon as
practicable following the Effective Time to provide for one or more First
National Advisory Boards, including an First National Advisory Board for Port
St. Lucie County. Seacoast shall cause each of the current directors of PSHC
(other than such PSHC and/or PSNB directors who are elected as directors of
Seacoast and/or First National) to be nominated and elected to the First
National Advisory Board for St. Lucie County as soon as practicable after such
Advisory Board is constituted according to the preceding sentence.
<PAGE> 32
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The
respective obligations of each Party to perform this Agreement and consummate
the Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by both Parties
pursuant to Section 11.6:
(a) SHAREHOLDER APPROVAL. The shareholders of PSHC shall
have approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent
required by Law, by the provisions of any governing instruments, or by
the rules of the NASD. The shareholders of Seacoast shall have
approved the issuance of shares of Seacoast Common Stock pursuant to
the Merger, as and to the extent required by Law, by the provisions of
any governing instruments, or by the rules of the NASD.
(b) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made
and shall be in full force and effect and all waiting periods required
by Law shall have expired. No Consent obtained from any Regulatory
Authority which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner (including
requirements relating to the raising of additional capital or the
disposition of Assets) which in the reasonable judgment of the Board of
Directors of Seacoast would so materially adversely affect the economic
or business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, such Party would
not, in its reasonable judgment, have entered into this Agreement.
(c) CONSENTS AND APPROVALS. Each Party shall have
obtained any and all Consents required for consummation of the Merger
(other than those referred to in Section 9.1(b)) or for the preventing
of any Default under any Contract or Permit of such Party which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a PSHC Material Adverse Effect or a Seacoast Material Adverse
Effect, as applicable. No Consent so obtained which is necessary to
consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable judgment of the Board of
Directors of Seacoast would so materially adversely affect the economic
or business benefits of the transactions contemplated by this Agreement
that, had such condition or requirement been known, such Party would
not, in its reasonable judgment, have entered into this Agreement.
(d) LEGAL PROCEEDINGS. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) or taken any other action which
prohibits, restricts or makes illegal consummation of the transactions
contemplated by this Agreement.
(e) REGISTRATION STATEMENT. The Registration Statement
shall be effective under the 1933 Act, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued, no
action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and
all necessary approvals under state securities Laws or the 1933 Act or
1934 Act relating to the issuance or trading of the shares of Seacoast
Common Stock issuable pursuant to the Merger shall have been received.
(f) SHARE LISTING. The shares of Seacoast Common Stock
issuable pursuant to the Merger shall have been approved for listing on
the Nasdaq National Market.
(g) POOLING LETTERS. Each of the Parties shall have
received letters, dated as of the date of filing of the Registration
Statement with the SEC and as of the Effective Time, addressed to
Seacoast, in form and substance reasonably acceptable to Seacoast, from
Arthur Andersen LLP to the effect that the
<PAGE> 33
Merger will qualify for pooling-of-interests accounting treatment. Each
of the Parties also shall have received letters, dated as of the date of
filing of the Registration Statement with the SEC and as of the
Effective Time, addressed to Seacoast, in form and substance reasonably
acceptable to Seacoast, from KPMG Peat Marwick to the effect that such
firm is not aware of any matters relating to PSHC and its Subsidiaries
which would preclude the Merger from qualifying for pooling-of-interests
accounting treatment.
(h) TAX MATTERS. Each Party shall have received a
written opinion of counsel from Alston & Bird, in form reasonably
satisfactory to such Parties (the "Tax Opinion"), to the effect that (i)
the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, (ii) the exchange in the
Merger of PSHC Common Stock for Seacoast Common Stock will not give rise
to gain or loss to the shareholders of PSHC with respect to such
exchange (except to the extent of any cash received), and (iii) none of
PSHC or Seacoast will recognize gain or loss as a consequence of the
Merger (except for amounts resulting from any required change in
accounting methods and any income and deferred gain recognized pursuant
to Treasury regulations issued under Section 1502 of the Internal
Revenue Code). In rendering such Tax Opinion, such counsel shall be
entitled to rely upon representations of officers of PSHC and Seacoast
reasonably satisfactory in form and substance to such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF SEACOAST. The
obligations of Seacoast to perform this Agreement and consummate the Merger and
the other transactions contemplated hereby are subject to the satisfaction of
the following conditions, unless waived by Seacoast pursuant to Section
11.6(a):
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 9.2(a), the accuracy of the representations and warranties of
PSHC set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as
of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such
date). The representations and warranties set forth in Section 5.3,
5.20, 5.21, and 5.22 shall be true and correct (except for inaccuracies
which are de minimus in amount). There shall not exist inaccuracies in
the representations and warranties of PSHC set forth in this Agreement
(including the representations and warranties set forth in Sections 5.3,
5.20, 5.21, and 5.22) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, a PSHC Material
Adverse Effect; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any
Person shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and
all of the agreements and covenants of PSHC to be performed and complied
with pursuant to this Agreement and the other agreements contemplated
hereby prior to the Effective Time shall have been duly performed and
complied with.
(c) CERTIFICATES. PSHC shall have delivered to Seacoast
(i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer,
to the effect that the conditions set forth in Section 9.1 as relates to
PSHC and in Section 9.2(a) and 9.2(b) have been satisfied, and (ii)
certified copies of resolutions duly adopted by PSHC's Board of
Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as Seacoast and its counsel shall request.
(d) OPINION OF COUNSEL. Seacoast shall have received an
opinion of Gunster, Yoakley, Valdes-Fauli & Stewart, P.A, counsel to
PSHC, dated as of the Closing, in form reasonably satisfactory to
Seacoast, as to the matters set forth in Exhibit 3.
(e) ACCOUNTANT'S LETTERS. Seacoast shall have received
from KPMG Peat Marwick letters dated not more than five days prior to
(i) the date of the Joint Proxy Statement and (ii) the Effective Time,
<PAGE> 34
with respect to certain financial information regarding PSHC, in form
and substance reasonably satisfactory to Seacoast, which letters shall
be based upon customary specified procedures undertaken by such firm in
accordance with Statement of Auditing Standard Nos. 71, 72 and 75.
(f) AFFILIATES' AGREEMENTS. Seacoast shall have received
from each affiliate of PSHC the affiliates letter referred to in Section
8.13, to the extent necessary to assure in the reasonable judgment of
Seacoast that the transactions contemplated hereby will qualify for
pooling-of-interests accounting treatment.
(g) SHAREHOLDERS' EQUITY. PSHC's shareholders' equity as
of the Closing shall not be less than PSHC's shareholders' equity as of
December 31, 1996, excluding for purposes of the calculation of such
shareholders' equity the effects of (i) all costs, fees and charges,
including fees and charges of PSHC's accountants, counsel and financial
advisors, whether or not accrued or paid, that are related to the
transactions contemplated by this Agreement not to exceed $200,000 in
the aggregate, (ii) all net charges resulting from the application of
FASB Statement No. 115 with respect to unrealized securities gains and
losses, and (iii) any reductions in PSHC's shareholders' equity
resulting from any actions or changes in policies of PSHC taken at the
request of Seacoast, including those described in Section 8.16 and (iv)
the effect on or after the Effective Time, as Seacoast may determine, of
the PSHC and/or PSNB data processing agreements as shown in Section
9.2(g) of the PSHC Disclosure Memorandum.
(h) DIRECTOR'S AGREEMENTS. Seacoast shall have received
from each director of PSHC the Director's Agreement set forth hereto at
Exhibit 4.
(i) CLAIMS LETTER. Seacoast shall have received from
each director and officer of PSHC the Claims Letter set forth hereto at
Exhibit 5.
9.3 CONDITIONS TO OBLIGATIONS OF PSHC. The obligations
of PSHC to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by PSHC pursuant to Section 11.6(b):
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this
Section 9.3(a), the accuracy of the representations and warranties of
Seacoast set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as
of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such
date). There shall not exist inaccuracies in the representations and
warranties of Seacoast set forth in this Agreement such that the
aggregate effect of such inaccuracies has, or is reasonably likely to
have, a Seacoast Material Adverse Effect; provided that, for purposes of
this sentence only, those representations and warranties which are
qualified by references to "material" or "Material Adverse Effect" or to
the "Knowledge" of any Person shall be deemed not to include such
qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and
all of the agreements and covenants of Seacoast to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been duly
performed and complied with in all material respects.
(c) CERTIFICATES. Seacoast shall have delivered to PSHC
(i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer,
to the effect that the conditions set forth in Section 9.1 as relates to
Seacoast and in Section 9.3(a) and 9.3(b) have been satisfied, and (ii)
certified copies of resolutions duly adopted by Seacoast's Board of
Directors and shareholders evidencing the taking of all corporate action
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as PSHC and its counsel shall request.
<PAGE> 35
(d) OPINION OF COUNSEL. PSHC shall have received an
opinion of Alston & Bird, counsel to Seacoast, dated as of the Effective
Time, in form reasonably acceptable to PSHC, as to the matters set forth
in Exhibit 6.
(e) FAIRNESS OPINION. PSHC shall have received from
Austin Associates, Inc. a letter, dated not more than five business days
prior to the date of the Proxy Statement, to the effect that, in the
opinion of such firm, the consideration to be received by PSHC
shareholders in connection with the Merger is fair, from a financial
point of view, to such shareholders.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of
this Agreement, and notwithstanding the approval of this Agreement by the
shareholders of PSHC and Seacoast or both, this Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of Seacoast and PSHC; or
(b) By either Party (provided that the terminating Party
is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event
of a breach by the other Party of any representation or warranty
contained in this Agreement which cannot be or has not been cured within
30 days after the giving of written notice to the breaching Party of
such breach and which breach is reasonably likely, in the opinion of the
non-breaching Party, to have, individually or in the aggregate, a PSHC
Material Adverse Effect or a Seacoast Material Adverse Effect, as
applicable, on the breaching Party; or
(c) By either Party (provided that the terminating Party
is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event
of a material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within
30 days after the giving of written notice to the breaching Party of
such breach; or
(d) By either Party (provided that the terminating Party
is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event
(i) any Consent of any Regulatory Authority required for consummation of
the Merger and the other transactions contemplated hereby shall have
been denied by final nonappealable action of such authority or if any
action taken by such authority is not appealed within the time limit for
appeal, or (ii) the shareholders of PSHC or Seacoast fail to vote their
approval of the matters relating to this Agreement and the transactions
contemplated hereby at the Shareholders' Meetings where such matters
were presented to such shareholders for approval and voted upon; or
(e) By either Party in the event that the Merger shall
not have been consummated by August 31, 1997, if the failure to
consummate the transactions contemplated hereby on or before such date
is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(e); or
(f) By either Party (provided that the terminating Party
is not then in material breach of any representation, warranty,
covenant, or other agreement contained in this Agreement) in the event
that any of the conditions precedent to the obligations of such Party to
consummate the Merger cannot be satisfied or fulfilled by the date
specified in Section 10.1(e); or
<PAGE> 36
(g) By Seacoast, in the event that the Board of Directors
of PSHC shall have failed to reaffirm its approval of the Merger and the
transactions contemplated by this Agreement (to the exclusion of any
other Acquisition Proposal), or shall have resolved not to reaffirm the
Merger, or shall have affirmed, recommended or authorized entering into
any other Acquisition Proposal or other transaction involving a merger,
share exchange, consolidation or transfer of substantially all of the
Assets of PSHC.
(h) By PSHC in the event that the Purchase Price Per Share
shall be less than $24.62.
10.2 EFFECT OF TERMINATION. In the event of the
termination and abandonment of this Agreement pursuant to Section 10.1, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Article 11 and Sections 8.6(b) and 8.7 shall survive
any such termination and abandonment, and (ii) a termination pursuant to
Sections 10.1(b), 10.1(c) or 10.1(f) shall not relieve the breaching Party from
Liability for an uncured willful breach of a representation, warranty,
covenant, or agreement giving rise to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The
respective representations, warranties, obligations, covenants, and agreements
of the Parties shall not survive the Effective Time except this Section 10.3
and Articles 1, 2, 3, 4 and 11 and Sections 8.7, 8.13, 8.14, 8.15 and 8.17.
ARTICLE 11
MISCELLANEOUS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition
of all of the stock or assets of, or other business combination
involving the acquisition of such Party or any of its Subsidiaries or
the acquisition of a substantial equity interest in, or a substantial
portion of the assets of, such Party or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; (ii) any
officer, director, partner, employer, or direct or indirect beneficial
owner of any 10% or greater equity or voting interest of such Person; or
(iii) any other Person for which a Person described in clause (ii) acts
in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated herein
by reference.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by Seacoast and filed with the Secretary of State of the State
of Florida relating to the Merger as contemplated by Section 1.1.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character
and description, whether real, personal or mixed, tangible or
intangible,
<PAGE> 37
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether
or not carried on the books and records of such Person, and whether or
not owned in the name of such Person or any Affiliate of such Person and
wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act
of 1956, as amended.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CONFIDENTIALITY AGREEMENT" shall mean that certain
Confidentiality Agreement, dated May 10, 1996, between PSHC and
Seacoast.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement,
arrangement, authorization, commitment, contract, indenture, instrument,
lease, obligation, plan, practice, restriction, understanding, or
undertaking of any kind or character, or other document to which any
Person is a party or that is binding on any Person or its capital stock,
Assets or business.
"DEFAULT" shall mean (i) any breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, (ii) any occurrence of any event that with the passage of time
or the giving of notice or both would constitute a breach or violation
of, default under, contravention of, or conflict with, any Contract,
Law, Order, or Permit, or (iii) any occurrence of any event that with or
without the passage of time or the giving of notice would give rise to a
right of any Person to exercise any remedy or obtain any relief under,
terminate or revoke, suspend, cancel, or modify or change the current
terms of, or renegotiate, or to accelerate the maturity or performance
of, or to increase or impose any Liability under, any Contract, Law,
Order, or Permit.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution
or protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and
which are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et
seq. ("CERCLA"), the Resource Conservation and Recovery Act, as amended,
42 U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"EQUITY RIGHTS" shall mean all arrangements, calls,
commitments, Contracts, options, rights to subscribe to, scrip,
understandings, warrants, or other binding obligations of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of a Person or by which a
Person is or may be bound to issue additional shares of its capital
stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"EXHIBITS" 1 through 6, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this Agreement. Such Exhibits
are hereby incorporated by reference herein and made a part hereof, and
may be referred to in this Agreement and any other related instrument or
document without being attached hereto.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation
"FNMA" shall mean the Federal National Mortgage Association.
<PAGE> 38
"FBCA" shall mean the Florida Business Corporation Act.
"FIRST NATIONAL" shall mean First National Bank & Trust
Company of the Treasure Coast, a national banking association and a
Seacoast Subsidiary.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic
substance (as those terms are defined by any applicable Environmental
Laws) and (ii) any chemicals, pollutants, contaminants, petroleum,
petroleum products, or oil (and specifically shall include asbestos
requiring abatement, removal, or encapsulation pursuant to the
requirements of governmental authorities and any polychlorinated
biphenyls).
"HOLA" shall mean the Home Owners' Loan Act of 1933, as
amended.
"HSR ACT" shall mean Section 7A of the Clayton Act, as added
by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, applications
therefor, technology rights and licenses, computer software (including
any source or object codes therefor or documentation relating thereto),
trade secrets, franchises, know-how, inventions, and other intellectual
property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated
thereunder.
"JOINT PROXY STATEMENT" shall mean the proxy statement used by
PSHC and Seacoast to solicit the approval of their respective
shareholders of the transactions contemplated by this Agreement, which
shall include the prospectus of Seacoast relating to the issuance of the
Seacoast Common Stock to holders of PSHC Common Stock.
"KNOWLEDGE" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall mean
those facts that are known or should reasonably have been known after
due inquiry by the chairman, president, chief financial officer, chief
accounting officer, chief operating officer, chief credit officer,
general counsel, any assistant or deputy general counsel, or any senior,
executive or other vice president of such Person and the knowledge of
any such persons obtained or which would have been obtained from a
reasonable investigation.
"LAW" shall mean any code, law (including common law),
ordinance, regulation, reporting or licensing requirement, rule, or
statute applicable to a Person or its Assets, Liabilities, or business,
including those promulgated, interpreted or enforced by any Regulatory
Authority.
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for
collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest,
title retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature
<PAGE> 39
whatsoever of, on, or with respect to any property or property interest,
other than (i) Liens for current property Taxes not yet due and payable,
(ii) for depository institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the ordinary course of the
banking business, (iii) Liens which do not materially impair the use of
or title to the Assets subject to such Lien, and which are disclosed in
Section 11.1 of the PSHC Disclosure Memorandum or Seacoast Disclosure
Memorandum, as applicable.
"LITIGATION" shall mean any action, arbitration, cause of
action, claim, complaint, criminal prosecution, governmental or other
examination or investigation, hearing, administrative or other
proceeding relating to or affecting a Party, its business, its Assets
(including Contracts related to it), or the transactions contemplated by
this Agreement, but shall not include regular, periodic examinations of
depository institutions and their Affiliates by Regulatory Authorities.
"MATERIAL" for purposes of this Agreement shall be determined
in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement
shall determine materiality in that instance.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ NATIONAL MARKET" shall mean the National Market System
of the National Association of Securities Dealers Automated Quotations
System.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in
which such Party or Subsidiary holds a security interest or other
interest (including an interest in a fiduciary capacity), and, where
required by the context, includes the owner or operator of such
property, but only with respect to such property.
"ORDER" shall mean any administrative decision or award,
decree, injunction, judgment, order, quasi- judicial decision or award,
ruling, or writ of any federal, state, local or foreign or other court,
arbitrator, mediator, tribunal, administrative agency, or Regulatory
Authority.
"PARTICIPATION FACILITY" shall mean any facility or property
in which the Party in question or any of its Subsidiaries participates
in the management and, where required by the context, said term means
the owner or operator of such facility or property, but only with
respect to such facility or property.
"PARTY" shall mean either PSHC or Seacoast, and "PARTIES"
shall mean both PSHC and Seacoast.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person or its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial
or governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
liability company, trust, business association, group acting in concert,
or any person acting in a representative capacity.
"PSHC COMMON STOCK" shall mean the $0.01 par value common
stock of PSHC.
"PSHC DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Port St. Lucie National Bank Holding Corp.
Disclosure Memorandum" delivered prior to the date of this Agreement to
Seacoast describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure
is being
<PAGE> 40
made. Information disclosed with respect to one Section shall not be
deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"PSHC ENTITIES" shall mean, collectively, PSHC and all PSHC
Subsidiaries.
"PSHC FINANCIAL STATEMENTS" shall mean (i) the consolidated
statements of condition (including related notes and schedules, if any)
of PSHC as of September 30, 1996, and as of December 31,1995 and 1994,
and the related statements of income, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) for the
nine months ended September 30, 1996, and for each of the three fiscal
years ended December 31,1995, 1994 and 1993, as filed by PSHC in SEC
Documents, and (ii) the consolidated statements of condition of PSHC
(including related notes and schedules, if any) and related statements
of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) included in SEC Documents filed
with respect to periods ended subsequent to September 30, 1996.
"PSHC MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change
or occurrence, has a material adverse impact on (i) the financial
position, business, or results of operations of PSHC and its
Subsidiaries, taken as a whole, or (ii) the ability of PSHC to perform
its obligations under this Agreement or to consummate the Merger or the
other transactions contemplated by this Agreement, provided that
"Material Adverse Effect" shall not be deemed to include the impact of
(a) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b)
changes in generally accepted accounting principles or regulatory
accounting principles generally applicable to banks and their holding
companies, (c) actions and omissions of PSHC (or any of its
Subsidiaries) taken with the prior informed written Consent of Seacoast
in contemplation of the transactions contemplated hereby, and (d) the
direct effects of compliance with this Agreement on the operating
performance of PSHC, including expenses incurred by PSHC in consummating
the transactions contemplated by this Agreement.
"PSHC STOCK PLANS" shall mean the existing stock option, stock
purchase and other stock-based plans of PSHC.
"PSHC SUBSIDIARIES" shall mean the Subsidiaries of PSHC, which
shall include the PSHC Subsidiaries described in Section 5.4 and any
corporation, bank, savings association, or other organization acquired
as a Subsidiary of PSHC in the future and held as a Subsidiary by PSHC
at the Effective Time.
"PSN BANK" shall mean Port St. Lucie National Bank, a national
banking association and a PSHC Subsidiary.
"PURCHASE PRICE PER SHARE" shall mean (i) the sum of (x) the
average of the closing prices on the Nasdaq National Market as reported
by The Wall Street Journal of Seacoast Common Stock for the 20 trading
days preceding the fifth trading day preceding the Closing Date (the
"Seacoast Stock Price") multiplied by 900,000 and (y) 1,242,953 (ii)
divided by the number of shares of PSHC Common Stock plus the number of
shares of PSHC Common Stock subject to PSHC Options, including PSHC
Warrants, outstanding at the Effective Time.
"REGISTRATION STATEMENT" shall mean the Registration Statement
on Form S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
Seacoast under the 1933 Act with respect to the shares of Seacoast
Common Stock to be issued to the shareholders of PSHC in connection with
the transactions contemplated by this Agreement.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC,
the NASD, the Federal Trade Commission, the United States Department of
Justice, the Board of the Governors of the Federal Reserve System, the
Office of the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, and all
<PAGE> 41
other federal, state, county, local or other governmental or regulatory
agencies, authorities (including self- regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction
over the Parties and their respective Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative
engaged by a Person.
"SEACOAST CAPITAL STOCK" shall mean, collectively, the
Seacoast Common Stock, the Seacoast Preferred Stock and any other class
or series of capital stock of Seacoast.
"SEACOAST COMMON STOCK" shall mean the $0.10 par value Class A
common stock of Seacoast.
"SEACOAST DISCLOSURE MEMORANDUM" shall mean the written
information entitled "Seacoast Banking Corporation of Florida Disclosure
Memorandum" delivered prior to the date of this Agreement to PSHC
describing in reasonable detail the matters contained therein and, with
respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made.
Information disclosed with respect to one Section shall not be deemed to
be disclosed for purposes of any other Section not specifically
referenced with respect thereto.
"SEACOAST ENTITIES" shall mean, collectively, Seacoast and all
Seacoast Subsidiaries.
"SEACOAST FINANCIAL STATEMENTS" shall mean (i) the
consolidated statements of condition (including related notes and
schedules, if any) of Seacoast as of September 30, 1996, and as of
December 31, 1995 and 1994, and the related statements of income,
changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) for the nine months ended September 30, 1996, and
for each of the three fiscal years ended December 31, 1995, 1994 and
1993, as filed by Seacoast in SEC Documents, and (ii) the consolidated
statements of condition and balance sheets of Seacoast (including
related notes and schedules, if any) and related statements of income,
changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to September 30, 1996.
"SEACOAST MATERIAL ADVERSE EFFECT" shall mean an event, change
or occurrence which, individually or together with any other event,
change or occurrence, has a material adverse impact on (i) the financial
position, business, or results of operations of Seacoast and its
Subsidiaries, taken as a whole, or (ii) the ability of Seacoast to
perform its obligations under this Agreement or to consummate the Merger
or the other transactions contemplated by this Agreement, provided that
"Material Adverse Effect" shall not be deemed to include the impact of
(a) changes in banking and similar Laws of general applicability or
interpretations thereof by courts or governmental authorities, (b)
changes in generally accepted accounting principles or regulatory
accounting principles generally applicable to banks and their holding
companies, (c) actions and omissions of Seacoast (or any of its
Subsidiaries) taken with the prior informed written Consent of PSHC in
contemplation of the transactions contemplated hereby, and (d) the
direct effects of compliance with this Agreement on the operating
performance of Seacoast, including expenses incurred by Seacoast in
consummating the transactions contemplated by this Agreement.
"SEACOAST PREFERRED STOCK" shall mean the $1.00 par value
preferred stock of Seacoast.
"SEACOAST STOCK PLANS" shall mean the existing stock option
and other stock-based compensation plans of Seacoast designated as
follows: (i) Seacoast Banking Corporation of Florida 1991 Stock Option
and Stock Appreciation Rights Plan and (ii) Seacoast Banking Corporation
of Florida 1996 Long-term Incentive Plan.
<PAGE> 42
"SEACOAST STOCK PRICE" shall mean the average of the closing
prices on the Nasdaq National Market as reported by The Wall Street
Journal of Seacoast Common Stock for the 20 trading days preceding the
fifth trading day preceding the Closing Date.
"SEACOAST SUBSIDIARIES" shall mean the Subsidiaries of
Seacoast, which shall include the Seacoast Subsidiaries described in
Section 6.4 and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of Seacoast in the future and held
as a Subsidiary by Seacoast at the Effective Time.
"SEC DOCUMENTS" shall mean all forms, proxy statements,
registration statements, reports, schedules, and other documents filed,
or required to be filed, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act
of 1940, as amended, the Trust Indenture Act of 1939, as amended, and
the rules and regulations of any Regulatory Authority promulgated
thereunder.
"SHAREHOLDERS' MEETINGS" shall mean the respective meetings of
the shareholders of PSHC and Seacoast to be held pursuant to Section
8.1, including any adjournment or adjournments thereof.
"SIGNIFICANT SUBSIDIARY" shall mean any present or future
consolidated Subsidiary of the Party in question, the assets of which
constitute ten percent (10%) or more of the consolidated assets of such
Party as reflected on such Party's consolidated statement of condition
prepared in accordance with GAAP.
"SUBSIDIARIES" shall mean all those corporations,
associations, or other business entities of which the entity in question
either (i) owns or controls 50% or more of the outstanding equity
securities either directly or through an unbroken chain of entities as
to each of which 50% or more of the outstanding equity securities is
owned directly or indirectly by its parent (provided, there shall not be
included any such entity the equity securities of which are owned or
controlled in a fiduciary capacity), (ii) in the case of partnerships,
serves as a general partner, (iii) in the case of a limited liability
company, serves as a managing member, or (iv) otherwise has the ability
to elect a majority of the directors, trustees or managing members
thereof.
"SURVIVING CORPORATION" shall mean Seacoast as the surviving
corporation resulting from the Merger.
"TAX RETURN" shall mean any report, return, information
return, or other information required to be supplied to a taxing
authority in connection with Taxes, including any return of an
affiliated or combined or unitary group that includes a Party or its
Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local,
or foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment,
sales, use, transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, environmental, federal highway use,
commercial rent, customs duties, capital stock, paid-up capital,
profits, withholding, Social Security, single business and unemployment,
disability, real property, personal property, registration, ad valorem,
value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposes or required to be
withheld by the United States or any state, county, local or foreign
government or subdivision or agency thereof, including any interest,
penalties, and additions imposed thereon or with respect thereto.
(b) The terms set forth below shall have the meanings
ascribed thereto in the referenced sections:
<PAGE> 43
<TABLE>
<S> <C>
Allowance Section 5.9
Bank Merger Section 1.4
Bank Plan Section 1.4
Closing Section 1.2
Counties Section 7.1
Effective Time Section 1.3
ERISA Affiliate Section 5.15(b)
Exchange Agent Section 4.1
Exchange Ratio Section 3.1(b)
Lower Threshold Price Section 3.1(b)
Maximum Amount Section 8.15
Merger Section 1.1
PSHC Benefit Plans Section 5.15
PSHC Contracts Section 5.16
PSHC ERISA Plan Section 5.15
PSHC Options Section 3.6
PSHC Pension Plan Section 5.15
PSHC SEC Reports Section 5.5(a)
Seacoast Benefit Plans Section 6.15
Seacoast Contracts Section 6.16
Seacoast ERISA Plan Section 6.15
Seacoast Pension Plan Section 6.15
Seacoast SEC Reports Section 6.5(a)
Takeover Laws Section 5.21
Tax Opinion Section 9.1(h)
Wholesale Mortgage Business Section 5.16
</TABLE>
(c) Any singular term in this Agreement shall be
deemed to include the plural, and any plural term the singular. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed followed by the words "without limitation."
11.2 EXPENSES. Except as otherwise provided in this
Section 11.2, each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other consultants,
investment bankers, accountants, and counsel, except that each of the Parties
shall bear and pay one-half of the filing fees payable in connection with the
Registration Statement and the Joint Proxy Statement and printing costs incurred
in connection with the printing of the Registration Statement and the Joint
Proxy Statement.
11.3 BROKERS AND FINDERS. Except for Austin Associates,
Inc. as to PSHC and except for The Robinson-Humphrey Company as to Seacoast,
each of the Parties represents and warrants that neither it nor any of its
officers, directors, employees, or Affiliates has employed any broker or finder
or incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by PSHC or by Seacoast, each of PSHC
and Seacoast, as the case may be, agrees to indemnify and hold the other Party
harmless of and from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly
provided herein, this Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement between the Parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings
<PAGE> 44
with respect thereto, written or oral (except, as to Section 8.6(b), for the
Confidentiality Agreement). Nothing in this Agreement expressed or implied, is
intended to confer upon any Person, other than the Parties or their respective
successors, any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, other than as provided in Sections 8.14 and 8.15.
11.5 AMENDMENTS. To the extent permitted by Law, this
Agreement may be amended by a subsequent writing signed by each of the Parties
upon the approval of each of the Parties, whether before or after shareholder
approval of this Agreement has been obtained; provided, that after any such
approval by the holders of PSHC Common Stock, there shall be made no amendment
that reduces or modifies in any material respect the consideration to be
received by holders of PSHC Common Stock; and further provided, that after any
such approval by the holders of Seacoast Common Stock, the provisions of this
Agreement relating to the manner or basis in which shares of PSHC Common Stock
will be exchanged for shares of Seacoast Common Stock shall not be amended
after the Shareholders' Meetings in a manner adverse to the holders of Seacoast
Common Stock without any requisite approval of the holders of the issued and
outstanding shares of Seacoast Common Stock entitled to vote thereon.
11.6 WAIVERS.
(a) Prior to or at the Effective Time, Seacoast,
acting through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by PSHC, to waive or extend the time
for the compliance or fulfillment by PSHC of any and all of its obligations
under this Agreement, and to waive any or all of the conditions precedent to
the obligations of Seacoast under this Agreement, except any condition which,
if not satisfied, would result in the violation of any Law. No such waiver
shall be effective unless in writing signed by a duly authorized officer of
Seacoast.
(b) Prior to or at the Effective Time, PSHC,
acting through its Board of Directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by Seacoast, to waive or extend the
time for the compliance or fulfillment by Seacoast of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of PSHC under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of PSHC.
(c) The failure of any Party at any time or times
to require performance of any provision hereof shall in no manner affect the
right of such Party at a later time to enforce the same or any other provision
of this Agreement. No waiver of any condition or of the breach of any term
contained in this Agreement in one or more instances shall be deemed to be or
construed as a further or continuing waiver of such condition or breach or a
waiver of any other condition or of the breach of any other term of this
Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby,
neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any Party hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Party. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the Parties and their respective successors
and assigns.
11.8 NOTICES. All notices or other communications which
are required or permitted hereunder shall be in writing and sufficient if
delivered by hand, by facsimile transmission, by registered or certified mail,
postage pre-paid, or by courier or overnight carrier, to the persons at the
addresses set forth below (or at such other address as may be provided
hereunder), and shall be deemed to have been delivered as of the date so
delivered:
<PAGE> 45
<TABLE>
<S> <C>
PSHC: Port St. Lucie National Bank Holding Corp.
1100 S.W. St. Lucie West Boulevard
Port St. Lucie, Florida 34986
Telecopy Number: (561) 878-5431
Attention: J. Hal Roberts, Jr.
Copy to Counsel: Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
777 South Flagler Drive
Suite 500 East
West Palm Beach, Florida 33401-6194
Telecopy Number: (561) 655-5677
Attention: Michael V. Mitrione, Esq.
Seacoast: Seacoast Banking Corporation of Florida
815 Colorado Avenue
P.O. Box 9012
Stuart, Florida 34995-9012
Telecopy Number: (561) 288-6012
Attention: Mr. Dennis S. Hudson, III
Copy to Counsel: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30327
Telecopy Number: (404) 881-7777
Attention: Ralph F. MacDonald, III, Esq.
</TABLE>
11.9 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Florida, without
regard to any applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
11.11 CAPTIONS; ARTICLES AND SECTIONS. The captions
contained in this Agreement are for reference purposes only and are not part of
this Agreement. Unless otherwise indicated, all references to particular
Articles or Sections shall mean and refer to the referenced Articles and
Sections of this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against any
party, whether under any rule of construction or otherwise. No party to this
Agreement shall be considered the draftsman. The parties acknowledge and agree
that this Agreement has been reviewed, negotiated, and accepted by all parties
and their attorneys and shall be construed and interpreted according to the
ordinary meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
11.13 ENFORCEMENT OF AGREEMENT. The Parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in
<PAGE> 46
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
11.14 SEVERABILITY. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
<PAGE> 47
IN WITNESS WHEREOF, each of the Parties has caused this
Agreement to be executed on its behalf by its duly authorized officers as of
the day and year first above written.
SEACOAST BANKING CORPORATION OF FLORIDA
By: /s/ Dennis S. Hudsen, III
--------------------------------
President
PORT ST. LUCIE NATIONAL BANK HOLDING CORP.
By: /s/ J. HAL ROBERTS, JR.
---------------------------------
President
<PAGE> 48
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . .
1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . .
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.4 Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2 - TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.1 Charter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 3 - MANNER OF CONVERTING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . .
3.3 Shares Held by PSHC or Seacoast . . . . . . . . . . . . . . . . . . . . .
3.4 Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.6 Conversion of Stock Options; Restricted Stock . . . . . . . . . . . . . .
ARTICLE 4 - EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.1 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.2 Rights of Former PSHC Shareholders . . . . . . . . . . . . . . . . . . . .
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF PSHC . . . . . . . . . . . . . . . . . . . .
5.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . . . . .
5.2 Authority of PSHC; No Breach By Agreement . . . . . . . . . . . . . . . .
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.4 PSHC Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . .
5.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . .
5.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . .
5.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.9 Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . .
5.10 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . .
5.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
5.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.14 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.15 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . .
5.16 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.17 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.18 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.19 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . .
5.20 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . .
5.21 State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.22 Charter Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.23 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . .
5.24 Board Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF Seacoast . . . . . . . . . . . . . . . . . .
6.1 Organization, Standing, and Power . . . . . . . . . . . . . . . . . . . .
6.2 Authority; No Breach By Agreement . . . . . . . . . . . . . . . . . . . .
6.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4 Seacoast Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . .
6.5 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 49
<TABLE>
<S> <C>
6.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . .
6.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . .
6.9 Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . .
6.10 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . .
6.12 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.13 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.14 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.15 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.16 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . .
6.17 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . .
ARTICLE 7 - CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . . . . . . . .
7.1 Affirmative Covenants of PSHC . . . . . . . . . . . . . . . . . . . . . .
7.2 Negative Covenants of PSHC . . . . . . . . . . . . . . . . . . . . . . . .
7.3 Covenants of Seacoast . . . . . . . . . . . . . . . . . . . . . . . . . .
7.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . . . . . . .
7.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 8 - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.1 Registration Statement; Proxy Statement; Shareholder Approval . . . . . .
8.2 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.3 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.4 Filings with State Offices . . . . . . . . . . . . . . . . . . . . . . . .
8.5 Agreement as to Efforts to Consummate . . . . . . . . . . . . . . . . . .
8.6 Investigation and Confidentiality . . . . . . . . . . . . . . . . . . . .
8.7 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.8 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.9 Accounting and Tax Treatment . . . . . . . . . . . . . . . . . . . . . . .
8.10 State Takeover Laws . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.11 Charter Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.12 PSHC Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.13 Agreements of Affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
8.14 Employee Benefits and Contracts . . . . . . . . . . . . . . . . . . . . .
8.15 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.16 Certain Policies of PSHC . . . . . . . . . . . . . . . . . . . . . . . . .
8.17 Nomination and Election of Directors . . . . . . . . . . . . . . . . . . .
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE . . . . . . . . . . . . . . .
9.1 Conditions to Obligations of Each Party . . . . . . . . . . . . . . . . .
9.2 Conditions to Obligations of Seacoast . . . . . . . . . . . . . . . . . .
9.3 Conditions to Obligations of PSHC . . . . . . . . . . . . . . . . . . . .
ARTICLE 10 - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . .
10.3 Non-Survival of Representations and Covenants . . . . . . . . . . . . . .
ARTICLE 11 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.3 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 50
<TABLE>
<S> <C>
11.11 Captions; Articles and Sections . . . . . . . . . . . . . . . . . . . . .
11.12 Interpretations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.13 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . .
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 51
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
1. Bank Plan of Merger. (Section 1.4).
2. Form of agreement of affiliates of PSHC. (Section
8.13, 9.2(g)).
3. Matters as to which Gunster, Yoakley, Valdes-Fauli &
Stewart, P.A. will opine. (Section 9.2(d)).
4. Form of Director's Agreement. (Section 9.2(h)).
5. Claims Letter. (Section 9.2(i)).
6. Matters as to which Alston & Bird will opine. (Section
9.3(d)).
</TABLE>
<PAGE> 52
EXHIBIT 1
TO AGREEMENT
AND PLAN OF
MERGER
PLAN OF MERGER
OF
PORT ST. LUCIE NATIONAL BANK
WITH AND INTO
FIRST NATIONAL BANK & TRUST COMPANY OF THE TREASURE COAST
This Plan of Merger ("Plan of Merger") is made and entered
into as of February 19, 1997, by and between PORT ST. LUCIE NATIONAL BANK, a
national banking association organized and existing under the laws of the
United States with its main office located in Port St. Lucie, Florida ("PSNB"),
and FIRST NATIONAL BANK & TRUST COMPANY OF THE TREASURE COAST, a national
banking association organized and existing under the laws of the United States
with its main office located in Stuart, Florida ("FNB").
FNB is a wholly-owned subsidiary of Seacoast Banking
Corporation of Florida, a corporation organized and existing under the laws of
the State of Florida, with its principal office located in Stuart, Florida
("Seacoast"). PSNB is a wholly-owned subsidiary of Port St. Lucie National
Bank Holding Corporation, a corporation organized and existing under the laws
of the State of Florida, with its principal office in Port St. Lucie, Florida
("PSHC"). Prior to the execution and delivery of this Plan of Merger, Seacoast
and PSHC have entered into a Agreement and Plan of Merger (the "Parent
Agreement") pursuant to which PSHC would merge with and into Seacoast. The
Parent Agreement also contemplates that PSNB will be merged with and into FNB.
The Boards of Directors of PSNB and FNB are of the opinion that the bests
interests of their respective banks would be served if PSNB is merged with and
into FNB on the terms and conditions provided in this Plan of Merger.
NOW, THEREFORE, in consideration of the covenants and
agreements contained herein, PSNB and FNB hereby make, adopt and approve this
Plan of Merger in order to set forth the terms and conditions for the merger of
PSNB into FNB.
ARTICLE ONE
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
1.1 "PSNB Common Stock" shall mean the $5.00 par value
common stock of PSNB.
1.2 "Bank Merger" shall refer to the merger of PSNB with
and into FNB as provided in Section 2.1 of this Plan of Merger.
1.3 "FNB Common Stock" shall mean the $10.00 par value
common stock of FNB.
1.4 "Certificate of Merger" shall mean the Certificate of
Merger to be issued by the Office of the Comptroller of the Currency of the
United States approving the Bank Merger.
1.5 "Effective Time" shall mean the date and time on which
the Bank Merger becomes effective as specified in the Certificate of Merger.
<PAGE> 53
ARTICLE TWO
TERMS OF BANK MERGER
2.1 Merger. Subject to the terms and conditions set
forth in this Plan of Merger, at the Effective Time, PSNB shall be merged with
and into FNB under the Charter and Articles of Association of FNB pursuant to
the provisions of and with the effect provided in Title 12, United States Code,
Section 215a. FNB shall be the surviving bank and the receiving association
resulting from the Bank Merger and shall continue to conduct its business under
the name "FIRST NATIONAL BANK & TRUST COMPANY OF THE TREASURE COAST." The Bank
Merger shall be consummated pursuant to the terms of this Plan of Merger, which
has been approved and adopted by the respective Boards of Directors and
shareholders of FNB and PSNB.
2.2 Method of Converting Shares. All of the shares of
FNB Common Stock issued and outstanding at the Effective Time shall remain
issued and outstanding after the Effective Time and shall be unaffected by the
Bank Merger. At the Effective Time, the certificates representing all of the
issued and outstanding shares of PSNB Common Stock shall be surrendered to FNB
for cancellation and no consideration shall be issued in exchange therefor.
ARTICLE THREE
EFFECT OF BANK MERGER
3.1 Business of FNB. The business of FNB from and after
the Effective Time shall continue to be that of a national banking association.
The business shall be conducted from its main office located in Stuart, Florida
and at its legally established branches, which shall also include the main
office and all branches, whether in operation or approved but unopened, of PSNB
at the Effective Time.
3.2 Assumption of Rights. At the Effective Time, the
separate existence and corporate organization of PSNB shall be merged into and
continued in FNB, as the surviving bank and receiving association of the Bank
Merger. All rights, franchises and interests of PSNB and FNB in and to every
type of property (real, personal and mixed), and all choses in action of PSNB
and FNB shall be transferred to and vested in FNB as the surviving bank and
receiving association by virtue of the Bank Merger without any deed or other
transfer. FNB, upon consummation of the Bank Merger and without any order or
other action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises and interests, including appointments,
designations and nominations, and all other rights and interests as trustee,
executor, administrator, registrar of stocks and bonds, guardian of estates,
assignee, receiver and committee of estates of lunatics, and in every other
fiduciary capacity, in the same manner and to the same extent as such rights,
franchises, and interests were held or enjoyed by either of PSNB or by FNB at
the Effective Time, subject to the conditions imposed by Title 12, United
States Code, Section 215a.
3.3 Assumption of Liabilities. All liabilities and
obligations of both of PSNB and of FNB of every kind and description shall be
assumed by FNB as the surviving bank and receiving association by virtue of the
Bank Merger, and FNB shall be bound thereby in the same manner and to the same
extent that either of PSNB or FNB was so bound at the Effective Time.
3.4 Articles of Association. At the Effective Time,
following consummation of the Bank Merger, the Articles of Association of FNB
shall be in the form set forth in Annex A to this Plan of Merger, as modified
only by such amendments as may be adopted by the sole shareholder of FNB prior
to the Effective Time. The Bylaws of FNB shall be in the form set forth in
Annex B to this Plan of Merger, as modified only by such amendments as may be
adopted by the sole shareholder of FNB prior to the Effective Time.
3.5 Officers, Employees and Directors. The officers and
employees of FNB immediately following the Effective Time shall include, among
others, the officers and employees of FNB and PSNB immediately prior to the
Effective Time. The Board of Directors of FNB immediately following the
Effective Time shall consist of the persons named in Annex C to this Plan of
Merger, including two persons from FNB's Board of
<PAGE> 54
Directors, each of whom shall serve until his respective successor is elected
and qualified or until a new Board of Directors is elected as provided in the
Articles of Association or Bylaws of FNB or as provided by law. All directors
of PSNB as of the Closing who do not become directors of FNB shall serve as
members of FNB's St. Lucie Advisory Board, and shall have such rights and
powers as are set out in FNB's Bylaws, as amended form time to time, and shall
receive fees for their service on such advisory board consistent with the fees
paid by FNB to members of its other advisory boards.
3.6 Capital Stock of FNB. The capital stock of FNB upon
completion of the Bank Merger shall be approximately $14.5 million, consisting
of 2,000,000 authorized shares and 1,450,000 issued and outstanding shares of
common stock of a par value of $10 per share. In addition, FNB shall have a
surplus of approximately $18 million and undivided profits, including capital
reserves, of approximately $38 million adjusted, however, for earnings and
expenses between December 31, 1996 and the Effective Time.
ARTICLE FOUR
EFFECTIVENESS
4.1 Conditions Precedent. Consummation of the Bank
Merger is conditioned upon (i) the Closing of the transactions contemplated by
the Parent Agreement and (ii) receipt of all approvals, consents, waivers, and
other clearances of all federal and state regulatory authorities having
jurisdiction over the transactions contemplated by this Plan of Merger.
4.2 Termination. This Plan of Merger may be terminated
at any time prior to the Effective Time by the parties hereto after termination
of the Parent Agreement in accordance with the provisions of Section 10.1
thereof.
4.3 Effectiveness. Subject to the satisfaction of all
requirements of applicable laws and regulations and the terms and conditions
set forth herein, the Bank Merger contemplated by this Plan of Merger shall be
and become effective at the time and on the date specified in the Certificate
of Merger.
ARTICLE FIVE
REPRESENTATIONS
5.1 Organization, Standing, and Power. PSNB is a bank
duly organized and validly existing under the Laws of the State of Florida, and
has the power and authority to carry on its business as now conducted and to
own, lease and operate its Assets.
5.2 Authority; No Breach By Agreement.
(a) PSNB has the corporate power and authority
necessary to execute, deliver, and perform its obligations under this Bank Plan
of Merger and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Bank Plan of Merger and the
consummation of the transactions contemplated herein have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
PSNB. Subject to such requisite shareholder approval, this Agreement
represents a legal, valid, and binding obligation of PSNB, enforceable against
PSNB in accordance with its terms (except in all cases as such enforceability
may be limited by applicable, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this
Bank Plan of Merger by PSNB, nor the consummation by PSNB of the transactions
contemplated hereby, nor compliance by PSNB with any of the
<PAGE> 55
provisions hereof, will except as specifically disclosed in the PSHC Disclosure
Memorandum delivered pursuant to the Parent Agreement (i) conflict with or
result in a breach of any provision of PSNB's Articles of Incorporation or
Bylaws, (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any PSHC
Company under, any Contract or Permit of any PSHC Company, or (iii) subject to
receipt of the requisite approvals referred to in Section 4.1 of this Bank Plan
of Merger, violate any Law or Order applicable to any PSHC Company or any of
their respective material Assets.
(c) Other than in connection or compliance with
the provisions of the Securities Laws, applicable state corporate and
securities Laws, and other than Consents required from Regulatory Authorities,
and other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit
plans, or under, and other than Consents, filings, or notifications which, if
not obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PSNB, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
PSNB of the Merger and the other transactions contemplated in this Bank Plan of
Merger.
5.3 Capital Stock.
(a) The authorized capital stock of PSNB consists
of 5,000,000 shares of PSNB Common Stock, of which 5,000,000 shares are issued
and outstanding as of the date of this Bank Plan of Merger and not more than
5,000,000 shares will be issued and outstanding at the Effective Time. All of
the issued and outstanding shares of capital stock of PSHC are duly and validly
issued and outstanding and are fully paid and nonassessable. None of the
outstanding shares of capital stock of PSNB has been issued in violation of any
preemptive rights of the current or past shareholders of PSNB.
(b) Except as set forth in Section 5.3(a) hereof,
there are no shares of capital stock or other equity securities of PSNB
outstanding and no outstanding Rights relating to the capital stock of PSNB.
ARTICLE SIX
MISCELLANEOUS
6.1 Amendment. To the extent permitted by law, this Plan
of Merger may be amended by a subsequent written instrument upon the approval
of the Boards of Directors of each of the parties hereto and upon execution of
such instrument by the duly authorized officers of each and by a majority of
the Boards of Directors of PSNB and FNB; provided that no amendment to this
Plan of Merger shall modify the requirements of regulatory approval as set
forth in Section 4.1 hereof.
6.2 Governing Law. This Plan of Merger shall be governed
by and construed in accordance with the laws of the State of Florida, except to
the extent that the federal laws of the United States of America apply to
consummation of the Bank Merger.
6.3 Headings. The headings in this Plan of Merger are
for convenience only and shall not affect the construction or interpretation of
this Plan of Merger.
6.4 Counterparts. This Plan of Merger may be executed in
two or more counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute one and the same instrument.
<PAGE> 56
IN WITNESS WHEREOF, PSNB and FNB has caused this Plan of Merger to be
executed on its behalf by its officers thereunto duly authorized and by a
majority of its Board of Directors, all as of the day and year first above
written.
ATTEST: FIRST NATIONAL BANK & TRUST COMPANY OF THE
TREASURE COAST
By: By:
------------------------- ------------------------------------
Title: Title:
[BANK SEAL]
ATTEST: PORT ST. LUCIE NATIONAL BANK
By: By:
------------------------- ------------------------------------
Title: Title:
[BANK SEAL]
<PAGE> 57
EXHIBIT 2
TO
AGREEMENT AND
PLAN OF MERGER
FORM OF AFFILIATE AGREEMENT
Seacoast Banking Corporation of Florida
P.O. Box 9012
Stuart, Florida 34995-9012
Attention: Dennis S. Hudson, III
Executive Vice President
Gentlemen:
The undersigned is a shareholder of Port St. Lucie National Bank
Holding Corp. ("PSHC"), a corporation organized and existing under the laws of
the State of Florida, and will become a shareholder of Seacoast Banking
Corporation of Florida ("Seacoast"), a corporation organized and existing under
the laws of the State of Florida, pursuant to the transactions described in the
Agreement and Plan of Merger, dated as of February 19, 1997 (the "Agreement"),
by and between Seacoast and PSHC. Under the terms of the Agreement, PSHC will
be merged into and with Seacoast (the "Merger"), and the shares of the $0.01
par value common stock of PSHC ("PSHC Common Stock") will be converted into and
exchanged for shares of the $0.10 par value Class A common stock of Seacoast
("Seacoast Common Stock"). This Affiliate Agreement represents an agreement
between the undersigned and Seacoast regarding certain rights and obligations
of the undersigned in connection with the shares of Seacoast to be received by
the undersigned as a result of the Merger.
In consideration of the Merger and the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are acknowledged, the undersigned and Seacoast hereby agree as
follows:
1. Affiliate Status. The undersigned understands and agrees that
as to PSHC he is an "affiliate" under Rule 145(c) as defined in Rule 405 of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended ("1933 Act"), and the undersigned
anticipates that he will be such an "affiliate" at the time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees
that he will not sell, transfer, or otherwise dispose of his interests in, or
reduce his risk relative to, any of the shares of Seacoast Common Stock into
which his shares of PSHC Common Stock are converted upon consummation of the
Merger until such time that the requirements of SEC Accounting Series Release
Nos. 130 and 135 ("ASR 130 and 135") have been met. The undersigned
understands that ASR 130 and 135 relate to publication of financial results of
post-Merger combined operations of Seacoast and PSHC. Seacoast agrees that it
will publish such results within 45 days after the end of the first fiscal
quarter of Seacoast containing the required period of post-Merger combined
operations and that it will notify the undersigned promptly following such
publication.
3. Covenants and Warranties of Undersigned. The undersigned
represents, warrants and agrees that:
(a) The Seacoast Common Stock received by the undersigned as a
result of the Merger will be taken for his own account and not for
others, directly or indirectly, in whole or in part.
(b) Seacoast has informed the undersigned that any distribution by
the undersigned of Seacoast Common Stock has not been registered under
the 1933 Act and that shares of Seacoast Common Stock received pursuant
to the Merger can only be sold by the undersigned (1) following
registration under the 1933 Act, or (2) in conformity with the volume
and other requirements of Rule 145(d) promulgated by the SEC as the same
now exist or may hereafter be amended, or (3) to the extent some other
exemption from registration under the 1933 Act might be available. The
undersigned understands that Seacoast is under no
<PAGE> 58
obligation to file a registration statement with the SEC covering the
disposition of the undersigned's shares of Seacoast Common Stock or to
take any other action necessary to make compliance with an exemption
from such registration available.
(c) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned
pursuant to Section 8 hereof to, have all shares of PSHC Common Stock
beneficially owned by the undersigned registered in the name of the
undersigned or in the name of any bank, broker-dealer, or clearinghouse
or nominee of any such bank, broker-dealer or clearinghouse, subject in
all cases to the restrictions contained herein and not for the purposes
of, or in any manner otherwise, changing the beneficial ownership of
such shares, reducing the undersigned's risk of ownership of such
shares, or avoiding the purposes of this Agreement. The undersigned
shall promptly notify any such bank, broker-dealer, clearinghouse or
nominee of the restrictions imposed hereby by providing such persons a
copy of this Agreement.
(d) During the 30 days immediately preceding the Effective Time of
the Merger, the undersigned has not sold, transferred, or otherwise
disposed of his interests in, or reduced his risk relative to, any of
the shares of PSHC Common Stock beneficially owned by the undersigned as
of the record date for determination of shareholders entitled to vote at
the Shareholders' Meeting of PSHC held to approve the Merger.
(e) The undersigned is aware that Seacoast intends to treat the
Merger as a tax-free reorganization under Section 368 of the Internal
Revenue Code ("Code") for federal income tax purposes. The undersigned
agrees to treat the transaction in the same manner as Seacoast for
federal income tax purposes. The undersigned acknowledges that Section
1.368-1(b) of the Income Tax Regulations requires "continuity of
interest" in order for the Merger to be treated as tax-free under
Section 368 of the Code. This requirement is satisfied if, taking into
account those PSHC shareholders who receive cash in exchange for their
stock, who receive cash in lieu of fractional shares, or who dissent
from the Merger, there is no plan or intention on the part of the PSHC
shareholders to sell or otherwise dispose of the Seacoast Common Stock
to be received in the Merger that will reduce such shareholders'
ownership to a number of shares having, in the aggregate, a value at the
time of the merger of less than 50% of the total fair market value of
the PSHC Common Stock outstanding immediately prior to the Merger. The
undersigned has no prearrangement, plan or intention to sell or
otherwise dispose of an amount of his Seacoast Common Stock to be
received in the Merger which would cause the foregoing requirement not
to be satisfied.
4. Restrictions on Transfer. The undersigned understands and
agrees that stop transfer instructions with respect to the shares of Seacoast
Common Stock received by the undersigned pursuant to the Merger will be given
to Seacoast's Transfer Agent and that there will be placed on the certificates
for such shares, or shares issued in substitution thereof, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO A
BUSINESS COMBINATION WHICH IS ACCOUNTED FOR AS A "POOLING OF INTERESTS"
AND MAY NOT BE SOLD, NOR MAY THE OWNER THEREOF REDUCE HIS RISKS RELATIVE
THERETO IN ANY WAY, UNTIL SUCH TIME AS SEACOAST BANKING CORPORATION OF
FLORIDA ("SEACOAST") HAS PUBLISHED THE FINANCIAL RESULTS COVERING AT
LEAST 30 DAYS OF COMBINED OPERATIONS AFTER THE EFFECTIVE DATE OF THE
MERGER THROUGH WHICH THE BUSINESS COMBINATION WAS EFFECTED. IN
ADDITION, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT OR UNLESS (1) COVERED BY AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, (2) IN ACCORDANCE WITH (I) RULE 145(D) (IN THE CASE OF SHARES
ISSUED TO AN INDIVIDUAL WHO IS NOT AN AFFILIATE OF SEACOAST) OR (II)
RULE 144 (IN THE CASE OF SHARES ISSUED TO AN INDIVIDUAL WHO IS AN
AFFILIATE OF SEACOAST) OF THE RULES AND REGULATIONS OF SUCH ACT, OR (3)
IN ACCORDANCE WITH A
<PAGE> 59
LEGAL OPINION SATISFACTORY TO COUNSEL FOR SEACOAST THAT SUCH SALE OR
TRANSFER IS OTHERWISE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT."
Such legend will also be placed on any certificate representing Seacoast
securities issued subsequent to the original issuance of the Seacoast Common
Stock pursuant to the Merger as a result of any transfer of such shares or any
stock dividend, stock split, or other recapitalization as long as the Seacoast
Common Stock issued to the undersigned pursuant to the Merger has not been
transferred in such manner to justify the removal of the legend therefrom.
Upon the request of the undersigned, Seacoast shall cause the certificates
representing the shares of Seacoast Common Stock issued to the undersigned in
connection with the Merger to be reissued free of any legend relating to
restrictions on transfer by virtue of ASR 130 and 135 as soon as practicable
after the requirements of ASR 130 and 135 have been met. In addition, if the
provisions of Rules 144 and 145 are amended to eliminate restrictions
applicable to the Seacoast Common Stock received by the undersigned pursuant to
the Merger, or at the expiration of the restrictive period set forth in Rule
145(d), Seacoast, upon the request of the undersigned, will cause the
certificates representing the shares of Seacoast Common Stock issued to the
undersigned in connection with the Merger to be reissued free of any legend
relating to the restrictions set forth in Rules 144 and 145(d) upon receipt by
Seacoast of an opinion of its counsel to the effect that such legend may be
removed.
5. Understanding of Restrictions on Dispositions. The
undersigned has carefully read the Agreement and this Affiliate Agreement and
discussed their requirements and effects upon his ability to sell, transfer, or
otherwise dispose of the shares of Seacoast Common Stock received by the
undersigned, to the extent he believes necessary, with his counsel or counsel
for PSHC.
6. Filing of Reports by Seacoast. Seacoast agrees, for a period
of three years after the effective date of the Merger, to file on a timely
basis all reports required to be filed by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, so that the public information
provisions of Rule 145(d) promulgated by the SEC as the same are presently in
effect will be available to the undersigned in the event the undersigned
desires to transfer any shares of Seacoast Common Stock issued to the
undersigned pursuant to the Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to
sell or otherwise transfer the shares of Seacoast Common Stock received by him
in connection with the Merger at any time during the restrictive period set
forth in Rule 145(d), the undersigned will provide the necessary representation
letter to the transfer agent for Seacoast Common Stock together with such
additional information as the transfer agent may reasonably request. If
Seacoast's counsel concludes that such proposed sale or transfer complies with
the requirements of Rule 145(d), Seacoast shall cause such counsel to provide
such opinions as may be necessary to Seacoast's Transfer Agent so that the
undersigned may complete the proposed sale or transfer.
8. Acknowledgments and Further Agreements. The undersigned
recognizes and agrees that the foregoing provisions also apply to all shares of
the capital stock of PSHC and Seacoast that are deemed to be beneficially owned
by the undersigned pursuant to applicable federal securities laws, which the
undersigned agrees may include, without limitation, shares owned or held in the
name of (i) the undersigned's spouse, (ii) any relative of the undersigned or
of the undersigned's spouse who has the same home as the undersigned, (iii) any
trust or estate in which the undersigned, the undersigned's spouse, and any
such relative collectively own at least a 10% beneficial interest or of which
any of the foregoing serves as trustee, executor, or in any similar capacity,
and (iv) any corporation or other organization in which the undersigned, the
undersigned's spouse and any such relative collectively own at least 10% of any
class of equity securities or of the equity interest. The undersigned further
recognizes that, in the event that the undersigned is a director or officer of
Seacoast or becomes a director or officer of Seacoast upon consummation of the
Merger, among other things, any sale of Seacoast Common Stock by the
undersigned within a period of less than six months following the effective
time of the Merger may subject the undersigned to liability pursuant to Section
16(b) of the Securities Exchange Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete
agreement between Seacoast and the undersigned concerning the subject matter
hereof. Any notice required to be sent to any party hereunder shall be sent by
registered or certified mail, return receipt requested, using the addresses set
forth herein or such other
<PAGE> 60
address as shall be furnished in writing by the parties. This Affiliate
Agreement shall be governed by the laws of the State of Florida.
This Affiliate Agreement is executed as of the 19th day of February,
1997.
Very truly yours,
---------------------------
Signature
---------------------------
Print Name
---------------------------
---------------------------
---------------------------
Address
[add below the signatures of all registered owners
of shares deemed beneficially owned by the affiliate]
---------------------------
Name:
---------------------------
Name:
---------------------------
Name:
AGREED TO AND ACCEPTED as of
February ___, 1997
SEACOAST BANKING CORPORATION OF FLORIDA
By:
--------------------------------------
<PAGE> 61
EXHIBIT 4
TO
AGREEMENT AND
PLAN OF MERGER
FORM OF DIRECTOR'S AGREEMENT
THIS DIRECTOR'S AGREEMENT ("Agreement") is made and entered
into as of the 19th day of February, 1997, by and between the undersigned,
______________________, a resident of ______________, Florida, and Seacoast
Banking Corporation of Florida, a corporation organized and existing under the
laws of the State of Florida ("Seacoast").
On even date herewith, Seacoast and Port St. Lucie National
Bank Holding Corp., a corporation organized and existing under the laws of the
State of Florida ("PSHC"), have entered into an Agreement and Plan of Merger
(the "Merger Agreement"). The Merger Agreement generally provides for the
merger of PSHC with and into Seacoast ("Merger"), and the conversion of the
issued and outstanding shares of the $0.01 par value common stock of PSHC
("PSHC Common Stock") into shares of the $0.10 par value Class A common stock
of Seacoast. The transactions contemplated by the Merger Agreement are subject
to the affirmative vote of the shareholders of PSHC, the receipt of certain
regulatory approvals and the satisfaction of other conditions.
The undersigned is a member of the Board of Directors of PSHC
and is the owner of _________ shares of PSHC Common Stock and has rights by
option, warrants and otherwise to acquire _________ additional shares of PSHC
Common Stock ("Shares"). To induce Seacoast to enter into the Merger
Agreement, the undersigned is entering into this Agreement with Seacoast to set
forth certain terms and conditions governing the actions to be taken by the
undersigned with respect to the Shares until consummation of the Merger.
NOW, THEREFORE, in consideration of the transactions
contemplated by the Merger Agreement and the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties, intending to be legally
bound, agree as follows:
1. Without the prior written consent of Seacoast, the
undersigned shall not transfer, sell, assign, convey or encumber any of the
Shares during the term of this Agreement, except to Seacoast pursuant to the
terms of the Merger Agreement. Without limiting the generality of the
foregoing, the undersigned shall not grant to any party any option or right to
purchase the Shares or any interest therein. Further, except with respect to
the Merger, the undersigned shall not approve or ratify any agreement or
contract pursuant to which the Shares would be transferred to any other party
as a result of a consolidation, merger, reorganization or acquisition.
2. The undersigned intends to, and will, vote all of the
Shares beneficially owned by him (and with respect to which he has voting
power) in favor of the Merger. The undersigned will also recommend that the
shareholders of PSHC approve the Merger when the same is presented to the
shareholders for consideration in properly prepared proxy materials, subject
only to the undersigned's legal obligations (if any) as a director of PSHC, and
will use his or her best efforts to effect consummation of the Merger and the
other transactions contemplated by the Merger Agreement. Further, the
undersigned intends to, and will, surrender the certificate or certificates
representing his or her Shares which are beneficially owned by him (and with
respect to which he has sole dispositive power) to Seacoast upon consummation
of the Merger as described in the Merger Agreement.
3. The undersigned covenants and agrees with Seacoast
that for a period of two years after the effective time of the Merger, the
undersigned shall not, without the prior written consent of Seacoast, directly
or indirectly serve as a consultant to, serve as a management official of, or
be or become a major shareholder of any Depository Institution having an office
in Indian River, St. Lucie and/or Martin Counties, Florida. It is expressly
understood that the covenants contained in this paragraph 3 do not apply to (i)
"management official" positions which the undersigned holds with financial
institutions other than PSHC as of the date of this Agreement, (ii) securities
holdings which cause the undersigned to be deemed a major shareholder of a
Depository Institution other than PSHC as of the date of this Agreement, or
(iii) advisory relationships with a Depository Institution which the
undersigned has as of the date of this Agreement or may have after the date
hereof solely in the capacity
<PAGE> 62
as legal counsel. For the purposes of the covenants contained in this paragraph
3, the following terms shall have the following respective meanings:
(a) The term "management official" shall refer to service
of any type which gives the undersigned the authority to participate,
directly or indirectly, in policy-making functions. This includes, but
is not limited to, service as an organizer, officer, director, or
advisory director of a Depository Institution. It is expressly
understood and agreed that the undersigned may be deemed a management
official of the Depository Institution whether or not he holds any
official, elected, or appointed position with such Depository
Institution.
(b) The term "Depository Institution" shall refer to any
person which engages in the business of making loans and taking deposits
or which owns or controls, or is under common control with, a company
which engages in such business.
(c) The term "major shareholder" shall refer to the
beneficial ownership of 2% or more of any class of voting securities of
such company or the ownership of 2% of the total equity interest in such
company, however denominated.
4. The undersigned waives and releases any claims and/or
rights he may have in or under the PSHC directors deferred compensation plan
(the "Deferred Plan"), except for the delivery to the undersigned of any cash
surrender value of any insurance policies held with respect to the
undersigned's accrued benefits under the Deferred Plan, net of any
cancellation, liquidation or surrender charges or fees.
5. The undersigned acknowledges and agrees that Seacoast
could not be made whole by monetary damages in the event of any default by the
undersigned of the terms and conditions set forth in this Agreement. It is
accordingly agreed and understood that Seacoast in addition to any other remedy
which it may have at law or in equity, shall be entitled to an injunction,
injunctions or a restraining order or orders to prevent breaches of this
Agreement and specifically to enforce the terms and provisions hereof in any
action instituted in any court of the United States or in any state having
appropriate jurisdiction.
6. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
7. Except with respect to the covenants contained in
paragraph 3, which shall be governed by the terms set forth therein and shall
be effective only upon consummation of the Merger, the covenants and
obligations set forth in this Agreement shall expire and be of no further force
and effect when the Merger Agreement has been terminated.
<PAGE> 63
EXHIBIT 5
TO
AGREEMENT AND
PLAN OF MERGER
FORM OF CLAIMS LETTER
February 19, 1997
Seacoast Banking Corporation of Florida
P.O. Box 9012
Stuart, Florida 34995-9012
Attention: Dennis S. Hudson, III
Executive Vice President
Gentlemen:
This letter is delivered pursuant to Section 9.2(i) of the Agreement
and Plan of Merger ("Merger Agreement") ,
dated as of February 19,1997 by and Seacoast Banking Corporation of Florida
("Seacoast") and Port St. Lucie National Bank Holding Corp. ("PSHC")
Concerning claims which the undersigned may have against PSHC,
Seacoast or any of their respective Subsidiaries in my capacity as an officer,
director, employee, partner, Controlling Person or Affiliate of PSHC or its
Subsidiaries, and in consideration of the premises, and the mutual covenants
contained herein and in the Merger Agreement and the mutual benefits to be
derived hereunder and thereunder, and other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the undersigned,
intending to be legally bound, I hereby affirm and agree to the following in
each and every such capacity of the undersigned:
1. CLAIMS. The undersigned does not have, and is not aware of,
any claims it might have against Seacoast, PSHC or any of their respective
Subsidiaries, except for (i) compensation for services rendered that have
accrued but not yet been paid in the ordinary course of business consistent
with past practice, (ii) contract rights, under loan commitments and agreements
between the undersigned and PSHC or its subsidiaries, specifically limited to
possible future advances in accordance with the terms of such commitments or
agreements, (iii) certificates of deposits, (iv) payment obligations under the
PSHC Directors Deferred Compensation Plan, (if any) consistent with any subject
to the terms and conditions of the Merger Agreement and the undersigned's
Director's Agreement with Seacoast (if applicable), and (v) obligations of any
PSHC Entity under any lease agreement between Harold H. Goldman and PSHC or
its subsidiaries consistent with Section 4 of the Director's Agreement entered
into by the undersigned.
2. RELEASES. The undersigned hereby releases and forever
discharges Seacoast, PSHC, and their respective directors, officers, employees,
agents, attorneys, representatives, Subsidiaries, partners, affiliates,
controlling persons and insurers, and its successors and assigns, and each of
them (hereinafter, individually and collectively, the "Releasees") of and from
any and all liabilities, claims, demands, debts, accounts, covenants,
agreements, obligations, costs, expenses, actions or causes of action of every
nature, character or description, now accrued or which may hereafter accrue,
without limitation and whether or not in law, equity or otherwise, based in
whole or in part on any facts, conduct, activities, transactions, events or
occurrences known or unknown, matured or unmatured, contingent or otherwise,
which have or allegedly have existed, occurred, happened, arisen or transpired
from the beginning of time to the date of the closing of the transactions
contemplated by the Merger Agreement, except for (i) compensation for services
rendered that have accrued but not yet been paid in the ordinary course of
business consistent with past practice or (ii) contract rights, under loan
commitments and agreements between the undersigned and PSHC or its subsidiaries
(collectively, the "Claims"). The undersigned
<PAGE> 64
represents, warrants and covenants that no Claim released herein has been
assigned, expressly, impliedly, by operation of law or otherwise, and that all
Claims released hereby are owned solely by the undersigned, which has the sole
authority to release them.
3. INDEMNITY. The undersigned shall indemnify and hold harmless,
to the fullest extent permitted by law, the Releasees from and against any and
all Claims which are released hereby and all claims, damages, losses,
liabilities, actions and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, arising from, out of, or in connection with
the performance or nonperformance of any obligation of the undersigned
hereunder, or any action or proceeding in respect thereof.
4. FORBEARANCE. The undersigned shall forever refrain and
forebear from commencing, instituting or prosecuting any lawsuit, action, claim
or proceeding before or in any court, regulatory, governmental, arbitral or
other authority to collect or enforce any Claims which are released and
discharged hereby.
5. MISCELLANEOUS.
(a) This Release shall be governed and construed in
accordance with the laws of the State of Florida (other than the choice of law
provisions thereof).
(b) This Release contains the entire agreement between the
parties with respect to the Claims released hereby, and such Release supersedes
all prior agreements, arrangement or understandings (written or otherwise) with
respect to such Claims and no representation or warranty, oral or written,
express or implied, has been made by or relied upon by any party hereto, except
as expressly contained herein, in the Merger Agreement.
(c) This Release shall be binding upon and inure to the
benefit of the undersigned and the Releasees and their respective successors
and assigns.
(d) This Release may not be modified, amended or rescinded
except by the written agreement of the undersigned and the Releasees, it being
the express understanding of the undersigned and the Releasees that no term
hereof may be waived by the action, inaction or course of delaying by or
between the undersigned or the Releasees, except in strict accordance with this
paragraph, and further that the waiver of any breach of this Release shall not
constitute or be construed as the waiver of any other breach of the terms
hereof.
(e) The undersigned represents, warrants and covenants that
it is fully aware of its rights to discuss any and all aspects of this matter
with any attorney chosen by it, and that it has carefully read and fully
understands all the provisions of this Release, and that it is voluntarily
entering into this Release.
(f) This Release is effective when signed by the undersigned
and delivered to Seacoast and acknowledged by Seacoast, and its operation to
extinguish all of the Claims released hereby is not dependent on or affected by
the performance or non-performance of any future act by the undersigned or the
Releasees.
Unless otherwise defined herein, all capitalized terms shall have the
same meanings as provided in the Merger Agreement.
Sincerely,
-----------------------------------------------------
Signature of Officer, Director, or Controlling Person
<PAGE> 65
On behalf of Seacoast, the undersigned thereunto duly authorized,
acknowledges receipt of this letter as of __________________, 1997.
Seacoast Banking Corporation of Florida
By:
--------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 23
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report incorporated by reference in this Form 10-K of
Seacoast Banking Corporation of Florida, into the Company's previously filed
registration statements on Form S-8 (File Nos. 33-61925, 33-46504, 33-25267 and
33-22846).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Miami, Florida,
March 24, 1997.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 24,340
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 76,250
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 159,133
<INVESTMENTS-CARRYING> 49,667
<INVESTMENTS-MARKET> 50,555
<LOANS> 471,597
<ALLOWANCE> 4,286
<TOTAL-ASSETS> 808,408
<DEPOSITS> 692,757
<SHORT-TERM> 45,088
<LIABILITIES-OTHER> 3,794
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0
0
<COMMON> 429
<OTHER-SE> 66,340
<TOTAL-LIABILITIES-AND-EQUITY> 808,408
<INTEREST-LOAN> 37,655
<INTEREST-INVEST> 12,875
<INTEREST-OTHER> 1,292
<INTEREST-TOTAL> 51,822
<INTEREST-DEPOSIT> 19,976
<INTEREST-EXPENSE> 20,720
<INTEREST-INCOME-NET> 31,102
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 72
<EXPENSE-OTHER> 27,517
<INCOME-PRETAX> 11,921
<INCOME-PRE-EXTRAORDINARY> 11,921
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,609
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.77
<YIELD-ACTUAL> 4.63
<LOANS-NON> 1,535
<LOANS-PAST> 59
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 4,066
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