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, 1997 No. 0-13660
SEACOAST BANKING CORPORATION OF FLORIDA
(Exact name of registrant as specified in its charter)
Florida 59-2260678
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
815 Colorado Avenue, Stuart, FL 34994
(Address of principal executive offices) (Zip code)
(561) 287-4000
Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Class A Common Stock, Par Value $.10
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by 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 13, 1998:
Class A Common Stock, $.10 par value - $137,719,952 based upon the closing sale
price on February 13, 1998, 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 - $3,037,387 based upon the closing sale
price on February 13, 1998, 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 13, 1998:
Class A Common Stock, $.10 Par Value - 4,779,544 shares
Class B Common Stock, $.10 Par Value - 377,273 shares
<PAGE>
Documents Incorporated by Reference:
1. Portions of the registrant's 1998 Proxy Statement for the Annual Meeting of
Shareholders to be held April 23, 1998 ("1998 Proxy Statement") are
incorporated by reference into Part III.
<PAGE>
FORM 10-K CROSS-REFERENCE INDEX
Part I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a
Vote of Security-Holders
Part II
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 7A. Market Risk
Item 8. Financial Statements and
Supplementary Data
Item 9. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure
Part III
Item 10. Directors and Executive Officers
of the Registrant
Item 11. Executive Compensation
<PAGE>
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Item 13. Certain Relationships and Related
Transactions
Part IV
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, 1997 and 1996
Consolidated Statements of Income
for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Shareholders'
Equity for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Cash Flows
for the years ended December 31,
1997, 1996, and 1995
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
<PAGE>
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 (the "Exchange Act", p. 8) 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
("Seacoast" or 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; the possible
effects of the Year 2000 problem on the Company, including such problems at the
Company's vendors, counter-parties and customers; 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
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Item 1. Business
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General
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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 (the
"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.
<PAGE>
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,
five in Vero Beach, one in Sebastian, five in Port St. Lucie, and one in Ft.
Pierce.
Most of the banking offices have one or more Automatic Teller Machines (ATM)
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 35,000 locations in twenty-one 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 or deposit account balances, and to transfer funds between linked
accounts, make loan payments, as well as 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., Monday through Friday, 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.
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, but 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, 1997, Seacoast and its subsidiaries employed 410 full-time
equivalent employees.
<PAGE>
Expansion of Business
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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 primarily through the
addition of branches, including the acquisition of a thrift branch in St. Lucie
County.
More recently, Seacoast has from time to time considered acquisitions of other
depository institutions or corporations engaged in bank-related activities. On
September 20, 1991, the Bank acquired from the Resolution Trust Corporation (the
"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 $230,000 remains outstanding as an
intangible asset at December 31, 1997). Following the acquisition, the Bank
temporarily rented all of 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 that it did not intend to acquire in order 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 it's 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, 1997, intangible assets resulting from this acquisition include
goodwill of $3,582,000 and core deposit premium of $1,410,000. 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 to operate
an office location owned by American Bank in southern Martin County. See "Item
2. Properties".
On May 30, 1997, Seacoast acquired Port St. Lucie National Bank Holding Corp.
("PSHC") pursuant to which Seacoast issued and exchanged Class A Common Stock
for all of the outstanding shares of PSHC common stock, warrants and options to
purchase common stock of PSHC. PSHC merged with and into Seacoast and PSHC's
subsidiary bank, Port St. Lucie National Bank, merged with and into the Bank.
The transaction, which had a value of approximately $26 million, was accounted
for under the pooling-of-interests method for business combinations. As of May
30, 1997, PSHC had total consolidated assets of approximately $130 million,
loans of $94 million and deposits of $116 million.
Florida law permits state-wide branching and 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. In May, June and
July 1997, three additional branch offices were opened in Indian River County.
See "Item 2. Properties".
<PAGE>
Competition
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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, 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
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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
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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.
<PAGE>
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 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 Branching
Act ("the Florida Branching Act"), which became 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
<PAGE>
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 reduced the notice and application requirements
applicable to bank and nonbank acquisitions and de novo expansion by
well-capitalized and well-managed bank holding companies; expanded the list of
nonbanking activities permitted under Regulation Y; reduced certain limitations
on previously permitted activities; and amended Federal Reserve anti-tying
restrictions to allow banks greater flexibility to package products and services
with their affiliates.
Bank and Bank Subsidiary Regulation Generally
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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 present Florida law, the Bank 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.
The OCC recently 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.
<PAGE>
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 exchange 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. As a member of the National Association of Securities Dealers, Inc.,
it also is subject to examination and supervision of its operations and
accounts.
Community Reinvestment Act
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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.
<PAGE>
Under CRA regulations which became effective January 1, 1996, the process-based
CRA assessment factors were 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.
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.
<PAGE>
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
November 1997, 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 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
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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 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 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 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, 1997, the consolidated capital ratios of the Company and the
Bank were as follows:
Regulatory
Minimum Company Bank
Tier 1 capital ratio.. 4.0% 13.7% 12.7%
Total Capital ratio... 8.0% 14.7% 13.6%
Leverage ratio........ 3.0-5.0% 8.4% 7.8%
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.
<PAGE>
Because the Company and the Bank exceed applicable 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 raise capital requirements
applicable to banking organizations, including a proposal 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 systems, 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 real estate lending, "truth in savings" provisions, the
requirement that a depository institution give 90 days prior notice to customers
and regulatory authorities 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.
<PAGE>
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 it's 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 premiums ranged from zero to $.27 for every $100 of deposits. Prior to
January 1, 1996, the 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 and, if applicable,
state regulators 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 are 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, 1997, and 1996, the Bank
paid $136,000 and $634,000, 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 1998.
<PAGE>
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 1998 have
been set at 1.25 basis points for BIF-assessable deposits and 6.25 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.
The Interstate Banking Act also directed the Secretary of the Treasury to take a
broad look at the strengths and weaknesses of the United States' financial
services system. In June 1997, the Treasury Department proposed legislation to
eliminate what it deemed outmoded barriers to competition among financial
services providers. On November 17, 1997, the United States Department of the
Treasury released its study "American Finance for the 21st Century" which
considered changes in the financial services industry during the next 10 years
and beyond and reviewed the adequacy of existing statutes and legislation.
<PAGE>
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 the 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
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.
New Accounting Pronouncements
- -----------------------------
In June 1997, the FASB issued Statements of Financial Accounting Standards
Number 130, Comprehensive Income ("SFAS 130"), and Number 131, Disclosures about
Segments of an Enterprise ("SFAS 131"). The Company is required to adopt these
statements in 1998. SFAS 130 establishes standards for reporting comprehensive
income and SFAS 131 establishes standards for reporting information about
operating segments. Management does not believe that the adoption of SFAS 130
and 131 will have a significant impact on the Company's financial statements or
related disclosures.
<PAGE>
The Year 2000 Issue
- -------------------
The Company has been evaluating its own systems, and does not believe that it
has material exposure to the Year 2000 issue with respect to its own information
systems. As part of its assessment, Company management has been evaluating Year
2000 compliance by its vendors, and to date has not discovered any Year 2000
problem with significant counter-parties that it believes are reasonably likely
to have a material adverse effect upon the Company. However, the Company has not
begun evaluating the effects of the Year 2000 problem on its loan and deposit
customers, and no assurance can be given that potential Year 2000 problems at
those with whom the Company does business will not occur, and if these occur,
consequences to the Company will not be material. Some of the Company's
technology systems have already been determined to be Year 2000 ready with
testing planned for other systems in 1998. The Company is in the process of
outsourcing its core processing systems to a third party with whom it is working
with a view to preventing any material Year 2000 problems. The costs related to
the conversion are expensed as incurred and are not expected to have a material
impact on future results of operations. The new third party core processing
vendor is expected to be Year 2000 ready by the end of 1998.
Management believes that its plans for dealing with the Year 2000 issue will
result in timely and adequate modifications of systems and technology.
Ultimately, the potential impact of the Year 2000 issue will depend not only on
the corrective measures the Company undertakes, but also on the way in which the
Year 2000 issue is addressed by governmental agencies, businesses, and other
entities who provide data to, or receive data from, the Company, or whose
financial condition or operational capability is important to the Company as
borrowers, vendors, customers or investment opportunities. Therefore,
communications with these parties have commenced to heighten their awareness of
the Year 2000 issue. Over the next two years, the plans of such third parties to
address the Year 2000 issue will be monitored and any identified impact on the
Company will be evaluated.
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, 1997, the net carrying value of branch offices (excluding the
main office) was approximately $9.2 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 its original location in 1978, is a 2,400 square
foot building leased by 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.
<PAGE>
COVE ROAD, opened in late 1983, is conveniently located close to housing
developments in the residential areas south of Stuart known as Port Salerno and
Hobe Sound. South Branch Building, Inc., a subsidiary of the Bank, 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
was added in early 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 square feet to 4,000
square feet and is under a 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 originally opened October 28, 1985 and occupied 1,700 square feet of
leased space in the Rivergate Shopping Center, Port St. Lucie, Florida. The Bank
moved to larger facilities in the shopping center in April of 1999 under a long
term lease agreement. Furniture and bank equipment located in the prior
facilities were moved to the new facility which occupies 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
presently utilized by local community groups for meetings.
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. The property consists of a 2,800 square foot building which houses
four drive-in lanes, a walk-up ATM and various bank equipment, all of which are
owned by the Bank and 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 the addition of three drive-in lanes and a walk-up ATM, all
of which are owned by the Bank. A second location, acquired in the merger with
PSHC, and in close proximity to this location, was closed on June 1, 1997 and
subsequently sold in September 1997.
HOBE SOUND, acquired from the RTC 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.
<PAGE>
FORT PIERCE, acquired from the RTC 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 RTC 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 RTC 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 RTC 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, opened in February 1993, consists of 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 were leased during 1996. This facility has 2 drive-in teller lanes, a
drive-up ATM, and furniture and equipment, all owned by the Bank.
SANDHILL COVE, opened in September 1993, is in an upscale life-care retirement
community. The 135 square foot office is located within the community facilities
which are located on a 36-acre development in Palm City, Florida. This community
contains approximately 168 private residences.
ST. LUCIE WEST, opened in November 1994, was in a 3,600 square foot building
located at 1320 S.W. St. Lucie Blvd, Port St. Lucie. As a result of the PSHC
acquisition, this facility was closed in June 1997 and the property was sold in
September 1997. On June 1, 1997, the Bank moved its St. Lucie West operations to
the Renar Centre (previously occupied by PSHC). The Bank leases 4,320 square
feet on the first floor of this facility and 2,468 square feet on the second
floor. The facility includes three drive-in teller lanes, a drive-up ATM, and
furniture and equipment.
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.
<PAGE>
SEBASTIAN, opened in May 1996, is located within a 174,000 square foot WalMart
Superstore 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.
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.
U.S. 1 AND PORT ST. LUCIE BOULEVARD office opened as a Bank location on June 1,
1997, upon the merger with PSHC. At the date of the merger, the leased space
consisted of 5,188 square feet on the first floor and 1,200 square feet on the
second floor. In October 1997, 1,800 square feet of the leased space on the
first floor and 1,200 square feet of leased space on the second floor were
assigned to another tenant. The present space leased by the Bank totals 3,388
square feet. The facility has two drive-in lanes, a walk-up ATM, and furniture
and equipment, all owned by the Bank.
SOUTH VERO SQUARE opened in May 1997 in a 3,150 quare foot building owned by the
Bank on South U.S. 1 in Vero Beach. The facility includes three drive-in teller
lanes, a drive-up ATM, and furniture and equipment, all owned by the Bank.
OAK POINT opened in June 1997. It occupies 12,000 square feet of leased space on
the first and second floor of a 19,700 square foot 3-story building in Indian
River County. The office is 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. Approximately 2,000 square feet of the second
floor is sublet to tenants.
ROUTE 60 VERO opened in July 1997. Similar to the Sebastian office, this
facility is housed in a WalMart Superstore in western Vero Beach in Indian River
County. The branch occupies 750 square feet of leased space and includes a
walk-up ATM.
In 1998, one new branch in Indian River County will open:
SEBASTIAN WEST will open on March 2, 1998 in a 3,150 square foot building owned
by the Bank. It is located at the intersection of Fellsmere Road and Roseland
Road in Sebastian. The facility will include three drive-in teller lanes, a
drive-up ATM, and furniture and equipment, all owned by the Bank.
<PAGE>
For additional information, refer to Notes F and I of the Notes to Consolidated
Financial Statements in the 1997 Annual Report of Seacoast incorporated herein
by reference pursuant to Item 8 of
this document.
Item 3. Legal Proceedings
- --------------------------
The Company and its subsidiaries, because of the nature of their business, are
at times subject to numerous legal actions, threatened or filed, 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>
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 ("Nasdaq National Market"). There is no
established public trading market for the Class B Common Stock of Seacoast. As
of February 13, 1998, there were approximately 1,257 record holders of the Class
A Common Stock and 89 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 under the symbol "SBCFA". The following table sets
forth the high, low and last 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.
Sale Price Per Annual Dividends
Share of Seacoast Declared Per Share
Class A Stock of Seacoast Class
A Stock
High Low
1997
First Quarter.......... 29.50 25.625 0.20
Second Quarter......... 30.50 24.625 0.20
Third Quarter.......... 38.50 29.75 0.20
Fourth Quarter......... 39.50 34.25 0.22
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
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.
<PAGE>
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. In 1997, cash dividends of $.82 per share of Class A Common Stock and $.74
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. 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>
Item 6. Selected Financial Data
- --------------------------------
Selected financial data is incorporated herein by reference under the caption
"Financial Highlights" on page 4 of the 1997 Annual Report. See Exhibit 13.
Item 7. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations, under the caption "Financial Review - 1997 Management's Discussion
and Analysis", on pages 18 through 30 of the 1997 Annual Report is incorporated
herein by reference. See Exhibit 13.
Item 7A. Market Risk
- ---------------------
Market risk reflects the risk of economic loss resulting from adverse changes in
market prices and interest rates. This risk of loss can be reflected in either
diminished current market values or reduced potential net income in future
periods.
The Company market risk arises from interest rate risk inherent in its lending
and deposit taking activities. The structure of the Company's loan and deposit
portfolios is such that a significant decline in the primary rate may adversely
effect net market values and interest income. Management seeks to manage this
risk through the utilization of various tools, including the pricing and
maturities of its assets and liabilities, including its investments. The
composition and size of the investment portfolio is managed so as to reduce the
interest rate risk in the deposit and loan portfolios. Currently, the Company
does not use any off-balance sheet derivatives. See the "Interest Rate
Sensitivity" section of the Annual Report for further information regarding the
risk associated with changes in interest rates.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The report of Arthur Andersen LLP, independent certified public accountants, and
the consolidated financial statements are included on pages 35 through 49 of the
1997 Annual Report and are incorporated herein by reference. "Selected Quarterly
Information - Consolidated Quarterly Average Balances, Yields & Rates" and
Quarterly Consolidated Income Statements" included on pages 31 through 33 of the
1997 Annual Report are incorporated herein by reference. See Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on
- ---------------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
Not applicable.
<PAGE>
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 "Proposal One - Election of Directors" and "Executive
Officers" on pages 2 through 8 in the 1997 Proxy Statement and is incorporated
herein by reference.
Item 11. Executive Compensation
- --------------------------------
Information set forth under the headings "Proposal One - Election of Directors -
Compensation of Executive Officers", "Salary and Benefits Committee Report",
"Summary Compensation Table", "Grants of Options/SARs in 1997", "Aggregated
Options/SAR Exercises in 1997 and 1997 Year-End Option/SAR Values", "Profit
Sharing Plan", "Employment and Severance Agreements", and "Information About the
Board of Directors and its Committees" on pages 6 through 15 of 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, "Proposal One Election of Directors -
General" on pages 2 through 7, "Proposal One - Election of Directors -
Management Stock Ownership" on page 7, and "Principal Shareholders" on page 16
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 "Proposal One - Election of Directors -
Certain Transactions and Business Relationships" on page 15 through 16 of the
1997 Proxy Statement is incorporated herein by reference.
<PAGE>
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, included in the 1997 Annual
Report are incorporated by reference into Item 8 of this Annual Report on
Form 10-K.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
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 3.1 Amended and Restated Articles of Incorporation
---------------------------------------------------------------
Incorporated herein by reference from registrant's Current Report on Form
8-K, File No. 0-13660, dated June 6, 1997
Exhibit 3.2 Amended and Restated By-laws of the Corporation
----------------------------------------------------------------
Incorporated herein by reference from Exhibit 3.2 of Registrant's Current
Report on Form 8-K, File No. 0-13660, dated June 6, 1997
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
<PAGE>
Exhibit 10.1 Profit Sharing Plan, as amended
--------------------------------------------
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 10.7 Executive Employment Agreement
--------------------------------------------
Dated February 19, 1997 between J. Hal Roberts, Jr. and the Bank,
incorporated herein by reference from registrant's Annual Reports on Form
10-K, dated March 24, 1997.
Exhibit 13 1997 Annual Report
------------------------------
The following portions of the 1997 Annual Report are incorporated herein by
reference:
Financial Highlights
Financial Review - Management's Discussion and Analysis
Selected Quarterly Information - Quarterly Consolidated
Income Statements
Selected Quarterly Information - Consolidated Quarterly
Average Balances, Yields & Rates
Financial Statements
Notes to Consolidated Financial Statements
Financial Statements - Report of Independent Certified
Public Accountants
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.
<PAGE>
Exhibit 23 Consent of Independent Certified Public Accountants
---------------------------------------------------------------
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 1997.
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>
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, on the 28th day of March, 1998.
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.
Date
/s/ Dennis S. Hudson, Jr. March 27, 1998
- -------------------------
Dennis S. Hudson, Jr., Chairman of the Board
and Director
/s/ Dale M. Hudson March 27, 1998
- ------------------
Dale M. Hudson, President, Chief Executive
Officer and Director
/s/ Dennis S. Hudson, III March 27, 1998
- -------------------------
Dennis S. Hudson, III Executive Vice
President, Chief Operating Officer and
Director
/s/ William R. Hahl March 27, 1998
- -------------------
William R. Hahl, Senior Vice President and
Chief Financial Officer
/s/ Jeffrey C. Bruner March 27, 1998
- ---------------------
Jeffrey C. Bruner, Director
March 27, 1998
- -----------------
John H. Crane, Director
/s/ Evans Crary, Jr. March 27, 1998
- --------------------
Evans Crary, Jr., Director
March 27, 1998
- ------------------------
Christopher E. Fogal, Director
March 27, 1998
- --------------------
Jeffrey S. Furst, Director
/s/ John R. Santarsiero, Jr. March 27, 1998
- -----------------------------
John R. Santarsiero, Jr., Director
/s/ Thomas H. Thurlow, Jr. March 27, 1998
- --------------------------
Thomas H. Thurlow, Jr., Director
<TABLE> <S> <C>
<ARTICLE> 9
<S>
<C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<CASH> 28,336
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 36,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 178,988
<INVESTMENTS-CARRYING> 41,162
<INVESTMENTS-MARKET> 41,873
<LOANS> 613,930
<ALLOWANCE> 5,363
<TOTAL-ASSETS> 943,037
<DEPOSITS> 806,098
<SHORT-TERM> 52,112
<LIABILITIES-OTHER> 3,763
<LONG-TERM> 0
0
0
<COMMON> 517
<OTHER-SE> 80,547
<TOTAL-LIABILITIES-AND-EQUITY> 943,037
<INTEREST-LOAN> 50,252
<INTEREST-INVEST> 12,906
<INTEREST-OTHER> 1,520
<INTEREST-TOTAL> 64,676
<INTEREST-DEPOSIT> 25,784
<INTEREST-EXPENSE> 26,601
<INTEREST-INCOME-NET> 38,077
<LOAN-LOSSES> 913
<SECURITIES-GAINS> 48
<EXPENSE-OTHER> 36,425
<INCOME-PRETAX> 11,683
<INCOME-PRE-EXTRAORDINARY> 11,683
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,432
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42
<YIELD-ACTUAL> 4.60
<LOANS-NON> 2,254
<LOANS-PAST> 478
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 5,657
<CHARGE-OFFS> 1,554
<RECOVERIES> 347
<ALLOWANCE-CLOSE> 5,363
<ALLOWANCE-DOMESTIC> 5,363
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
Financial Highlights
(Dollars in thousands except per
share data) 1997 1996 1995
- ----------------------------------------------------------------
FOR THE YEAR
Net interest income $38,077 $36,223 $31,035
Provision for loan losses 913 1,090 456
Noninterest income:
Securities gains 48 76 421
Other 10,896 10,331 8,747
Noninterest expenses 36,425 31,768 27,766
Income before income taxes 11,683 13,772 11,981
Provision for income taxes 4,251 4,933 4,208
Income before cumulative effect 7,432 8,839 7,773
of a change in accounting
principle
Cumulative effect on prior years 0 0 0
of a change in accounting for
income taxes
Net income 7,432 8,839 7,773
Core earnings (1) 12,755 14,968 12,099
PER SHARE DATA:
Income before cumulative
effect of a change in
accounting principle -
diluted 1.42 1.71 1.51
basic 1.45 1.73 1.52
Cumulative effect on prior 0.00 0.00 0.00
years of a change in
accounting for income taxes
Net income - Diluted 1.42 1.71 1.51
- Basic 1.45 1.73 1.52
Cash dividends paid: 0.82 0.65 0.54
Class A common
Book value 15.75 15.08 14.05
Dividends to net income 53.8% 30.9% 29.3%
AT YEAR END
Assets $943,037 $938,501 $885,881
Securities 220,150 223,169 234,795
Net loans 608,567 570,667 493,328
Deposits 806,098 811,493 765,200
Shareholders' equity (2) 81,064 76,995 71,155
Performance ratios:
Return on average assets .83% 1.04% .98%
Return on average equity 9.17 11.63 11.12
Net interest margin (3) 4.60 4.60 4.24
Average equity to average assets
9.09 8.96 8.77
Financial Highlights (CON'T)
(Dollars in thousands except per
share data) 1994 1993
- -----------------------------------------------------------------
FOR THE YEAR
Net interest income $ 28,758 $ 28,779
Provision for loan losses 308 317
Noninterest income:
Securities gains 764 1,232
Other 7,219 8,444
Noninterest expenses 25,684 26,625
Income before income taxes 10,749 11,513
Provision for income taxes 3,562 3,897
Income before cumulative effect 7,187 7,616
of a change in accounting
principle
Cumulative effect on prior years 0 264
of a change in accounting for
income taxes
Net income 7,187 7,880
Core earnings (1) 10,320 11,733
PER SHARE DATA:
Income before cumulative
effect of a change in
accounting principle
- diluted 1.39 1.47
- basic 1.40 1.48
Cumulative effect on prior 0.00 0.06
years of a change in
accounting for income taxes
Net income - diluted 1.39 1.53
- basic 1.40 1.54
Cash dividends paid: 0.49 0.45
Class A common
Book value 12.27 13.24
Dividends to net income 31.4% 24.8%
AT YEAR END
Assets $759,014 $719,976
Securities 286,664 314,999
Net loans 351,956 300,069
Deposits 646,312 605,258
Shareholders' equity (2) 62,975 67,673
Performance ratios:
Return on average assets 1.03% 1.18%
Return on average equity 11.01 13.16
Net interest margin (3) 4.55 4.74
Average equity to average assets 9.39 8.94
- -------------------------------------------------------------
(1) Income before taxes excluding the provision for loan losses, securities
gains and expenses associated with foreclosed and repossessed asset
management and dispositions.
(2) On a fully taxable equivalent basis.
<PAGE>
FINANCIAL REVIEW
1997 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, and the Financial Highlights provided on page 4 of this report.
Net income for 1997 totalled $7,432,000 or $1.42 per share diluted, compared
with $8,839,000 or $1.71 per share diluted in 1996 and $7,773,000 or $1.51 per
share diluted in 1995. Return on average assets was 0.83 percent and return on
average shareholders' equity was 9.17 percent for 1997, compared to the prior
year's results of 1.04 percent and 11.63 percent, respectively, and 1995's
results of 0.98 percent and 11.12 percent, respectively.
Earnings in 1997 were impacted by a special charge for a planned replacement of
the Company's mainframe hardware and software of $1,079,000 ($682,000 after tax)
and merger related expenses of $1,542,000 ($975,000 after tax).
Earnings in 1996 were reduced by a one-time special assessment of $500,000
($316,000 after tax) to replenish the Savings Association Insurance Fund (SAIF)
and a nonrecurring charge of $600,000 ($379,000 after tax) related to the
termination and settlement of the Company's pension plan.
The Company acquired Port St. Lucie National Bank Holding Corp.(PSHC) and its
subsidiary, Port St. Lucie National Bank (PSNB) on May 30, 1997. The transaction
was accounted for as a pooling of interests and all prior year amounts have been
restated assuming the companies had been combined since inception. PSHC
shareholders reclined 900,000 shares of the company for all of their issued and
outstanding common stock, warrants and options. Acquired deposits totaled $116.0
million and loans totaled $93.7 million.
Condensed Income Statement
as a Percent of Average Assets
(Tax equivalent basis)
1997 1996 1995
-----------------------------------
Net interest income 4.31% 4.32% 3.95%
Provision for loan losses 0.10 0.13 0.06
Noninterest income
Securities gains 0.01 0.01 0.05
Other 1.22 1.22 1.10
Noninterest expenses 4.09 3.75 3.48
-----------------------------------
Income before income taxes 1.35 1.67 1.56
Provision for income taxes
including tax equivalent
adjustment 0.52 0.63 0.58
-----------------------------------
Net Income 0.83% 1.04% .98%
==== ==== ===
================================================================================
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income (fully taxable equivalent) for 1997 rose $1,803,000 or 4.9
percent, due to increased business volumes at a net interest margin level year
over year at 4.60 percent. In 1997, rates paid for interest bearing deposits
rose by five basis points to 3.82 percent primarily as a result of two new
higher rate deposit product offerings. In addition, the interest rates paid for
short term borrowings, primarily sweep repurchase agreements with customers of
the Company's subsidiary bank, decreased thirteen basis points to 4.03 percent.
The resulting rate paid for all interest bearing liabilities in 1997 was 3.82
percent, four basis points higher than in 1996.
During 1997, average total deposits increased $30,985,000 or 4.8 percent.
Average time deposits increased $22,500,000 or 6.7 percent, while on an
aggregate basis, average balances for NOW, savings and money market accounts,
which are lower cost interest bearing deposits, increased $8,485,000 or 2.8
percent. Most significant of all, the deposit mix was favorably affected by an
increase in average noninterest bearing demand deposits of $6,095,000 or 5.9
percent.
The yield on earning assets increased three basis points during 1997 to 7.78
percent. Average earning assets for 1997 increased $39,817,000 or 5.0 percent,
compared to the prior year. Although $58.5 million in fixed rate residential
mortgage loans were sold in 1997, average total loans grew $57,554,000 or 10.7
percent. Partially funding the growth in loans was a decline in average
investment securities of $17,964,000 or 7.8 percent.
Loan demand in the Company's markets was strong, particularly for fixed rate
residential loans. To manage exposure to rising interest rates the company sold
nearly all mortgage loans with a fixed rate and nearly all mortgage loans with a
fixed rate and term of thirty years. With long term rates remaining below six
percent and possibly headed lower, it is estimated that loan demand should
remain strong.
During 1996, average total deposits increased $19,572,000 or 3.1 percent.
Average time deposits increased $5,645,000 or 1.7 percent, while on an aggregate
basis, average balances for NOW, savings and money market accounts, which are
lower cost interest bearing deposits, increased $13,927,000 or 4.7 percent. Most
significant of all, the deposit mix was favorably affected by an increase in
average noninterest bearing demand deposits of $16,011,000 or 18.3 percent.
The yield on earning assets improved ten basis points during 1996 to 7.75
percent. A more favorable mix of higher yield loans versus investments offset an
individual yield decline for investment securities of twenty-one basis points.
Average earning assets for 1996 increased $54,750,000 or 7.4 percent, compared
to the prior year. Although $114.6 million in fixed rate residential mortgage
loans were sold in 1996, average total loans grew $108,207,000 or 25.2 percent.
Partially funding the growth in loans were declines in average investment
securities of $39,141,000 or 14.5 percent and average federal funds sold of
$14,316,000 or 34.0 percent.
For the years ended December 31, 1997 and 1996, 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.
Changes in Average Earning Assets
(Dollars in thousands)
Increase/(Decrease) Increase/(Decrease)
1997 vs 1996 1996 vs 1995
- ----------------------------------------------------------------
Securities:
Taxable $(16,216) (7.5)% $(37,600) (14.9)%
Nontaxable (1,748) (11.4) (1,541) (9.1)
Federal funds sold
and other short 227 0.8 (14,316) (34.0)
term investments
Loans, net 57,554 10.7 108,207 25.2
---------------------------------------------
Total $ 39,817 5.0% $54,750 7.4%
========== === ======= ===
================================================================================
RATE/VOLUME ANALYSIS (ON A TAX EQUIVALENT BASIS)
(Dollars in thousands)
Amount of Increase/ 1997 vs 1996
(Decrease)Due to
Change In: Volume Rate Mix Total
- -----------------------------------------------------------------
Interest income
Securities:
Taxable $(1,193) $329 $(30) $(894)
Nontaxable (163) 18 (2) (147)
------------------------------------------
(1,356) 347 (32) (1,041)
Federal funds sold and
other short term
investments 237 (171) (28) 38
Loans 5,878 (1,350) (173) 4,355
------------------------------------------
Total Interest 4,759 (1,174) (233) 3,352
Income
Interest expense
NOW (including Super 91 116 10 217
NOW)
Savings deposits (76) (60) 2 (134)
Money market accounts 140 180 8 328
Time deposits 1,448 (341) (28) 1,079
------------------------------------------
1,603 (105) (8) 1,490
Federal funds purchased
and other short term 115 (49) (7) 59
borrowings
Total Interest 1,718 (154) (15) 1,549
Expense
------------------------------------------
Net Interest
Income $3,041 $(1,020) $(218) $1,803
===== ====== ==== =====
RATE/VOLUME ANALYSIS (ON A TAX EQUIVALENT BASIS)
Table 3 (CON'T)
(Dollars in thousands)
Amount of Increase/ 1996 vs 1995
(Decrease)Due to
Change In: Volume Rate Mix Total
- --------------------------------------------------------------
Interest income
Securities:
Taxable $(2,130) $(894) $120 $(2,904)
Nontaxable (106) 3 0 (103)
---------------------------------------
(2,236) (891) 120 (3,007)
Federal funds sold and
other short term
investments (1,063) 85 (36) (1,014)
Loans 8,420 479 109 9,008
---------------------------------------
Total Interest 5,121 (327) 193 4,987
Income
Interest expense
NOW (including Super (992) (272) 124 (1,140)
NOW)
Savings deposits 99 206 12 317
Money market accounts 1,839 (694) (465) 680
Time deposits 54 (432) (1) (379)
---------------------------------------
1,000 (1,192) (330) (522)
Federal funds purchased
and other short term 424 (37) (38) 349
borrowings
---------------------------------------
Total Interest 1,424 (1,229) (368) (173)
Expense
---------------------------------------
Net Interest
Income $3,697 $902 $561 $5,160
===== === === =====
CHANGES IN AVERAGE
INTEREST BEARING LIABILITIES
(Dollars in thousands)
Increase/(Decrease) Increase/(Decrease)
1997 vs 1996 1996 vs 1995
- ----------------------------------------------------------------
NOW (including
Super NOW) $3,893 5.7% $(54,029) (44.2)%
Savings deposits (2,955) (3.7) 4,368 5.8
Money market
accounts 7,547 4.7 63,588 66.0
Time deposits 22,500 6.7 5,645 1.7
Federal funds
purchased and
other short term
borrowings 2,058 11.3 9,585 110.8
---------------------------------------------
Total $33,043 5.0% $ 29,157 4.6%
======= === ======== ===
================================================================================
PROVISION FOR LOAN LOSSES
Strong loan demand and growth in total loans outstanding in 1997 resulted in
higher provisioning, which was mitigated by a continued favorable net charge off
ratio (0.20 percent in 1997), and resulted in a provision for loan losses in
1997 of $913,000. The provision for loan losses in 1996 was $1,090,000, and in
1995 was $456,000. 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 balances
outstanding, management believes higher provisions for loan losses will result
in 1998 compared to 1997 and 1996.
THREE-YEAR SUMMARY
Balances, Interest Income and Expenses, Yields and Rates (1)
(Dollars in 1997
thousands)
- -------------------------------------------------
Average Interest Yield/
Balance Rate
- --------------------------------------------------
Assets
Earning assets:
Securities
Taxable $198,745 $ 12,129 6.10%
Nontaxable 13,620 1,130 8.30
-------------------------------
Total 212,365 13,259 6.24
Securities
Federal funds 28,068 1,520 5.42
sold and other
short term
investments
Loans (2) 595,884 50,267 8.44
-------------------------------
Total 836,317 65,046 7.78
Earning
Assets
Allowance for loan (5,554)
losses
Cash and due from 26,148
banks
Bank premises and 17,996
equipment
Other assets 16,594
-----------
$891,501
========
Liabilities and
Shareholders
Equity
Interest-bearing
liabilities:
NOW (Including $72,239 $1,245 1.72%
Super NOW)
Savings deposits 77,230 1,860 2.41
Money market 167,411 3,751 2.24
accounts
Time deposits 358,637 18,928 5.28
Federal funds 20,294 817 4.03
purchased and
other short
term borrowings
-------------------------------
Total 695,811 26,601 3.82
Interest
Bearing
Liabilities
Demand deposits 109,388
Other liabilities 5,244
-------------------------------
810,443
Shareholders' 81,058
equity
-------------------------------
$891,501
========
Interest expense
as % of earning
assets 3.18%
Net interest
income/yield on
earning assets $38,445 4.60%
======= ====
THREE-YEAR SUMMARY (CON'T)
Balances, Interest Income and Expenses, Yields and Rates (1)
(Dollars in 1996
thousands)
- -------------------------------------------------
Average Yield/
Balance Interest Rate
- --------------------------------------------------
Assets
Earning assets:
Securities
Taxable $214,961 $13,023 6.06%
Non Taxable 15,368 1,277 8.31
------------------------------
Total 230,329 14,300 6.21
Securities
Federal funds 27,841 1,482 5.32
sold and other
short term
investments
Loans (2) 538,330 45,912 8.53
-------------------------------
Total 796,500 61,694 7.75
Allowance for loan (5,130)
losses
Cash and due from 23,660
banks
Bank premises and 17,187
equipment
Other assets 16,410
-------------------------------
$848,627
========
Liabilities and
Shareholders
Equity
Interest-bearing
liabilities:
NOW (Including $68,346 $1,028 1.50%
Super NOW)
Savings deposits 80,185 1,994 2.49
Money market 159,864 3,423 2.14
accounts
Time deposits 336,137 17,849 5.31
Federal funds 18,236 758 4.16
purchased and
other short
term borrowings
-------------------------------
Total 662,768 25,052 3.78
Demand deposits 103,293
Other liabilities 6,535
-------------------------------
772,596
Shareholders' 76,031
Equity
-------------------------------
$848,627
========
Interest expense 3.15%
as % of earning
assets
Net interest $36,642 4.60%
income/yield on
earning assets
THREE-YEAR SUMMARY (CON'T)
Balances, Interest Income and Expenses, Yields and Rates (1)
(Dollars in 1995
thousands)
- -------------------------------------------------
Average Yield/
Balance Interest Rate
- --------------------------------------------------
Assets
Earning assets:
Securities
Taxable $252,561 $15,927 6.31%
Nontaxable 16,909 1,380 8.16
-------------------------------
Total 269,470 17,307 6.42
Securities
Federal funds 42,157 2,496 5.92
sold and other
short term
investments
Loans (2) 430,123 36,904 8.58
-------------------------------
Total 741,750 56,707 7.65
Allowance for loan (4,619)
losses
Cash and due from 27,032
banks
Bank premises and 17,925
equipment
Other assets 14,962
-------------------------------
$797,050
========
Liabilities and
Shareholders
Equity
Interest-bearing
liabilities:
NOW (Including $122,375 $2,168 1.77%
Super NOW)
Savings deposits 75,817 1,677 2.21
Money market 96,276 2,743 2.85
accounts
Time deposits 330,492 18,228 5.52
Federal funds 8,651 409 4.73
purchased and
other short
term borrowings
-------------------------------
Total 633,611 25,225 3.98
Interest
Bearing
Liabilities
Demand deposits 87,282
Other liabilities 6,246
-------------------------------
727,139
Shareholders' 69,911
Equity
-------------------------------
$797,050
========
Interest expense 3.40%
as % of earning
assets
Net interest
income/yield on
earning assets $31,482 4.24%
======= ====
- ----------
(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.
================================================================================
NONINTEREST INCOME
Table 6 shows noninterest income for the years indicated.
Noninterest income, excluding gains from sales of securities, increased $565,000
or 5.5 percent in 1997 compared to the prior year. The largest increase in
noninterest income occurred in service charges on deposits which increased
$747,000 or 21.7 percent, a result of internal growth, certain services being
repriced, and the impact of the acquisition. Trust income increased, by $137,000
or 6.6 percent. Additional sales staff in trust and the increased market values
of trust assets accounted for the improved income. Brokerage commissions and
fees decreased $193,000 or 9.4 percent as business volumes were impacted by
staff turnover and market volatility. The Company intends to continue to
emphasize its brokerage and trust services to both existing and new customers,
as expectations are that these financial products will remain in demand.
Noninterest income, excluding gains from sales of securities, increased
$1,584,000 or 18.1 percent in 1996 compared to prior year. The largest increase
in non-interest 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. Also increasing,
service charges on deposits grew $403,000 or 13.3 percent, a result of internal
growth, certain services being repriced, and a full year impact of the
acquisition (of American Bank in 1995).
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 remained strong in 1997.
In 1997, additional income of $202,000 from the sale of fixed rate residential
mortgages was recorded in other income. However, in 1996 income from the sale of
mortgages of $564,000 was recorded and explains the $191,000 or 16.5 percent
decline in other income in 1997. The decline results from ceasing to offer
mortgage products to customers outside the Company's primary markets and
adjacent communities. During 1997 and 1996, 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 1997 and 1996, net gains of $48,000 and $76,000 were recognized.
During 1995, as interest rates declined and the market value of the securities
portfolio increased, sales of securities generated a net gain of $421,000.
Noninterest Income
Table 6
(Dollars in thousands)
Year Ended % Change
---------------------------------------------------
1997 1996 1995 97/96 96/95
- --------------------------------------------------------------------
Service charges $4,182 $3,435 $3,032 21.7% 13.3%
on deposit
accounts
Trust fees 2,206 2,069 1,908 6.6 8.4
Other service
charges and
fees 1,688 1,623 1,440 4.0 12.7
Brokerage
commissions and
fees 1,853 2,046 1,555 (9.4) 31.6
Other 967 1,158 812 (16.5) 42.6
---------------------------------------------------
10,896 10,331 8,747 5.5 18.1
Securities gains 48 76 421 (36.8) (81.9)
---------------------------------------------------
Total $10,944 $10,407 $9,168 5.2% 13.5%
======= ======= ====== === ====
================================================================================
NONINTEREST EXPENSES
(Dollars in thousands)
Year Ended
-----------------------------------
1997 1996 1995
---------------------------------------
Salaries and wages $13,203 $12,447 $11,021
Pension and other employee
benefits 2,945 2,875 2,240
Occupancy 2,961 2,675 2,635
Furniture and equipment 2,267 2,038 2,114
Marketing 2,151 1,878 1,529
Legal and professional fees 918 1,046 907
FDIC assessments 136 634 823
Foreclosed and repossessed
asset management and
dispositions 207 182 83
Amortization of intangibles 671 661 418
Other 10,966 7,332 5,996
---------------------------------------
Total $36,425 $31,768 27,766
======= ======= ======
NONINTEREST EXPENSES (CON'T)
(Dollars in thousands)
% Change
------------------------
97/96 96/95
----------------------------
Salaries and wages 6.1% 12.9%
Pension and other employee 2.4 28.3
benefits
Occupancy 10.7 1.5
Furniture and equipment 11.2 (3.6)
Marketing 14.5 22.8
Legal and professional fees (12.2) 15.3
FDIC assessments (78.5) (23.0)
Foreclosed and repossessed
asset management and 13.7 119.3
dispositions
Amortization of intangibles 1.5 58.1
Other 49.6 22.3
----------------------------
Total 14.7% 14.4%
==== ====
NONINTEREST EXPENSES
Table 7 shows the Company's noninterest expenses for the years indicated.
When compared to 1996, noninterest expenses increased $4,657,000 or 14.7 percent
in 1997. As previously discussed, $2.6 million of the increase were due to
special charges related to the merger and year 2000 considerations. Included in
1996 are one-time charges of $500,000 in Federal Deposit Insurance Corporation
(FDIC) assessments (incurred in the third quarter) to recapitalize the SAIF and
a charge of $600,000 to terminate the Company's defined benefit plan increased
employee benefit costs.
In 1997, salaries and wages increased $756,000 or 6.1 percent and employee
benefits rose $70,000 or 2.4 percent. In Indian River County, the company
expanded from three offices in 1996 to six offices in 1997.
Occupancy and furniture and equipment expenses, on an aggregate basis, increased
$515,000 or 10.9 percent. Marketing expenses increased $273,000 or 14.5 percent,
primarily as a result of increases in sales promotion and ad agency production
and print costs associated with the expanded markets.
Legal and professional fees decreased $128,000 or 12.2 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. Costs associated with foreclosed and repossessed asset
management increased $25,000, but totaled only $207,000. These results reflect
the level of activity with respect to problem asset management.
The premium for FDIC insurance was lower in 1997 as a result of the one-time
charge of $500,000 in 1996. 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. For 1997,
the rate for commercial banks has been reduced to 0.013 percent. The rate the
Company's subsidiary bank is being assessed has been and is the lowest rate
indicated, based on guidelines.
When compared to 1995, noninterest expenses increased $4,002,000 or 14.4 percent
in 1996. Included in the increase was a one-time charge of $500,000 in FDIC
assessments (incurred in the third quarter) to recapitalize the 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 $1,426,000 or 12.9 percent and employee
benefits rose $635,000 or 28.3 percent. Commercial loan officers were added in
1996 and increased the costs in lending. Higher revenue in brokerage resulted in
increased commissions paid. 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. A one-time $600,000 charge to terminate the
Company's defined benefit plan increased employee benefit costs.
Marketing expenses increased $349,000 or 22.8 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 $139,000 or 15.3 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 the prior year. Costs associated with foreclosed
and repossessed asset management increased $99,000, but totaled only $182,000.
The premium for FDIC insurance was $189,000 lower in 1996, and would have been
lower if not for the one-time charge of $500,000.
The Company's overhead ratio (excluding the one-time charges of $1,079,000 and
$1,542,000 for hardware and software and merger related expenses, respectively,
in 1997 and the one-time SAIF charge of $500,000, in 1996) was 68.5 percent for
1997, compared to 66.6 percent in 1996 and 69.0 percent in 1995.
INCOME TAXES
Applicable income taxes for the year were lower by $682,000 or 13.8 percent.
Income taxes for the year 1996 were $4,933,000, 17.2 percent above the
$4,208,000 for 1995.
Income taxes as a percentage of income before taxes were 36.4 percent for 1997,
35.8 percent for 1996, compared to 35.1 percent in 1995. Most of the increase in
rates is due to higher provisioning for state income taxes, a result of lower
intangible taxes paid that can be taken as a credit and lower tax exempt income
from state and municipal debt securities net.
The Company has deferred tax assets, for which no valuation allowance is
required because the majority of the asset is related to unrealized securities
losses which, as a result of Statement of Financial Accounting, (SFAS) No. 115,
are deemed to be temporary, as well as, sufficient taxable income to carryback
to recover these differences.
FINANCIAL CONDITION
Total assets increased 16.7 percent from the originally reported total a year
earlier as a result of the acquisition of PSHC on May 30, 1997. The transaction
was accounted for as a pooling of interests and therefore all balances for prior
years are restated on a combined basis. Therefore, the Company's total assets
increased 0.5 percent between December 31, 1996 and December 31, 1997. In
comparison, the Company increased its assets 5.9 percent between December 31,
1995 and December 31, 1996.
CAPITAL RESOURCES
Table 8 summarizes the Company's capital position and selected ratios. The
Company's ratio of shareholders' equity to period end assets was 8.60 percent at
December 31, 1997, compared with 8.20 percent one year earlier.
Book value per common share outstanding totalled $15.75 at December 31, 1997,
compared to $15.08 at December 31, 1996.
Capital Resources
(Dollars in thousands)
December 31 1997 1996 1995
- --------------------------------------------------------------------------------
Tier 1 capital
Common stock $ 517 $ 514 $ 514
Additional paid in capital 27,256 26,936 25,561
Retained earnings 55,249 52,090 47,624
Treasury stock (1,289) (911) (1,676)
Valuation allowance (437) (801) (1,016)
Intangibles (5,308) (5,727) (6,488)
------ ------ ------
Total Tier 1 capital 75,988 72,101 64,519
====== ====== ======
Tier 2 capital
Allowance for loan losses, 5,363 5,657 4,893
as limited ----- ----- -----
Total Tier 2 capital 5,363 5,657 4,893
----- ----- -----
Total risk based capital $81,351 $77,758 $69,412
======= ======= =======
Risk weighted assets $554,988 $528,713 $474,020
======== ======== ========
Tier 1 risk based capital 13.69% 13.64% 13.61%
ratio
Total risk based capital ratio 14.66 14.71 14.64
Regulatory minimum 8.00 8.00 8.00
Tier 1 capital to adjusted 8.44 8.26 7.88
total assets'
Regulatory minimum 4.00 4.00 4.00
Shareholders' equity to assets 8.60 8.20 8.03
Average shareholders' equity 9.09 8.96 8.77
to average total assets
- ----------
(1) Intangible assets have been deducted from tier 1 capital and adjusted total
assets for this calculation.
================================================================================
LOAN PORTFOLIO
Table 9 shows total loans (net of unearned income) by category outstanding at
the indicated dates.
Total loans (net of unearned income and excluding the allowance for loan losses)
were $613,930,000 at December 31, 1997, $37,606,000 or 6.5 percent more than at
December 31, 1996. The increase in the Company's loan balances also reflects the
impact of the residential loan sales of $58.5 during 1997. Sales of fixed rate
residential loans transacted in 1996 totaled $114.6 million.
At December 31, 1997, the Company's mortgage loan balances secured by
residential properties amounted to $335,384,000 or 54.6 percent of total loans.
The next largest concentration was loans secured by commercial real estate which
totalled $143,858,000 or 23.4 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
$64,765,000 and unsecured credit cards of $8,908,000.
Total loans (net of unearned income and excluding the allowance for loan losses)
were $576,324,000 at December 31, 1996, $78,102,000 or 15.7 percent greater than
at December 31, 1995. At December 31, 1996, the Company's portfolio of mortgage
loan balances secured by residential properties amounted to $308,240,000 or 53.5
percent of total loans and loans secured by commercial real estate totalled
$127,748,000 or 22.2 percent of total loans. Consumer loans to individual
customers and credit card loans totalled $64,071,000 and $9,153,000,
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, 1997,
approximately $187 million or 53 percent of the Company's mortgage loan balances
secured by residential properties were adjustable.
Of the $187 million, $184 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
$24 million were outstanding at December 31, 1997, 2) those limited to a two
percent per annum increase and a six percent cap over the life of the loan, of
which approximately $68 million in balances existed at year end 1997, 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 $92 million were
outstanding at December 31, 1997.
Of the approximately $120 million of new residential loans originated in 1997,
$46 million were adjustable rate and $74 million were fixed rate. The Company
generally sells all of the 30-year fixed rate loan originations while retaining
a portion of 15-year fixed rate residential loans. Loans secured by residential
properties having fixed rates totalled approximately $149 million at December
31, 1997, of which 15- and 30-year mortgages totalled approximately $71 million
and $44 million, respectively. Remaining fixed rate balances were comprised of
home improvement loans with short maturities less than 15 years. The Company's
historical charge off rates for residential loans has been very low, with only
$27,000 in charge offs for the year 1997. The Company expects that the 1998
residential loan demand will be comprised of mostly fixed rate mortgages as a
low interest rate environment is anticipated by economists.
Fixed rate and adjustable rate loans secured by commercial real estate total
approximately $44 million and $100 million, respectively, at December 31, 1997.
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
$31,239,000 at December 31, 1997 compared to $35,459,000 at December 31, 1996.
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.
The Company had commitments to make loans (excluding unused home equity lines of
credit and credit card lines) of $37,840,000 at December 31, 1997, compared to
$31,941,000 at the end of 1996.
Loans Outstanding
Table 9
(Dollars in thousands)
December 31 1997 1996 1995
- --------------------------------------------------------------------------------
Real estate mortgage $492,410 $448,680 $391,471
Real estate construction 16,363 18,458 15,492
Commercial and financial 31,239 35,459 27,280
Installment loans to 73,673 73,224 63,685
individuals
Other loans 245 503 294
--- --- ---
Total $613,930 $576,324 $498,222
======== ======== ========
LOANS OUTSTANDING (CON'T)
(Dollars in thousands)
December 31 1994 1993
----------------------------------------------
Real estate mortgage $234,550 $237,196
Real estate construction 52,561 4,070
Commercial and financial 18,235 15,768
Installment loans to 50,346 47,196
individuals
Other loans 336 79
--- --
Total $356,028 $304,309
======== ========
================================================================================
LOAN MATURITY DISTRIBUTION
Table 10
(Dollars in thousands)
Commercial,
Financial & Real Estate
December 31, 1997 Agricultural Construction Total
- ----------------------------------------------------------------
In one year or less $ 8,830 $14,121 $22,951
After one year but
within five years:
Interest rates are 3,480 1,006 4,486
floating or
adjustable
Interest rates are 15,018 379 15,397
fixed
In five years or more:
Interest rates are 2,182 167 2,349
floating or
adjustable
Interest rates are 1,729 690 2,419
fixed ----- --- -----
Total $31,239 $16,363 $47,602
======= ======= =======
================================================================================
ALLOWANCE FOR LOAN LOSSES
Table 11 provides certain information concerning the Company's allowance for
loan losses for the years indicated.
The allowance for loan losses was $5,363,000 at December 31, 1997, $294,000
lower than one year earlier. The ratio of the allowance for loan losses to total
loans outstanding (net of unearned income) was 0.87 percent at December 31,
1997. The ratio was 0.98 percent at December 31, 1996. The allowance for loan
losses as a percentage of nonaccrual loans was 237.9 percent at December 31,
1997, compared to 246.1 percent at December 31, 1996. Nonaccrual loans at
December 31, 1997, were $2,254,000 or 0.37 percent compared to $2,299,000 or
0.40 percent of outstanding loans at December 31, 1996. 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 necessitated 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 1997, the Company experienced net charge offs of $1,207,000 compared to
$326,000 one year earlier. Net charge offs as a percentage of average loans
outstanding were 0.20 percent for 1997, higher than in 1996 when the percentage
was 0.06 percent. A peer group of banks of similar size experienced a net charge
off ratio of 0.20 percent through September 30, 1997. Net consumer loan losses,
related to indirect automobile lending and credit cards, were $739,000 in 1997,
versus $289,000 in 1996. Real estate net charge-offs of $101,000 in 1997
compared to $29,000 in 1996. Net commercial and financial charge offs were
$367,000 in 1997 compared to $8,000 in 1996. In general the higher dollar of
charge offs recorded in 1997 is due to higher loan balances and the acquired
loans. During negotiations problem loans were identified and additional
provisioning was recorded by PSHC.
Table 12 summarizes the Company's allocation of the allowance for loan losses to
each type of loan and information regarding the composition of the loan
portfolio at the dates indicated.
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 the 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.
Summary of Loan Loss Experience
Table 11
(Dollars in thousands)
Year Ended December 31 1997 1996 1995
- --------------------------------------------------------------------------------
Allowance for loan losses
Beginning balance $5,657 $4,893 $4,072
Provision for loan losses 913 1,090 456
Allowance applicable to 0 0 556
loans purchased
Charge offs:
Commercial and 443 80 80
financial
Consumer 936 525 453
Commercial real 137 36 54
estate
Residential real
estate 38 84 31
-- -- --
Total Charge 1,554 725 618
Offs
Recoveries:
Commercial and 76 72 67
financial
Consumer 197 236 212
Commercial real 63 91 146
estate
Residential real 11 0 2
estate ---- ---- ----
Total Recoveries 347 399 427
--- --- ---
Net loan charge offs 1,207 326 191
----- --- ---
Ending Balance $5,363 $5,657 $4,893
====== ====== ======
Loans outstanding at end of $613,930 $576,324 $498,222
year*
Ratio of allowance for loan
losses to loans
outstanding at end of year 0.87% .98% .98%
Daily average loans
outstanding* $595,884 $538,330 $430,123
Ratio of net charge offs to
average loans outstanding 0.20% 0.06% 0.04%
- ----------
* Net of unearned income.
SUMMARY OF LOAN LOSS EXPERIENCE (CONT')
Table 11
(Dollars in thousands)
Year Ended December 31 1994 1993
- ----------------------------------------------------------
Allowance for loan losses
Beginning balance $4,240 $4,571
Provision for loan losses 308 317
Allowance applicable to loans 0 9
of purchased company
Charge offs:
Commercial and financial 118 63
Consumer 464 541
Commercial real estate 288 378
Residential real estate 35 25
-- --
Total Charge Offs 905 1,007
Recoveries:
Commercial and financial 167 64
Consumer 209 261
Commercial real estate 39 14
Residential real estate 14 11
-- --
Total Recoveries 429 350
--- ---
Net loan charge offs 476 657
--- ---
Ending Balance $4,072 $4,240
====== ======
Loans outstanding at end of
year* $356,028 $304,309
Ratio of allowance for loan
losses to loans outstanding at
end of year 1.14% 1.39%
Daily average loans outstanding* $319,510 $288,770
Ratio of net charge offs to
average loans outstanding 0.15% 0.23%
- ----------
* Net of unearned income.
================================================================================
Allowance for Loan Losses
Table 12
(Dollars in thousands)
Allowance Amount
December 31 1997 1996 1995 1994 1993
- ----------------------------------------------------------------
Commercial and $ 363 $ 665 $ 450 $481 $453
financial loans
Real estate loans 3,347 3,681 3,571 2,825 3,111
Installment loans 1,653 1,311 872 766 676
----- ----- --- --- ---
Total $5,363 $5,657 $4,893 $4,072 $4,240
====== ====== ====== ===== =====
Percent of Loans in Each Category to Total Loans
December 31 1997 1996 1995 1994 1993
- ----------------- ------ ------ ------ ------ ------
Commercial and 5.1% 6.2% 5.5% 5.2% 5.2%
financial loans
Real estate loans 82.9 81.1 81.7 80.7 79.3
Installment loans 12.0 12.7 12.8 14.1 15.5
------ ------ ------ ------ ------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
================================================================================
NONPERFORMING ASSETS
At December 31, 1997, the Company's ratio of nonperforming assets to loans
outstanding plus other real estate owned was 0.45 percent, compared to 0.58
percent at December 31, 1996. Nonperforming assets (other real estate owned and
nonaccrual loans) at December 31, 1997, were $2,790,000, a decrease of $573,000
compared to December 31, 1996. Other real estate owned totaled $536,000 while
nonaccrual loans equaled $2,254,000 at December 31, 1997.
Nonaccrual loans totalling $1,541,000 at December 31, 1997 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, 1997, 64 percent is secured with real estate, 11 percent is ninety
percent guaranteed by the Small Business Administration (SBA), the remainder by
other collateral. 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.
Nonperforming assets (other real estate owned and nonaccrual loans) at December
31, 1996, were $3,363,000, a decrease of $3,036,000 from December 31, 1995. At
December 31, 1996, the Company's ratio of nonperforming assets to loans
outstanding plus other real estate owned was 0.58 percent, compared to 1.28
percent at December 31, 1995.
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, 1997, the Company had $178,988,000 of securities held for sale
or 81.3 percent of total securities compared to $170,530,000 or 76.4 percent at
December 31, 1996.
Total securities declined $3,019,000 or 1.4 percent in 1997, compared to prior
year. These declines are directly related to growth in the loan portfolio.
Management has lowered the total portfolio's interest rate risk by reducing the
average life of the portfolio. At December 31, 1997 and 1996, the average life
of the portfolio was 2.6 years and 2.4 years respectively. The percentage of
adjustable and floating rate securities in the securities portfolio is 28.5
percent, compared to 24.0 percent last year. The held for sale portfolio
decreased to an average life of 2.1 years from 2.4 years in 1996.
A total of $23,217,000 in securities will mature along with approximately $31
million of periodic principal payments from mortgage back securities in 1998.
Management believes most of these funds will be used to fund increases in its
consumer and commercial loan portfolio.
At December 31, 1997, the Company had unrealized net losses of $174,000 or 0.08
percent of amortized cost. At December 31, 1996, unrealized net losses of
$1,174,000 or 0.52 percent. While rates have remained low in 1997, a shifting
U.S. Treasury yield curve caused a decrease in unrealized depreciation.
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 Federal Financial Institution Examination Counsel (FFIEC) definition of
a high risk investment.
Nonperforming Assets
(Dollars in thousands)
December 31 1997 1996 1995
- --------------------------------------------------------------------
Nonaccrual loans (1) $ 2,254 $ 2,299 $ 5,510
Renegotiated loans 0 0 0
Other real estate owned 536 1,064 889
--- ----- ---
Total Nonperforming $ 2,790 $ 3,363 $ 6,399
Assets -------- -------- --------
Amount of loans outstanding
at end of year (2) $613,930 $576,324 $498,222
======== ======== ========
Ratio of total nonperforming 0.45% 0.58% 1.28%
assets to loans outstanding
and other real estate owned
at end of period
Accruing loans past due $ 478 $ 59 $ 134
90 days or more
NON-PERFORMING ASSETS (CON'T)
(Dollars in Thousands)
December 31 1994 1993
- -----------------------------------------------------------
Nonaccrual loans (1) $ 2,311 $ 3,116
Renegotiated loans 0 0
Other real estate owned 382 4,206
--- -----
Total Nonperforming $ 2,693 $ 7,322
-------- --------
Amount of loans outstanding $356,028 $304,309
at end of year (2) ======== ========
Ratio of total nonperforming 0.76% 2.41%
assets to loans outstanding
and other real estate owned
at end of period
Accruing loans past due 90 $ 170 $ 66
days or more
- ----------
(1) Interest income that could have been recorded during 1997 related to
nonaccrual loans was $110,000, none of which was included in interest
income or net income. All nonaccrual loans are secured.
(2) Net of unearned income.
================================================================================
DEPOSITS
Total deposits declined slightly, 0.7 percent to $806,098,000 at December 31,
1997, compared to one year earlier, due to the investment of approximately $20.0
million in deposit balances held by local governments at year end 1996 being
invested into other products, primarily sweep repurchase arrangements, at
December 31, 1997.
Deposit balances increased $113,341,000 or 16.4 percent from the originally
reported totals for year end 1996. The increases in deposits in 1997 resulted
from the acquisition and internal growth from the opening of three new branches.
Offsetting the increases were deposit run off as a result of the acquisition and
PSHC customers transferring deposit balances into sweep repurchase arrangements,
a product not offered by PSHC. Repurchase agreement balances increased
$7,024,000 or 15.6 percent when compared to the prior year.
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, 1997, the Company had a negative gap position based on
contractual maturities and prepayment assumptions for the next twelve months,
with a negative cumulative interest rate sensitivity gap as a percentage of
total earning assets of 29.7 percent. This means that the Company's assets
reprice more slowly than its deposits. In a declining interest rate environment,
the cost of the Company's deposits and other liabilities may be expected to fall
faster than the interest received on its earnings assets, thus increasing the
net interest spread. If interest rates generally increase, the negative gap
means that the interest received on earning assets may be expected to increase
more slowly than the interest paid on the Company's liabilities, therefore
decreasing the net interest spread.
It has been the Company's experience that deposit balances for NOW and savings
accounts are stable and subjected to limited repricing when interest rates
increase or decrease within a range of 200 basis points. The Company's ALCO uses
model 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. Based on
the Company's most recent ALCO model simulations, net interest income would
decline 9.5 percent if interest rates would immediately rise 200 basis points.
The Company does not presently use interest rate protection products in managing
its interest rate sensitivity.
LIQUIDITY MANAGEMENT
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
opportunities for business expansion. 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, 1997, the Company had available federal funds lines
of credit of $48,000,000. At December 31, 1997, the Company had $68,298,000 of
United States Treasury and Government agency securities and mortgage backed
securities not pledged and available for use under repurchase agreements. At
December 31, 1996, the amount of securities available and unpledged was
$91,717,000.
Liquidity, as measured in the form of cash and cash equivalents, totalled
$64,436,000 at December 31, 1997, compared to $110,008,000 at December 31, 1996.
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.
Investment Securities
Yield, Maturity and Market Value
Table 14
- ----------------------------------------------------------------
U.S. Treasury and U.S.
Government Agencies
- ----------------------------------------------------------------
(Dollars in thousands) Amortized Market Weighted
Cost Value Yield
- ----------------------------------------------------------------
Maturity at December 31, 1997
Held for Sale
Within one year $11,967 $11,952 5.37%
One to five years 43,480 43,459 5.26
Five to ten years
Over ten years
No contractual maturity
--------------------------------
Total Value $55,447 $55,411 5.28%
================================
Held for Investment
Within one year
One to five years 9,908 9,971 5.31
Five to ten years
Over ten years
--------------------------------
Total Value $9,908 $9,971 5.31%
================================
Maturity at December 31, 1996
Held for Sale $51,684 $51,499 5.24%
================================
Held for Investment $15,596 $15,863 5.93%
================================
- ----------
(1) On a fully taxable equivalent basis.
Investment Securities (CON'T)
Yield, Maturity and Market Value
(Dollars in thousands)
- ----------------------------------------------------------------
Mortgage Backed Securities
(Fixed)
- ----------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ----------------------------------------------------------------
Maturity at December 31, 1997
Held for Sale
Within one year $22,278 $22,272 5.84%
One to five years 40,320 40,145 6.26
Five to ten years 156 163 7.75
Over ten years
No contractual maturity
--------------------------------
Total Value $62,754 $62,580 6.11%
================================
Held for Investment
Within one year $760 $797 5.17%
One to five years 15,344 15,531 7.01
Five to ten years
Over ten years
--------------------------------
Total Value $16,104 $16,328 6.92%
================================
Maturity at December 31, 1996
Held for Sale $70,083 $69,454 5.99%
================================
Held for Investment $19,163 $19,327 6.86%
- ----------
(1) On a fully taxable equivalent basis.
Investment Securities (CON'T)
Yield, Maturity and Market Value
(Dollars in thousands)
- ----------------------------------------------------------------
Mortgage Backed Securities
(Adjustable)
- ----------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ----------------------------------------------------------------
Maturity at December 31, 1997
Held for Sale
Within one year
One to five years $4,249 $4,257 6.58%
Five to ten years 14,196 14,157 5.19%
Over ten years 15,720 15,765 4.69%
No contractual maturity
--------------------------------
Total Value $34,165 $34,179 5.14%
================================
Held for Investment
Within one year
One to five years 3,289 3,297 6.55%
Five to ten years
Over ten years
--------------------------------
Total Value $3,289 $3,297 6.55%
================================
Maturity at December 31, 1996
Held for Sale $12,508 $12,282 6.22%
================================
Held for Investment $3,901 $3,902 6.42%
- ----------
(1) On a fully taxable equivalent basis.
Investment Securities (CON'T)
Yield, Maturity and Market Value
(Dollars in thousands)
- ----------------------------------------------------------------
Obligations of States and
Political Subdivisions (1)
- ----------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ----------------------------------------------------------------
Maturity at December 31, 1997
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 $2,223 $2,233 8.78%
One to five years 7,576 7,863 8.83%
Five to ten years 1,274 1,340 7.95%
Over ten years 688 741 8.58%
--------------------------------
Total Value $11,761 $12,177 8.71%
================================
Maturity at December 31, 1996
Held for Sale $ 0 $ 0 0.00%
================================
Held for Investment $13,879 $14,356 8.57%
================================
- ----------
(1) On a fully taxable equivalent basis.
Investment Securities (CON'T)
Yield, Maturity and Market Value
(Dollars in thousands)
- ----------------------------------------------------------------
Mutual Funds
- ----------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ----------------------------------------------------------------
Maturity at December 31, 1997
Held for Sale
Within one year
One to five years
Five to ten years
Over ten years
No contractual maturity $24,914 $24,223 5.92%
--------------------------------
Total Value $24,914 $24,223 5.92%
================================
Held for Investment
Within one year
One to five years
Five to ten years
Over ten years
--------------------------------
Total Value $ 0 $ 0 $ 0
================================
Maturity at December 31, 1996
Held for Sale $35,377 $34,333 6.05%
-------------------------------
Held for Investment $ 0 $ 0 0%
================================
- ----------
(1) On a fully taxable equivalent basis.
Investment Securities (CON'T)
Yield, Maturity and Market Value
(Dollars in thousands)
- ----------------------------------------------------------------
Other (1)
- ----------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ----------------------------------------------------------------
Maturity at December 31, 1997
Held for Sale
Within one year
One to five years
Five to ten years
Over ten years
No contractual maturity $2,593 $2,595 4.57%
--------------------------------
Total Value $2,593 $2,595 4.57%
================================
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, 1996
Held for Sale $2,961 $2,962 4.46%
--------------------------------
Held for Investment $ 100 $ 100 8.13%
================================
- ----------
(1) On a fully taxable equivalent basis.
Investment Securities (CON'T)
Yield, Maturity and Market Value
(Dollars in thousands)
- ----------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------
Amortized Market Weighted
Cost Value Yield
- ----------------------------------------------------------------
Maturity at December 31, 1997
Held for Sale
Within one year $34,245 $34,224 5.68%
One to five years 88,049 87,861 5.78
Five to ten years 14,352 14,320 5.22
Over ten years 15,720 15,765 4.69
No contractual maturity 27,507 26,818 5.79
--------------------------------
Total Value $179,873 $178,988 5.62%
================================
Held for Investment
Within one year $2,983 $3,030 7.86%
One to five years 36,217 36,762 6.89%
Five to ten years 1,274 1,340 7.95%
Over ten years 688 741 8.58%
--------------------------------
Total Value $41,162 $41,873 7.02%
================================
Maturity at December 31, 1996
Held for Sale $172,613 $170,530 5.77%
================================
Held for Investment $52,639 $53,548 7.01%
================================
- ----------
(1) On a fully taxable equivalent basis.
Investment Securities (CON'T)
Yield, Maturity and Market Value
Gross Gross Gross
December 31, 1997 Amortized Unrealized Unrealized
(dollars in thousands) Cost Gains Losses
- -----------------------------------------------------------
Held for Sale: $55,447 $146 $(182)
U.S.Treasury and
U.S.Government
Agencies
Mortgage Backed
Securities:
Fixed 62,754 125 (299)
Adjustable 34,165 296 (282)
Mutual Funds 24,914 20 (711)
Other securities 2,593 2
------------------------------------
$179,873 $589 $(1,474)
======== ==== =======
Held for Investment:
U.S. Treasury and $ 9,908 $63 $0
U.S. Government
Agencies
Mortgage Backed
Securities:
Fixed 16,104 282 (58)
Adjustable 3,289 23 (15)
Obligations of States 11,761 416 (0)
and Political
Subdivisions
Other Securities 100 0 0
------------------------------------
$41,162 $784 $(73)
======= ==== ====
- ----------
* Other Securities excluded from calculated average for total securities.
Investment Securities (CON'T)
Yield, Maturity and Market Value
Average
Market Years to
December 31, 1997 Value Maturity
- ------------------------------------------------
Held for Sale:
U.S.Treasury and $55,411 1.50
U.S.Government
Agencies
Mortgage Backed
Securities:
Fixed 62,580 1.57
Adjustable 34,179 9.03
Mutual Funds 24,223
Other securities 2,595 0*
-------------------------
$178,988 2.76
======== ====
Held for Investment:
U.S. Treasury and $9,971 0.48
U.S. Government
Agencies
Mortgage Backed
Securities:
Fixed 16,328 2.42
Adjustable 3,297 3.53
Obligations of States 12,177 2.68
and Political
Subdivisions
Other Securities 100 0*
-------------------------
$41,873 2.11
======= ====
- ----------
* Other Securities excluded from calculated average for total securities.
Investment Securities (CON'T)
Yield, Maturity and Market Value
Gross Gross
Amortized Unrealized Unrealized
December 31, 1996 Cost Gains Losses
- -----------------------------------------------------------
Held for Sale: $51,684 $290 $(475)
U.S.Treasury and
U.S.Government
Agencies
Mortgage Backed
Securities:
Fixed 70,083 90 (719)
Adjustable 12,508 69 (295)
Mutual Funds 35,377 0 (1,044)
Other securities 2,961 1 0
------------------------------------
$172,613 $450 $(2,533)
======== ==== =======
Held for Investment: $15,596 $267
U.S. Treasury and
U.S. Government
Agencies
Mortgage Backed
Securities:
Fixed 19,163 250 (86)
Adjustable 3,901 15 (14)
Obligations of States 13,879 484 (7)
and Political
Subdivisions
Other Securities 100 0 0
-----------------------------------
$52,639 $1,016 $(107)
======= ====== =====
- ----------
* Other Securities excluded from calculated average for total securities.
Investment Securities (CON'T)
Yield, Maturity and Market Value
Gross Average
Market Years to
December 31, 1996 Value Maturity
- ------------------------------------------------
Available for Sale:
U.S.Treasury and $51,499 2.81%
U.S.Government
Agencies
Mortgage Backed
Securities:
Fixed 69,454 2.62
Adjustable 12,282 6.89
Mutual Funds 34,333
Other securities 2,962 *
-------------------------
$170,530 2.45
======== ====
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 14,356 3.29
and Political
Subdivisions
Other Securities 100 *
---------------------
$53,548 2.37
======= ====
- ----------
* Other Securities excluded from calculated average for total securities.
================================================================================
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.
SFAS 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 judgments 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.
Maturity of Certificates of Deposit
of $100,000 or More
Table 15
(Dollars in thousands)
% of % of
December 31 1997 Total 1996 Total
- ---------------------------------------------------------------
Maturity Group:
Under 3 months $16,903 26.0% $17,974 32.0%
3 to 6 months 12,644 19.5 11,967 21.3
6 to 12 months 17,375 26.7 14,885 26.5
Over 12 months 18,101 27.8 11,348 20.2
--------------------------------------------
Total $65,023 100.0% $56,174 100.0%
--------------------------------------------
================================================================================
INTEREST RATE SENSITIVITY(1)
Table 16
(Dollars in thousands)
0-3 4-12 1-5
December 31, 1997 Months Months Years
- ----------------------------------------------------------------
Federal funds sold $ 36,100 $0 $0
Securities 78,119 37,460 98,198
Loans available for 15,020
sale
Loans (2) 89,677 112,362 253,208
------------------------------------------
Earning assets 218,916 149,822 351,406
Savings deposits 328,980 0 0
Certificates of 93,883 156,243 108,798
deposit
Other short term
borrowings 52,112 0 0
------------------------------------------
Total interest
bearing liabilities 474,975 156,243 108,798
------------------------------------------
Interest sensitivity $(256,059) $ (6,421) $242,608
gap ========= ========= ========
Cumulative gap $(256,059) $(262,480) $(19,872)
========= ========= ========
Cumulative gap to
earning assets (%) (29.0) (29.7) (2.3)
Earning assets to
interest bearing
liabilities (%) 46.1 95.9 323.0
INTEREST RATE SENSITIVITY(1)(CON'T)
(Dollars in thousands)
Over 5
December 31, 1997 Years Total
- --------------------------------------------------
Federal funds sold $0 $ 36,100
Securities 6,373 220,150
Loans available for
sale 0 15,020
Loans (2) 156,429 611,676
----------------------------
Earning assets 162,802 882,946
Savings deposits 0 328,980
Certificates of
deposit (3) 0 358,924
Other short term
borrowings 0 52,112
----------------------------
Interest bearing
liabilities 0 740,016
----------------------------
Interest sensitivity
gap $162,802 $142,930
======== ========
Cumulative gap $142,930
========
Cumulative gap to
earning assets (%) 16.2
Earning assets to N/M
interest bearing
liabilities (%)
- ----------
(1) The repricing dates may differ from maturity dates for certain assets due
to prepayment assumptions.
(2) Excludes nonaccrual loans.
(3) This category is comprised of NOW, savings and money market deposits. If
NOW and savings deposits (totaling $160,700,000) were deemed to be
repriceable in "4-12 months," the interest sensitivity gap and cumulative
gap would be $95,359,000 indicating 10.8% of total earning assets and
69.7% of earning assets to interest bearing liablilities for the "0-3
months" category.
N/M Not meaningful.
================================================================================
SELECTED QUARTERLY INFORMATION
Quarterly Consolidated Income Statement
1997 Quarters
-------------
(Dollars in thousands except per Fourth Third
share data)
--------------------------------------------------------------------------
Net interest income:
Interest income $16,472 $15,806
Interest expense 6,721 6,494
----- -----
Net interest income 9,751 9,312
Provision for loan losses 300 225
--- ---
Net interest income after provision for 9,451 9,087
losses
Noninterest income:
Service charges on deposit accoun 1,074 1,176
Trust fees 513 561
Other service charges and fees 446 389
Brokerage commissions and fees 391 440
Other 266 115
Securities gains (losses) 34 51
-- --
Total noninterest income 2,724 2,732
Noninterest expenses:
Salaries and wages 3,194 3,293
Pension and other employee benefits 684 737
Occupancy 755 748
Furniture and equipment 604 561
Marketing 541 558
Legal and professional fees 233 253
FDIC assessments 34 34
Foreclosed and repossessed asset
management and dispositions 61 44
Amortization of intangibles 167 168
Merger Related Expenses 0 0
Other 3,268 2,179
----- -----
Total noninterest expenses 9,541 8,575
----- -----
Income before income taxes 2,634 3,244
Provision for income taxes 961 1,182
--- -----
Net income $ 1,673 $ 2,062
======= =======
PER COMMON SHARE DATA
Net income diluted $ 0.32 $ 0.39
======= =======
Cash dividends declared:
Class A common stock $ 0.22 $ 0.20
Market price Class A common stock:
Low close 34 1/4 29 3/4
High close 39 1/2 38 1/2
Bid price at end of period 38 1/4 35
SELECTED QUARTERLY INFORMATION (CON'T)
Quarterly Consolidated Income Statement
- ---------------------------------------
1997 Quarters
-------------
(Dollars in thousands except per Second First
share data)
- --------------------------------------------------------------------------------
Net interest income:
Interest income $ 16,237 $ 16,163
Interest expense 6,684 6,702
----- -----
Net interest income 9,553 9,461
Provision for loan losses 172 216
--- ---
Net interest income after provision for 9,381 9,245
losses
Noninterest income:
Service charges on deposit accoun 984 948
Trust fees 568 564
Other service charges and fees 441 412
Brokerage commissions and fees 510 512
Other 303 283
Securities gains (losses) 65 (102)
-- ----
Total noninterest income 2,871 2,617
Noninterest expenses:
Salaries and wages 3,378 3,338
Pension and other employee benefits 769 755
Occupancy 722 736
Furniture and equipment 562 540
Marketing 546 506
Legal and professional fees 247 185
FDIC assessments 36 32
Foreclosed and repossessed asset
management and dispositions 80 22
Amortization of intangibles 168 168
Merger Related Expenses 1,467 75
Other 2,020 1,957
----- -----
Total noninterest expenses 9,995 8,314
----- -----
Income before income taxes 2,257 3,548
Provision for income taxes 820 1,288
--- -----
Net income $ 1,437 $ 2,260
======== ========
PER COMMON SHARE DATA
Net income $ 0.28 $ 0.43
======== ========
Cash dividends declared:
Class A common stock $ 0.20 $ 0.20
Market price Class A common stock:
Low close 24 5/8 25 5/8
High close 30 1/2 29 1/2
Bid price at end of period 29 3/4 28
SELECTED QUARTERLY INFORMATION (CON'T)
Quarterly Consolidated Income Statement
- ---------------------------------------
1996 Quarters
-------------
(Dollars in thousands except per Fourth Third
share data)
- --------------------------------------------------------------------------------
Net interest income:
Interest income $ 15,950 $ 15,072
Interest expense 6,539 6,094
----- -----
Net interest income 9,411 8,978
Provision for loan losses 634 59
--- --
Net interest income after provision for 8,777 8,919
losses
Noninterest income:
Service charges on deposit accounts 955 859
Trust fees 519 505
Other service charges and fees 431 368
Brokerage commissions and fees 534 432
Other 317 240
Securities gains (losses) 23 8
-- -
Total noninterest income 2,779 2,412
Noninterest expenses:
Salaries and wages 3,362 3,125
Pension and other employee benefits 761 669
Occupancy 644 676
Furniture and equipment 514 515
Marketing 587 416
Legal and professional fees 264 219
FDIC assessments (37) 555
Foreclosed and repossessed asset
management and dispositions 78 100
Amortization of intangibles 166 165
Merger Related Expenses 0 0
Other 1,973 1,797
----- -----
Total noninterest expenses 8,312 8,237
----- -----
Income before income taxes 3,244 3,094
Provision for income taxes 1,164 1,124
----- -----
Net income $ 2,080 $ 1,970
======== ========
PER COMMON SHARE DATA
Net income $ 0.40 $ 0.38
======== ========
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
SELECTED QUARTERLY INFORMATION (CON'T)
Quarterly Consolidated Income Statement
- ---------------------------------------
1996 Quarters
-------------
(Dollars in thousands except per share Second First
data)
- --------------------------------------------------------------------------------
Net interest income:
Interest income $ 14,947 $ 15,306
Interest expense 5,987 6,432
----- -----
Net interest income 8,960 8,874
Provision for loan losses 214 183
--- ---
Net interest income after provision 8,746 8,691
for losses
Noninterest income:
Service charges on deposit accounts 820 801
Trust fees 513 532
Other service charges and fees 418 406
Brokerage commissions and fees 569 511
Other 275 326
Securities gains (losses) 20 25
-- --
Total noninterest income 2,615 2,601
Noninterest expenses:
Salaries and wages 2,957 3,003
Pension and other employee benefits 685 760
Occupancy 692 663
Furniture and equipment 519 490
Marketing 467 408
Legal and professional fees 328 235
FDIC assessments 58 58
Foreclosed and repossessed asset
management and dispositions (31) 35
Amortization of intangibles 165 165
Merger Related Expenses 0 0
Other 1,754 1,808
----- -----
Total noninterest expenses 7,594 7,625
----- -----
Income before income taxes 3,767 3,667
Provision for income taxes 1,327 1,318
----- -----
Net income $ 2,440 $ 2,349
======== ========
PER COMMON SHARE DATA
Net income $ 0.47 $ 0.46
======== ========
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
================================================================================
SELECTED QUARTERLY INFORMATION
Consolidated Quarterly Average Balances, Yields and Rates (1)
- -------------------------------------------------------------
1997 QUARTERS
Fourth Third
------------------------
Average Yield Average Yield
Balance /Rate Balance /Rate
- --------------------------------------------------------------------------
Assets
Earning Assets
Securities
Taxable $188,710 6.09% $192,333 6.09%
Nontaxable 12,471 8.47 13,899 8.17
--------------------------------------
Total Securities 201,181 6.23 206,232 6.23
Federal funds sold and
other short term investments 31,150 5.53 16,829 5.52
Loans (2) 615,617 8.37 592,608 8.34
--------------------------------------
Total Earning Assets 847,948 7.75 815,669 7.73
Allowance for loan losses (5,353) (5,472)
Cash and due from banks 28,189 23,430
Bank premises and equipment 18,247 18,636
Other assets 16,209 16,531
--------------------------------------
$905,240 $868,794
======== ========
Liabilities and Shareholders' Equity
Interest bearing liabilities
NOW including Super NOW) $72,492 1.63% $64,852 1.63%
Savings deposits 72,893 2.26 74,837 2.31
Money market accounts 168,846 2.21 168,451 2.24
Time deposits 358,536 5.27 356,410 5.26
Federal funds purchased and
other short term borrowings 29,326 4.11 11,415 4.14
--------------------------------------
Total Interest Bearing 702,093 3.8 675,965 3.81
Demand deposits 116,188 106,620
Other liabilities 4,975 4,533
--------------------------------------
Total 823,256 787,118
Shareholders' equity 81,984 81,676
--------------------------------------
$905,240 $868,794
======== ========
Interest expense as % of earning 3.14% 3.16%
assets
Net interest income as % of earning 4.60 4.57
assets
SELECTED QUARTERLY INFORMATION (CON'T)
Consolidated Quarterly Average Balances, Yields and Rates (1)
- -------------------------------------------------------------
1997 QUARTERS
Second First
------------------------
Average Yield Average Yield
Balance /Rate Balance /Rate
- --------------------------------------------------------------------------
Assets
Earning Assets
Securities
Taxable $208,484 6.25% $205,709 6.05%
Nontaxable 14,057 8.22 14,066 8.33
--------------------------------------
Total Securities 222,541 6.38 219,775 6.21
Federal funds sold and
other short term investments 23,534 5.40 40,992 5.29
Loans (2) 591,649 8.45 583,342 8.59
--------------------------------------
Total Earning Assets 837,724 7.82 844,109 7.81
Allowance for loan losses (5,703) (5,691)
Cash and due from banks 25,543 27,453
Bank premises and equipment 17,722 17,361
Other assets 17,105 16,537
--------------------------------------
$892,391 $899,769
======== ========
Liabilities and Shareholders' Equity
Interest bearing liabilities
NOW including Super NOW) $74,188 1.80% $77,562 1.81%
Savings deposits 79,835 2.48 81,475 2.56
Money market accounts 168,223 2.26 164,061 2.26
Time deposits 363,364 5.29 356,239 5.29
Federal funds purchased and
other short term borrowings 11,494 4.05 29,037 3.88
--------------------------------------
Total Interest Bearing 697,104 3.85 708,374 3.84
Demand deposits 108,544 106,118
Other liabilities 6,017 5,463
--------------------------------------
Total 811,665 819,955
Shareholders' equity 80,726 79,814
--------------------------------------
$892,391 $899,769
======== ========
Interest expense as % of earning 3.20% 3.22%
assets
Net interest income as % of earning 4.62 4.59
assets
SELECTED QUARTERLY INFORMATION (CON'T)
Consolidated Quarterly Average Balances, Yields and Rates (1)
- -------------------------------------------------------------
1996 QUARTERS
Fourth Third
------------------------
Average Yield Average Yield
Balance /Rate Balance /Rate
- --------------------------------------------------------------------------
Assets
Earning Assets
Securities
Taxable $203,564 6.14% $205,192 5.99%
Nontaxable 14,638 8.36 15,015 8.36
--------------------------------------
Total Securities 218,202 6.29 220,207 6.15
Federal funds sold and
other short term investments 38,677 5.28 9,149 5.26
Loans (2) 568,328 8.48 547,738 8.46
--------------------------------------
Total Earning Assets 825,207 7.74 777,094 7.77
Allowance for loan losses (5,230) (5,212)
Cash and due from banks 25,098 20,500
Bank premises and equipment 17,234 17,100
Other assets 16,737 16,160
--------------------------------------
$879,046 $825,642
--------------------------------------
Liabilities and Shareholders' Equity
Interest bearing liabilities
NOW including Super NOW) $74,259 1.67% $63,715 1.66%
Savings deposits 79,840 2.61 79,003 2.51
Money market accounts 157,043 2.21 156,859 2.14
Time deposits 350,025 5.26 335,281 5.20
Federal funds purchased and other
short term borrowings 20,079 3.96 8,756 4.54
--------------------------------------
Total Interest Bearing 681,246 3.82 643,614 3.77
Demand deposits 112,447 98,441
Other liabilities 6,982 6,629
--------------------------------------
Total 800,675 748,684
Shareholders' equity 78,371 76,958
--------------------------------------
$879,046 $825,642
======== ========
Interest expense as % of earning 3.15% 3.12%
assets
Net interest income as % of earning 4.59 4.65
assets
- ----------
(1)The tax equivalent adjustment is based on a 34% tax rate. All yields/rates
are calculated on an annualized basis.
SELECTED QUARTERLY INFORMATION (CON'T)
Consolidated Quarterly Average Balances, Yields and Rates (1)
- -------------------------------------------------------------
1996 QUARTERS
Second First
------------------------
Average Yield Average Yield
Balance /Rate Balance /Rate
- --------------------------------------------------------------------------
Assets
Earning Assets
Securities
Taxable $227,771 6.03% $223,551 6.11%
Nontaxable 15,236 8.30 16,595 8.22
--------------------------------------
Total Securities 243,007 6.18 240,146 6.25
Federal funds sold and
other short term investments 10,307 5.31 53,318 5.37
Loans (2) 530,771 8.47 506,049 8.72
--------------------------------------
Total Earning Assets 784,085 7.72 799,513 7.76
Allowance for loan losses (5,076) (5,001)
Cash and due from banks 23,302 25,757
Bank premises and equipment 17,121 17,294
Other assets 16,128 16,615
--------------------------------------
$835,560 $854,178
======== ========
Liabilities and Shareholders' Equity
Interest bearing liabilities
NOW including Super NOW) $68,846 1.31% $66,551 1.36%
Savings deposits 79,714 2.38 82,198 2.46
Money market accounts 161,385 2.04 164,234 2.17
Time deposits 327,007 5.28 332,090 5.49
Federal funds purchased and other
short term borrowings 15,578 4.57 28,617 3.95
--------------------------------------
Total Interest Bearing 652,530 3.69 673,690 3.84
Demand deposits 101,890 100,345
Other liabilities 5,970 6,554
--------------------------------------
Total 760,390 780,589
Shareholders' equity 75,170 73,589
--------------------------------------
$835,560 $854,178
======== ========
Interest expense as % of earning 3.07% 3.24%
assets
Net interest income as % of earning 4.65 4.52
assets
- ----------
(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.
================================================================================
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. Were 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 1997 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
Executive Vice President and Chief Financial Officer
John R. Turgeon
Controller
<PAGE>
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, 1997 and 1996, and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Miami, Florida,
January 20, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars except per share data)
Year Ended December 31 1997 1996 1995
- ----------------------------------------------------------------
Interest on securities
Taxable $12,129 $13,023 $15,927
Nontaxable 777 869 942
Interest and fees on loans 50,252 45,901 36,895
Interest on federal funds 1,520 1,482 2,496
sold
------------------------------------
Total Interest Income 64,678 61,275 56,260
Interest on deposits 6,856 6,445 6,588
Interest on time 18,928 17,849 18,228
certificates
Interest on borrowed money 817 758 409
------------------------------------
Total Interest Expense 26,601 25,052 25,225
------ ------ ------
Net Interest Income 38,077 36,223 31,035
Provision for loan losses 913 1,090 456
------------------------------------
Net Interest Income
After Provision for 37,164 35,133 30,579
Loan Losses
Noninterest income
Securities gains 48 76 421
Other 10,896 10,331 8,747
Noninterest expenses 36,425 31,768 27,766
------------------------------------
Income Before Income 11,683 13,772 11,981
Taxes
Provision for income taxes 4,251 4,933 4,208
------------------------------------
Net Income $ 7,432 $ 8,839 $ 7,773
======= ======= =======
- ----------------------------------------------------------------
Net income per share common
stock
Diluted $1.42 $1.71 $1.51
Basic $1.45 $1.73 $1.52
---- ---- ----
Average shares outstanding
(Diluted) 5,251,712 5,180,984 5,158,466
(Basic) 5,128,208 5,096,856 5,113,923
- ----------
See notes to consolidated financial statements.
================================================================================
CONSOLIDATED BALANCE SHEETS
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
December 31 1997 1996
- ----------------------------------------------------------------
Assets
Cash and due from banks $ 28,336 29,358
Federal funds sold 36,100 80,650
Securities:
Securities held for sale (at market) 178,988 170,530
Securities held for investment
(market values:
1997 - $41,873 and 1996 - $53,548) 41,162 52,639
---------------------------
Total Securities 220,150 223,169
Loans available for sale 15,020 0
Loans 613,930 576,324
Less: Allowance for loan losses 5,363 5,657
---------------------------
Net Loans 608,567 570,667
Bank premises and equipment 18,324 17,213
Other real estate owned 536 1,064
Core deposit intangibles 1,640 1,975
Goodwill 3,582 3,882
Other assets 10,782 10,523
---------------------------
$943,037 $938,501
======== ========
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand deposits (noninterest
bearing) $118,194 $138,023
Savings deposits 328,980 321,227
Other time deposits 293,901 296,069
Time certificates of $100,000 or
more 65,023 56,174
---------------------------
Total Deposits 806,098 811,493
Federal funds purchased and securities
sold under agreement to repurchase,
maturing within 30 days 52,112 45,088
Other liabilities 3,763 4,925
---------------------------
861,973 861,506
Commitments and Contingent(Notes I and N)
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 4,795,853 and
outstanding 4,769,698 shares in 1997,
and 4,644,177 issued and outstanding
4,613,977 shares in 1996 479 465
Class B common stock, par value $.10
per share authorized 810,000 shares,
issued and outstanding 377,273 shares
in 1997 and 492,529 shares in 1996 38 49
Additional paid-in capital 27,256 26,936
Retained earnings 55,249 52,090
Less: Treasury Stock (26,155 shares in
1997 and 30,200 shares in 1996), at
cost (1,289) (911)
---------------------------
81,733 78,629
Securities valuation allowance (669) (1,634)
---------------------------
Total Shareholders' Equity 81,064 76,995
---------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $943,037 $938,501
======== ========
- ----------
See notes to consolidated financial statements.
================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
Year Ended December 31 1997 1996 1995
- -------------------------------------------------------------------
Increase (Decrease) in Cash and
Cash Equivalents
Cash flows from operating
activities
Interest received $ 64,718 $ 61,092 $ 57,241
Fees and commissions received 10,821 9,767 8,435
Interest paid (26,932) (25,385) (25,008)
Cash paid to suppliers and (34,366) (28,862) (25,029)
employees
Income taxes paid (5,032) (5,488) (3,468)
------ ------ ------
Net cash provided by operating 9,209 11,124 12,171
activities
Cash flows from investing
activities
Maturities of securities held
for sale 26,581 46,987 40,317
Maturities of securities held
for investment 17,602 10,046 26,798
Proceeds from sale of
securities held for sale 73,302 53,758 124,301
Purchase of securities held for
sale (106,861) (65,697) (115,152)
Purchase of securities held for
investment (5,928) (5,011) (5,112)
Proceeds from sale of loans 33,274 85,467 61,640
Net new loans and principal
repayments (87,168) (194,129) (158,158)
Proceeds from sale of other
real estate owned 861 1,081 327
Additions to bank
premises and equipment (3,005) (1,798) (371)
Purchase of American Bank
Capital Corporation of
Florida, net of cash 0 0 (4,659)
Net change in other assets (415) (339) (227)
----------------------------------
Net cash used in investing
activities (51,757) (69,635) (30,296)
Cash flows from financing
activities
Net increase (decrease) in (5,404) 46,301 56,592
deposits
Net increase (decrease) in
federal funds purchased and 7,024 1,181 (1,632)
repurchase agreements
Issuance of common stock -
Employee Stock Purchase 0 0 115
and Profit Sharing Plans
Exercise of stock options 879 369 (50)
Treasury stock acquired (1,524) 131 (1,676)
Dividends paid (3,999) (2,732) (2,277)
---------------------------------
Net cash provided by financing (3,024) 45,250 51,072
activities
---------------------------------
Net increase (decrease) in cash (45,572) (13,261) 32,947
and cash equivalents
Cash and cash equivalents at 110,008 123,269 90,322
beginning of year
---------------------------------
Cash and cash equivalents at end
of year $64,436 $110,008 $123,269
======= ======== ========
- ----------
See Note P for supplemental disclosures. See notes to consolidated
financial statements.
================================================================================
Consolidated Statements of Shareholders' Equity
Seacoast Banking Corporation of Florida and Subsidiaries
Common Stock
Class A Class B
-------------------------------------------
(In thousands of
dollars) Shares Amount Shares Amount
- ------------------------------------------------------------------
Balance at December 4,567,400 457 563,354 56
31, 1994
Exchange of Class B 46,143 4 (46,143) (4)
common stock for
Class A common stock
Issuance of Class A 5,952 1
common stock for
Employee Stock
Purchase and Profit
Sharing Plan
Treasury stock (71,500)
acquired
Treasury stock issued 694
for Employee Stock
Purchase and Profit
Sharing Plan
Exercise of stock
options and warrants
Net income
Cash dividends
declared
Net change in
securities valuation
equity (allowance)
-------------------------------------------
Balance at December
31, 1995 4,548,689 462 517,211 52
Exchange of Class B 24,682 3 (24,682) (3)
common stock for
Class A common stock
Treasury stock (736)
acquired
Treasury stock issued 2,842
for Employee Stock
Purchase and Profit
Sharing Plan
Treasury stock issued 28,500
for exercise of stock
options
Excercise of Stock
Options and Warrants
Treasury stock issued 10,000
for stock awards
Net income
Cash dividends
declared
Net change in
securities
valuation equity
(allowance)
-------------------------------------------
Balance at December
31, 1996 4,613,977 465 492,529 49
Exchange of Class B
common stock for
Class A common stock 115,256 11 (115,256) (11)
Treasury stock (37,892)
acquired
Treasury stock issued
for Emploee Stock
Purchase and Profit
Sharing Plan 2,170
Treasury stock issued
for exercise of stock
options 35,767
Exercise of stock
options (new issue) 36,420 3
Treasury stock issued
for stock awards 4,000
Net income
Cash dividends
declared
Net change in
securities valuation
equity (allowance)
-------------------------------------------
Balance at December
31, 1997 4,769,698 $479 377,273 $38
========= === ======= ==
- ----------
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity (CON'T)
Seacoast Banking Corporation of Florida and Subsidiaries
Additional
(In thousands of Paid-in Retained Treasury
dollars) Capital Earnings Stock
- ----------------------------------------------------------------
Balance at December 31, $26,782 40,843 0
1994
Exchange of Class B
common stock for
Class A common stock
Issuance of Class A 113
common stock for
Employee Stock
Purchase and Profit
Sharing Plan
Treasury stock acquired (1,692)
Treasury stock issued 16
for Employee Stock
Purchase and Profit
Sharing Plan
Exercise of stock
options and warrants 9 (58)
Net income 7,773
Cash dividends declared (2,277)
Net change in
securities valuation
equity (allowance)
-----------------------------------------
Balance at December 31,
1995 26,904 46,281 (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 (10) (300) 644
for exercise of stock
options
Exercise of stock
options and warrants 32
Treasury stock issued 11 75
for stock awards
Net income 8,839
Cash dividends declared (2,730)
Net change in
securities
valuation equity
(allowance)
-----------------------------------------
Balance at December 31,
1996 26,936 52,090 (911)
Exchange of Class B
common stock for Class
A common stock
Treasury stock acquired (1,420)
Treasury stock issued
for Employee Stock
Purchase and Profit
Sharing Plan 6 58
Treasury stock issued
for exercise of stock
options (46) (274) 883
Exercise of stock
options (new issue) 313
Treasury stock issued
for stock awards 47 101
Net income 7,432
Cash dividends declared (3,999)
Net change in
securities valuation
equity (allowance)
-----------------------------------------
Balance at December 31,
1997 $27,256 $55,249 $(1,289)
======= ======= =======
- ----------
See notes to consolidated financial statements.
Consolidated Statements of Shareholders' Equity (CON'T)
Seacoast Banking Corporation of Florida and Subsidiaries
Securities
Valuation
(In thousands of Equity
dollars) (Allowance) Total
- ------------------------------------------------------
Balance at December 31,
1994 (5,163) 62,975
Exchange of Class B
common stock for Class
A common stock
Issuance of Class A 114
common stock for
Employee Stock
Purchase and
Profit Sharing Plan
Treasury stock acquired (1,692)
Treasury stock issued 16
for Employee
Stock Purchase and
Profit Sharing Plan
Exercise of stock (49)
options
Net income 7,773
Cash dividends declared (2,277)
Net change in
securities valuation
equity (allowance) 4,295 4,295
-------------------------------
Balance at December 31, (868) 71,155
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 334
for exercise of stock
options
Exercise of stock
options and warrants 32
Treasury stock issued 86
for stock awards
Net income 8,839
Cash dividends declared (2,730)
Net change in
securities
valuation equity
(allowance) (766) (766)
-------------------------------
Balance at December 31, (1,634) 76,995
1996
Exchange of Class B
common stock for Class
A common stock
Treasury stock acquired (1,420)
Treasury stock issued
for Employee Stock
Purchase and Profit
Sharing Plan 64
Treasury stock issued
for exercise of stock
options 563
Exercise of stock
options (new issue) 316
Treasury stock issued
for stock awards 148
Net income 7,432
Cash dividends declared (3,999)
Net change in
securities valuation
equity (allowance) 965 965
-------------------------------
Balance at December 31,
1997 $(669) $81,064
==== ======
- ----------
See notes to consolidated financial statements.
================================================================================
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 acquires mortgage servicing rights
through the origination of mortgage loans, and thee 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.
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.
Business Combinations: The accompanying consilidated financial statements
include the financial position and results of operations on Port St. Lucie
National Bank Holding Corporation ("PSHC"), which the Company acquired on May
30, 1997. PSHC shareholders received 848,576 shares of Class A common stock for
all their issued and outstanding stock, warrants and options. This transaction
was accounted for under the pooling-of-interests method of accounting and,
accordingly, the consolidated financial statements have been restated as if the
Company had operated as one intity since inception. Interest income and net
income of the Company and PSHC for the periods indicated before the
pooling-of-interests combination was consummated are as follows:
Three Months Year Ended
Ended March 31 December 31
- --------------------------------------------------------------------------------
(Dollars in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
Interest Income:
Company $13,634 $51,822 $48,151
PSHC 2,529 9,453 8,109
Net Income:
Company $ 1,935 $ 7,609 $ 6,826
PSHC 325 1,230 947
================================================================================
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, 1997 was approximately $3,600,000.
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, 1997, the
maximum amount available for transfer from the subsidiary bank to the Company in
the form of loans approximated 19 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 1998, without
prior approval of the Comptroller of the Currency, approximately $11,400,000.
================================================================================
NOTE C - SECURITIES
The amortized cost and market value of securities at December 31, 1997, by
contractual maturity, are shown below. Expected aturities will differ from
contractual maturities because borrowers may have the right to call or repay
obligations with or without call or prepayment penalties.
Held for
Investment Held for Sale
- --------------------------------------------------------------------------------
(In thousands Amortized Market Amortized Market
of dollare) Cost Value Cost Value
- --------------------------------------------------------------------------------
Due in one year or less $ 2,223 $ 2,234 $11,967 $11,952
Due after one year 17,584 17,934 43,480 43,459
through five years
Due after five years 1,274 1,340 0 0
through ten years
Due after ten years 688 741 0 0
-------------------------------------------
21,769 22,248 55,447 55,411
Mortgage backed 19,393 19,625 96,919 96,759
securities
No contractual maturity 0 0 27,507 26,818
-------------------------------------------
$ 41,162 $ 41,873 $179,873 $178,988
======== ======== ======== ========
Proceeds from sales of securities during 1997 were $73,302,000 with gross gains
of $392,000 and gross losses of $344,000. During 1996, proceeds from sales of
securities were $53,758,000 with gross gains of $154,000 and gross losses of
$78,000. During 1995, proceeds from sales of securities were $124,301,000 with
gross gains of $778,000 and gross losses of $357,000.
Securities with a carrying value of $113,173,000 at December 31, 1997, were
pledged to secure United States Treasury deposits, other public deposits, trust
deposits and repurchase agreements with customers of the Company's subsidiary
bank.
The amortized cost and market value of securities follow:
Gross Gross
Amortized Unrealized Unrealized Market
(In thousands of dollars) Cost Gains Losses Value
- --------------------------------------------------------------------------------
December 31, 1997:
Securities Held for Sale:
U.S. Treasury and U.S.
Government agencies $ 55,447 $ 146 $ (182) $55,411
Mortgage backed
securities: 96,919 421 (581) 96,759
Mutual funds 24,914 20 (711) 24,223
Other securities 2,593 2 0 2,595
-----------------------------------------------
$179,873 $ 589 $(1,474) $178,988
======== ====== ======= ========
Securities Held for
Investment:
U.S. Treasury and U.S. $ 9,908 $ 63 $ 0 $ 9,971
Government agencies
Mortgage backed securities 19,393 305 (73) 19,625
Obligations of states and
political subdivisions 11,761 416 0 12,177
Other securities 100 0 0 100
-----------------------------------------------
$ 41,162 $ 784 $(73) $ 41,873
======== ====== ==== ========
December 31, 1996:
Securities Held for Sale:
U.S. Treasury and U.S.
Government agencies $ 51,684 $ 290 $ (475) $ 51,499
Mortgage backed securities 82,591 159 (1,014) 81,736
Mutual funds 35,377 0 (1,044) 34,333
Other securities 2,961 1 0 2,962
-----------------------------------------------
$172,613 $450 $(2,533) $170,530
======== ==== ======= ========
Securities Held for
Investment:
U.S. Treasury & U.S. $ 15,596 $ 267 $ 0 $ 15,863
Government agencies
Mortgage backed securities 23,064 265 (100) 23,229
Obligations of states and 13,879 484 (7) 14,356
political subdivisions
Other securities 100 0 0 100
-----------------------------------------------
$ 52,639 $1,016 $ (107) $53,548
======== ====== ======= =======
================================================================================
NOTE D - LOANS
An analysis of loans follows:
December 31 (In 1997 1996
thousands of dollars)
- -------------------------------------------------
Real estate $ 14,141 $ 18,459
construction
Real estate mortgage 494,632 448,680
Commercial and 31,239 35,459
financial
Installment loans to 73,673 72,486
individuals
Other 245 1,240
--------------------------
$613,930 $576,324
======== ========
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 $4,425,000 and $3,777,000 at
December 31, 1997 and 1996, respectively. During 1997, $2,280,000 of new loans
were made and repayments totalled $1,632,000.
See Page 23 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:
December 31, 1997 1996
(In thousands Recorded Valuatio Recorded Valuation
of dollars) Investment Allowance Investment Allowance
- --------------------------------------------------------------------------------
Impaired loans:
Valuation $ 0 $ 0 $ 0 $ 0
allowance
required
No valuation 174 0 925 0
allowance
required
------------------------------------------------
$ 174 $ 0 $925 $ 0
====== ===== ==== =====
The valuation allowance is included in the allowance for loan losses. The
average recorded investment in impaired loans for the years ended December 31,
1997 and 1996 were $154,000 and $1,361,000 respectively.
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 $5,000 for the year ended
December 31, 1997.
Transactions in the allowance for loan losses are summarized as follows:
Year Ended December 31 1997 1996 1995
(In thousands of dollars)
- -------------------------------------------------------------------
Balance, beginning of year $5,657 $4,893 $4,072
Provision charged to operating expense 913 1,090 456
0 0 556
Allowance applicable to loans of
purchased company
Charge offs (1,554) (725) (618)
Recoveries 347 399 427
------------------------------
Balance, end of year $5,363 $ 5,657 $4,893
====== ======= ======
================================================================================
NOTE F - BANK PREMISES AND EQUIPMENT
Bank premises and equipment are summarized as follows:
Accumulated
Depreciation Net
& Carrying
(In thousands of dollars) Cost Amortization Value
- -----------------------------------------------------------------------
December 31, 1997
Premises (including land of $19,646 $6,172 $13,473
$2,967)
Furniture and equipment 14,336 9,485 4,851
--------------------------------------
$33,981 $15,657 $18,324
--------------------------------------
December 31, 1996
Premises (including land of $18,934 $5,617 $13,317
$3,391)
Furniture and equipment 13,386 9,490 3,896
--------------------------------------
$32,320 $15,107 $17,213
======= ======= =======
================================================================================
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:
(In thousands of dollars) 1997 1996 1995
- ----------------------------------------------------------
Maximum amount outstanding
at any month end $52,112 $45,088 $43,907
Average interest rate
outstanding at end of 4.30% 3.92% 3.91%
year
Average amount outstanding $20,294 $18,236 $8,651
Weighted average interest 4.03% 4.16% 4.73%
rate
The Company's subsidiary bank has unused lines of credit to purchase federal
funds from its correspondent banks of $48,000,000 at December 31, 1997.
================================================================================
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 $814,000 in 1997, $801,000 in 1996 and $572,000 in 1995.
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 149,000 shares, respectively through
December 31, 1997. 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 1995,1996
and 1997:
Weighted Weighted
Average Average
Number Fair Option Price Exercise
of Shares Value Per Share Price
----------------------------------------------
Options
outstanding,
January 1, 1995 256,500 $8.24-22.92 $14.86
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 300,500 8.24 - 22.92 15.36
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 311,000 8.24 - 22.92 16.59
Excercised (72,000) 8.24-22.92 12.04
Granted 51,000 6.90 25.50 25.50
51,000 8.24-22.92 10.57
(5,000) 17.50-19.00 18.79
Options
outstanding,
December 31, 1997 285,000 11.00-25.50 19.33
======= ===== ===== =====
Options
exercisable,
December 31, 1995 130,000 12.89
December 31, 1996 159,000 14.38
December 31, 1997 154,000 16.91
The following table summarizes information about stock options outstanding at
December 31, 1997:
Options Outstanding Options Exercisable
- -------------------------------------------------------------------
Weighted
Average
Number of Remaining Weighted Number of Weighted
Range of Shares Contrac- Average Shares Average
Exercise Outstand- tual Life Exercise Exercis- Exercise
Prices ing in Years Price able Price
- -------------------------------------------------------------------
$11.00 10,000 3.42 $ 11.00 10,000 $11.00
11.75 23,500 4.17 11.75 23,500 11.75
14.50 1,500 1.33 14.50 1,500 14.50
17.50 49,000 7.17 17.50 16,000 17.50
17.75 35,000 5.92 17.75 35,000 17.75
19.00 66,800 5.17 19.00 66,800 19.00
21.75 47,000 8.50 21.75 -- --
21.93 1,200 1.33 21.93 1,200 21.93
25.50 51,000 9.58 25.50 -- --
- ----- ------ ---- ----- ----- -----
285,000 6.01 17.59 154,000 16.91
======= ==== ===== ======= =====
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 No. 123, the Company's net
income and earnings per share would have been reduced to the following pro forma
amounts:
In Thousands 1997 1996 1995
- -------------------------------------------------------------
Net Income: As Reported $7,432 $8,839 $7,773
Pro Forma 7,278 8,758 7,734
Per Share: As Reported
(Diluted) 1.42 1.71 1.51
Pro Forma 1.39 1.69 1.50
Because the SFAS No.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 1997, 1996 and 1995; risk-free interest rates of
6.90 percent for 1997, 7.11 percent for 1996 and 7.59 percent for 1995; expected
dividend yield of 2.5 percent; expected lives of 7 years; expected volatility of
30.4 percent for 1997 and 20.8 percent for 1996 and 1995.
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, 1997, future minimum lease
payments under leases with initial or remaining terms in excess of one year are
as follows:
(In thousands of dollars)
- ------------------------------
1998 $1,396
1999 1,266
2000 1,061
2001 1,053
2002 755
Thereafter 7,391
-------
$12,922
=======
Rent expense charged to operations was $1,382,000 in 1997, $1,278,000 in 1996,
and $1,172,000 in 1995. 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 $217,000 in 1997,
$293,000 in 1996, and $272,000 in 1995.
================================================================================
NOTE J - INCOME TAXES
The provision for income taxes including tax effects of security transaction
gains (1997 - $18,000; 1996 - $28,000; 1995 - $154,000) are as follows:
Year Ended December 31
(In thousands of dollars) 1997 1996 1995
- ------------------------------------------------------------
Current
Federal $3,438 $4,916 $3,759
State 434 616 460
Deferred
Federal 337 (529) (7)
State 42 (70) (4)
--------------------------------
$4,251 $4,933 $4,208
====== ====== ======
Temporary differences in the recognition of revenue and expense for tax and
financial reporting purposes resulted in deferred income taxes as follows:
(In thousands of dollars) 1997 1996 1995
- ------------------------------------------------------------
Depreciation $148 $(147) $(134)
Allowance for loan losses 134 (280) (75)
Interest and fee income 81 68 (58)
Other real estate owned 7 (24) (4)
Tax accounting change 0 0 26
Pension 0 (229) 53
Other 9 13 181
--------------------------------
$379 $ (599) $ (11)
===== ======= ======
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:
Year Ended December 31
(In thousands of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
34% of income before $ 3,972 $ 4,682 $ 4,074
income taxes
Increase (decrease)
resulting from the effects
of:
Tax-exempt interest on
obligations of states and (237) (262) (285)
political subdivisions
State income taxes (162) (186) (155)
Dividend exclusion (8) (8) (7)
Amortization of 200 198 108
intangibles
Other 10 (37) 17
-- --- --
Federal tax provision 3,775 4,387 3,752
State tax provision 476 546 456
--- --- ---
Applicable income taxes $ 4,251 $ 4,933 $ 4,208
======= ======= =======
The net deferred tax assets (liabilities) are comprised of the following:
December 31
(In thousands of dollars) 1997 1996
- --------------------------------------------------------------------------------
Allowance for loan losses $ 1,625 $ 1,759
Other real estate owned 32 39
Net unrealized securities losses 410 972
Other 39 199
-- ---
Gross deferred tax assets 2,106 2,969
Depreciation (917) (769)
Interest and fee income (503) (584)
Other (11) 0
--- -
Gross deferred tax liabilities (1,431) (1,353)
Deferred tax asset valuation 0 0
allowance - -
Net deferred tax assets (liabilities) $ 675 $ 1,616
===== =======
================================================================================
NOTE K - NONINTEREST INCOME AND EXPENSES
Details of noninterest income and expenses follow:
Year Ended December 31
(In thousands of dollars) 1997 1996 1995
- ---------------------------------------------------------------------
Noninterest income
Service charges on deposit accounts $4,182 $3,435 $3,032
Trust fees 2,206 2,069 1,908
Other service charges and fees 1,688 1,623 1,440
Brokerage commissions and fees 1,853 2,046 1,555
Other 967 1,158 812
--------------------------------
10,896 10,331 8,747
Securities gains 48 76 421
--------------------------------
$10,944 $10,407 $9,168
======= ======= ======
Noninterest expenses
Salaries and wages $13,203 $12,447 $11,021
Pension and other employee benefits 2,945 2,875 2,240
Occupancy 2,961 2,675 2,635
Furniture and equipment 2,267 2,038 2,114
Marketing 2,151 1,878 1,529
Legal and professional fees 918 1,046 907
FDIC assessments 136 634 823
Foreclosed and repossessed asset
management and dispositions 207 182 83
Amortization of intangibles 671 661 418
Other 10,966 7,332 5,996
--------------------------------
$36,425 $31,768 $27,766
======= ======= =======
================================================================================
NOTE L - 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, 1997, 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, 1997 that the Company meets all capital adequacy requirements to
which it is subject.
As of December 31, 1997, 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.
Minimum for
Capital Adequacy
Purposes
---------------------
(In thousands of dollars) Amount Ratio Amount Ratio
- --------------------------------------------------------------------------------
At December 31, 1996:
Total Capital (to $81,351 14.66% $44,399 >= 8.00%
risk- weighted
assets)
Tier 1 Capital (to 75,988 13.69 22,200 >= 4.00%
risk-weighted assets)
Tier 1 Capital (to 75,988 8.44 35,935 >= 4.00%
average assets)
At December 31, 1995:
Total Capital (to $77,758 14.71% $42,297 >= 8.00%
risk- weighted assets)
Tier 1 Capital (to 72,101 13.64 21,149 >= 4.00%
risk-weighted assets)
Tier 1 Capital (to 72,101 8.26 34,933 >= 4.00%
average assets)
(CON'T)
Minimum To Be
Well Capitalized
Under Prompt
Corrective Action
Provisions
---------------------
(In thousands of dollars) Amount Ratio
At December 31, 1996:
Total Capital (to $55,499 >=10.00%
risk- weighted assets)
Tier 1 Capital (to 33,299 >= 6.00%
risk-weighted assets)
Tier 1 Capital (to 44,919 >= 5.00%
average assets)
At December 31, 1995:
Total Capital (to $52,871 >=10.00%
risk- weighted assets)
Tier 1 Capital (to 31,723 >= 6.00%
risk-weighted assets)
Tier 1 Capital (to 43,666 >= 5.00%
average assets)
================================================================================
NOTE M - SEACOAST BANKING CORPORATION OF FLORIDA
(PARENT COMPANY ONLY) FINANCIAL INFORMATION
Balance Sheets
(In thousands of dollars)
December 31 1997 1996
- --------------------------------------------------------------------------------
Assets
Cash $ 10 $ 10
Deposit with subsidiary bank 0 12
Securities purchased under
agreement to resell with
subsidiary bank, maturing
within 30 days 3,498 4,605
Securities held for sale 1,530 1,547
Investment in subsidiaries 75,543 70,321
Other assets 586 737
--- ---
$81,167 $77,232
======= =======
Liabilities and Shareholders'
Equity
Liabilities
Other liabilities $ 103 $ 237
Shareholders' Equity 81,064 76,995
------ ------
$81,167 $77,232
======= =======
===================================================
STATEMENTS OF INCOME
Year Ended December 31 1997 1996 1995
(In thousands of dollars)
- ---------------------------------------------------
Income
Dividends
Subsidiary $4,133 $3,219 $2,668
Other 32 33 30
Interest 239 253 297
Other 13 30 30
-- -- --
4,417 3,535 3,025
Expenses 1,799 606 554
----- --- ---
Income before income tax credit
and equity in undistributed
income of subsidiaries 2,618 2,929 2,471
Income tax credit 565 125 80
--- --- --
Income before equity in 3,183 3,054 2,551
undistributed income of
subsidiaries
Equity in undistributed income 4,249 5,785 5,222
of subsidiaries ----- ----- -----
Net income $7,432 $8,839 $7,773
====== ====== ======
- --------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
Year Ended December 31
(In thousands of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
Cash flows from operating
activities
Interest received $ 243 $ 253 $ 292
Dividends received 4,165 3,251 2,701
Other income received 13 30 30
Income taxes received (paid) 133 (751) (127)
Cash paid to suppliers (1,858) 131 (147)
------ --- ----
Net cash provided by operating 2,696 2,914 2,749
Cash flows from investing
Decrease (increase) in securities
purchased under agreement to
resell, maturing in 30 days 1,107 (833) 1,213
Decrease (increase) in deposit
with subsidiary bank 12 154 (77)
Proceeds from sale of premises 512 0 0
--- - -
Net cash provided by (used in)
investing activities 1,631 (679) 1,136
Cash flows from financing
Issuance of common stock - 0 33 123
Employee Stock Purchase and
Profit Sharing Plan
Exercise of Stock Options 879 336 (58)
Treasury Stock (purchased) (1,207) 131 (1,676)
issued
Dividends paid (3,999) (2,732) (2,277)
------ ------ ------
Net cash used in financing (4,327) (2,232) (3,888)
------ ------ ------
Net change in cash 0 3 (3)
Cash at beginning of year 10 10 7
-- -- -
Cash at end of year $ 10 $ 10 $ 7
======= ======= =======
Reconciliation of Net Income to
Cash Provided by Operating
Activities
Net income $ 7,432 $ 8,839 $ 7,773
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain on sale of premises (44) 0 0
Equity in undistributed income (4,249) (5,785) (5,222)
of subsidiaries
Other net (443) (140) 198
---- ---- ---
Net cash provided by operating $ 2,696 $ 2,914 $ 2,749
activities ======= ======= =======
================================================================================
NOTE N - 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.
Contract or
Notional Amount
(In thousands of dollars)
December 31 1997 1996
- --------------------------------------------------------------------------------
Financial instruments whose
contract amounts represent credit
risk:
Commitments to extend credit $60,163 $54,669
Standby letters of credit and
financial guarantees written:
Secured 1,115 573
Unsecured 141 736
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. 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 $60,163,000 outstanding at December 31, 1997,
$35,117,000 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, 1997 and 1996 amounted to
$2,079,000 and $872,000, respectively.
================================================================================
NOTE O - MORTGAGE SERVICING RIGHTS, NET
The following is an analysis of the mortgage servicing rights, net:
(In thousands of dollars) 1997 1996
- ------------------------------------------
Balance at beginning of $ 546 $ 102
year
Origination of mortgage
servicing rights 377 506
Amortization (125) (62)
---- ---
Total $ 798 $ 546
===== =====
The fair value of captialized mortgage servicing rights was estimated using a
discounted cash flow model in 1997. Prepayment speed projections and market
assumptions regarding discount rate, servicing cost, escrow earnings credits,
payment float and advance cost interest rates were determined from guidelines
provided by a third-party mortgage servicing rights broker.
December 31 1997 1996
(In thousands of dollars)
- ----------------------------------------------
Unpaid principal
balance of serviced
loans for which
mortgage servicing
rights are
capitalized $63,878 $43,618
======= =======
Unpaid principal
balance of serviced
loans for which
there are no
servicing rights
capitalized $63,427 $48,005
======= =======
================================================================================
NOTE P - SUPPLEMENTAL DISCLOSURES FOR CONSOLIDATED STATEMENT OF CASH FLOWS
Reconciliation of Net Income to Net Cash Provided by Operating Activities
Year Ended December 31 1997 1996 1995
(In thousands of dollars)
- --------------------------------------------------------------------------------
Net Income $ 7,432 $ 8,839 $ 7,773
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization 2,707 2,653 2,792
Provision for loan losses 913 1,090 456
Provision (credit) for deferred 379 (599) (11)
taxes
Gain on sale of securities (48) (76) (421)
Gain on sale of loans (202) (564) (323)
(Gain) loss on sale and write 95 107 (5)
down of foreclosed assets
Loss on disposition of (8) 18 53
equipment
Change in interest receivable 32 (332) 567
Change in interest payable (331) (333) 218
Change in prepaid expenses 1 457 38
Change in accrued taxes (1,154) 55 751
Change in other liabilities (607) (191) 283
---- ---- ---
Total adjustments 1,777 2,285 4,398
----- ----- -----
Net cash provided by operating
activities $ 9,209 $11,124 $12,171
======== ======= =======
Supplemental disclosure of non
cash investing activities:
Market value adjustment to securities $ 1,197 $(1,517) $ 4,118
Transfer from securities held for
sale to securities held for investment 0 0 16,147
Transfer from securities held
for investments to securities
held for sale 0 0 74,573
Transfers from loans to other
real estate owned 428 1,363 945
=== ===== ===
================================================================================
NOTE Q - 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, 1997 and 1996. 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.
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.
1997 1996
-------------------------------------------
December 31 Carrying Fair Carrying Fair
(In thousands of Amount Value Amount Value
dollars)
- --------------------------------------------------------------------------------
Financial Assets
Cash and cash $ 64,436 $ 64,436 $110,008 $110,008
equivalents
Securities 220,150 220,861 223,169 224,078
Loans, net 608,567 611,000 570,667 571,710
Financial Liabilities
Deposits 806,098 806,537 811,493 812,385
Borrowings 52,112 52,112 45,088 45,088
Contingent Liabilities
Commitments to extend 0 602 0 547
credit
Standby letters of 0 13 0 13
credit
================================================================================
NOTE R - EARNINGS PER SHARE
Basic earnings per common share were computed by dividing net income by the
weighted average number of shares of common stock outstanding during the year.
Diluted earnings per common share were determined by including assumptions of
stock option conversions. In 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share," effective December 15, 1997.
As a result, there were no changes to the Company's reported earnings per share
for 1996 and 1995 attributable to SFAS No. 128.
Year ended December 31 Net Per-share
(In thousands of dollars) Income Shares Amount
- ---------------------------------------------------------------
1997:
Basic Earnings Per Share
Income available to common $7,432 5,128,208 $1.45
shareholders -----
Options issued to executives - 123,504
(See Note H) -------- ---------
Diluted Earnings Per Share
Income available to common
shareholders plus assumed
conversions $7,432 5,251,712 $1.42
====== ========= =====
1996:
Basic Earnings Per Share
Income available to common
shareholders $8,839 5,096,856 $1.73
-----
Options issued to executives
(See Note H) - 84,128
-------- ---------
Diluted Earnings Per Share
Income available to common
shareholders plus assumed
conversions $8,839 5,180,984 $1.71
====== ========= =====
1995:
Basic Earnings Per Share
Income available to common
shareholders $7,773 5,113,923 $1.52
-----
Options issued executives
(See Note H) - 44,543
-------- ---------
Diluted Earnings Per Share
Income available to common
shareholders $7,773 5,158,466 $1.51
====== ========= =====
<PAGE>
CORPORATE DIRECTORY
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
Dennis S. Hudson, Jr.
Chairman of the Board
Dale M. Hudson
President & Chief Executive Officer
Dennis S. Hudson, III
Senior Executive Vice President & Chief Operating Officer
Jeffrey C. Bruner
Self-Employed Real Estate Investor
John H. Crane
President of Krauss & Crane, an electrical contracting firm
Evans Crary, Jr.
Member of Crary, Buchanan, Bowdish, Lord, Roby & Evans,Chartered, a Law Firm
Christopher Fogal
Fogal, Lynch, Johnson & Long Certified Public Accountants
Jeffrey S. Furst
Owner of Century 21, The Real Estate Center
John R. Santarsiero, Jr.
Private Investor
Thomas H. Thurlow, Jr.
Shareholder of Thurlow & Smith, P.A., a Law Firm
Stephen E. Bohner
Owner of Premier Realty Group, a real estate company;serves on the Board of the
Bank only
A. Douglas Gilbert
Executive Vice President & Chief Credit Officer; serves on the Board of the
Bank only.
Marian B. Monroe
Past President and Member of the Board, Martin Memorial Hospital; serves on
the Board of the Bank only.
James H. Bruner
Director Emeritus
Archie A. Hendry, III
Director Emeritus
Frederick P. Stein
Director Emeritus
FIRST NATIONAL OFFICERS
Dale M. Hudson
Chairman of the Board
Dennis S. Hudson, III
President & Chief Executive Officer
A. Douglas Gilbert
Senior Executive Vice President & Chief Operating and Credit Officer
C. William Curtis, Jr.
Senior Executive Vice President & Chief Financial Officer
William R. Hahl
Executive Vice President & Chief Financial Officer
J. Hal Roberts
Executive Vice President - Residential Real Estate Mortgage Production &
President, St. Lucie County
Jean Strickland
Executive Vice President Credit Administration & Bank Operations
Bonny L. Turner
Executive Vice President - Personal Financial Services Group
Seymour "Sam" Beller
Senior Vice President - Manager Consumer Lending
Michael D. Hayes
Senior Vice President - Commerical/Commercial Real Estate Lending
Jocelyn Hooker
Senior Vice President & Region Manger - Martin County Branches
James A. Morris
Senior Vice President & Chief Information Officer
Charles A. Olsson
Senior Vice President - Administrative Support Services
Marshall M. "Buck" Miller
City President, Fort Pierce
David Balongue
Vice President & Region Manger Martin County Commercial Lending
Susan Bergstrom
Vice President - Marketing Manager
Adam S. Bolinger
Vice President & Region Manager Indian River County Commercial Lending
Ronald Brown
Vice President - Commercial Lending
Kathy Cavicchioli
Vice President - Cash Management
Patricia A. Cucchiara
Vice President - Bank Operations
Cyn Delee Dalton
Vice President & Region Manager - Indian River County Branches
Carolyn Elkins
Vice President - Branch Manager
Randall Ezell
Vice President - Strategic Business Planning
Joseph L. Dousi
Vice President & Region Manager St. Lucie County Commercial Lending
Thomas L. Hall
Vice President & Private Banking Manager
David Kelso
Vice President & General Auditor
Warren Knowles
Vice President - Consumer Lending
Barry E. Oberholtzer
Vice President - Commercial Lending
David L. Rankin
Vice President - Manager Residential Mortgage Division
Andrew Richman
Vice President & Investment Services Manager
Bradford R. Smith
Vice President & Region Manager - St. Lucie County Branches
G. David Smith
Vice President & Trust Officer
John R. Turgeon
Vice President & Controller
Thomas H. Wilkinson
Vice President - Commercial Lending
Danita Wright
Vice President - Private Client Group
L. Alfred Wright
Vice President & Loan Review Manager
Jennifer J. Yingling
Vice President - Branch Manager
SEACOAST OFFICERS
Dennis S. Hudson, Jr.
Chairmang of the Board
Dale M. Hudson
President & Chief Executive Officer
Dennis S. Hudson, III
Senior Executive Vice President & Cheif Operating Officer
A. Douglas Gilbert
Senior Executive Vice President & Chief Operating Officer
C. William Curtis, Jr.
Senior Executive Vice President & Chief Banking Officer
William R. Hahl
Executive Vice President & Chief Financial Officer
J. Hal Roberts, Jr.
Executive Vice President - Residential Real Estate Mortgage Production
Jean Strickland
Executive Vice President - Credit Administration & Bank Operations
Bonny L. Turner
Executive Vice President - Personal Financial Services Group
James A. Morris
Senior Vice President & Chief Information Officer
Charles A. Olsson
Senior Vice President - Administrative Support Services
FNB BROKERAGE SERVICES, INC.
Leonard J. Hoag
President
William H. Jones, III
Vice President & Account Executive
Peter Lowery
Vice President
Lis F. Patterson
Vice President & Secretary
COMMUNITY BOARDS OF DIRECTORS
MARTIN COUNTY
Dennis S. Hudson, Jr.
Chairman
L. Mark Cocorullo
Lorraine Conwell
Jack Daner
Karlin Daniel
Michael Diterlizzi
Gary W. Guertin
Timothy Kinane
Ann S. MacMillan
Alvin McHardy
David A Ralicki
Robert Rigel
Gary E. Simmons
Lynne W. Spraker
Robert Taylor
Arthur Young, D.V.M.
INDIAN RIVER COUNTY
Ross Cotherman
Kenneth Felten
Nancy Green
Gena K. Grove
Stephen Holmes
Charles B. Johnson, D.V.M.
Robin A. Lloyd, Sr.
David Milwood
ST. LUCIE COUNTY
Howard Bickford
Charles Bigge
Ellen Guteri
Dr. Ray Isenburg
Joe Marinaro
Karen Miret
Jane Rowley
<PAGE>
SHAREHOLDER INFORMATION
Form 10-K
The Seacoast Banking Corporation of Florida's Annual Report to the Securities
and Exchange Commission on Form 10-K is available at the headquarters upon
request. Requests may be directed to: William R. Hahl, P.O. Box 9012, Stuart,
Florida, 34995-9012, 561.221.2825
TRANSFER AGENT
The First Chicago Trust
Company of New York
Shareholder Relations
P.O. Box 2500
Jersey City, NJ 07303-2500
1.800.446.2617
INDEPENDENT AUDITORS
Arthur Andersen LLP
Miami, Florida
STOCK LISTING
The Class A Common Stock of Seacoast Banking Corporation of Florida is traded on
the NASDAQ Stock Market under the symbol SBCFA. The abbreviation in most
newspaper stock listings is "SeaBK" or "Seacst BKFL". The Class B Common Stock
of Seacoast Banking Corporation of Florida is not publicly traded.
INTERNET
www.fnb-tc.com
e-mail: [email protected]
INFORMATION
For further information on Seacoast Banking Corporation of Florida, contact
Dennis S. Hudson, III, COO, at 561.288.6086 or William R. Hahl, CFO, at
561.221.2825.
As a service to our shareholders and prospective investors, copies of the
Company's recent news releases can be transmitted at no charge via fax by
calling "Company News On Call" at 800.758.5804, extension 105663.
EXHIBIT 23
ARTHUR ANDERSON 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 10K of
Seacoast banking Corporation of Florida, into the Company's previously filed
registration statements on Form S-8 (File nos. 33-61925, 33-46501, 33-25267 and
33-22846).
/s/ Arthur Anderson LLP
ARTHUR ANDERSON LLP
Miami, Florida
March 27, 1998
EXHIBIT 10.1
Retirement Savings Plan For
Employees of First National Bank & Trust
Company of the Treasure Coast
(As Amended and Restated Effective January 1, 1993)
ARTICLE 1
INTRODUCTION
1.01 History of the Plan.
Effective January 1, 1983, Seacoast Banking Corporation of Florida
("Employer" or "Company") adopted and established the Retirement
Savings Plan For Employees of First National Bank & Trust Company of
the Treasure Coast ("Prior Plan") for the exclusive benefit of its
Eligible Employees. The Prior Plan was thereafter amended from time
to time. The Prior Plan was at all times maintained as a plan meeting
the requirements of qualification under Section 401(a) of the
Internal Revenue Code of 1986, as amended.
1.02 Amended and Restated Plan.
Effective January 1, 1993, the Prior Plan is renamed the Retirement
Savings Plan For Employees of First National Bank & Trust Company of
the Treasure Coast (the "Plan") and is continued in an amended and
restated form as set forth in its entirety in this document for the
purpose of complying with the provisions of the Employee Retirement
Income Security Act of 1974, as amended, and maintaining
qualification under Sections 401(a) and 401(k) of the Internal
Revenue Code of 1986, as amended.
1.03 Effective Date.
Notwithstanding the fact that the Plan was amended and restated
effective January 1, 1993, certain provisions of this Plan shall have
effective dates prior to, or subsequent to, the date of the Plan's
amendment and restatement. Those provisions with effective dates
prior to January 1, 1993 are as follows:
(a) The provision regarding the $200,000 limit of compensation which
can be taken into account for Plan purposes and which is
contained in definition of "Compensation" in Section 2.13 shall
be effective January 1, 1989.
(b) The provision regarding "leased employees" contained in the
definition of "Eligible Employees" in Section 2.17 shall be
effective January 1, 1987.
(c) Article 9, Hardship Withdrawals; Loans, shall be effective
January 1, 1989.
(d) Article 12, Special Discrimination Rules, shall be effective
January 1, 1989.
(e) Article 13, Highly Compensated Employees, shall be effective
January 1, 1989.
(f) Article 14, Maximum Benefits, shall be effective January 1, 1987.
(g) Article 15, Top Heavy Rules, shall be effective January 1, 1987.
1.04 Plan Governs Distribution of Benefits.
The distribution of benefits for all Participants (whether employed
by the Employer before or after the Effective Date) shall be governed
by the provisions of this Plan. Nevertheless, early retirement
benefits, retirement-type subsidies, or optional forms of benefits
protected under Code Section 411(d)(6) ("Protected Benefits") shall
not be reduced or eliminated with respect to benefits accrued under
such Protected Benefits unless such reduction or elimination is
permitted under the Code, Treasury Regulations, authority issued by
the Internal Revenue Service, or judicial authority.
1.05 Purpose.
The purpose of this Plan is to encourage savings on the part of
Participants by allowing them to accumulate tax-deferred savings
while providing an incentive through matching contributions made by
the Employer. Further, the benefits described in the Plan are
provided for the exclusive benefit of the Participants and their
Beneficiaries and this Plan shall be administered and interpreted in
accordance with such purpose.
1.06 Merger with Port St. Lucie National Bank Retirement Savings Plan.
Effective 12:01 a.m. on June 1, 1997, the Port St. Lucie National Bank
Retirement Savings Plan (the "Port St. Lucie Plan") shall be merged
with and into this Plan. As soon as administratively feasible after
the effective date of this merger, the trustees of the Port St. Lucie
Plan shall transfer to this Plan all of the account balances held
under the Port St. Lucie Plan.
ARTICLE 2
DEFINITIONS
Certain terms of this Plan have defined meanings which are set forth in this
Article and which shall govern unless the context in which they are used clearly
indicates that some other meaning is intended.
2.01 Account shall mean the Account established and maintained by the
Committee or Trustee for each Participant or their Beneficiaries to
which shall be allocated each Participant's interest in the Trust
Fund. Each Account shall be comprised of the sub-accounts described
in Section 6.01.
2.02 Adjustment shall mean for any Valuation Date the aggregate earnings,
realized or unrealized appreciation, losses, expenses, and realized
or unrealized depreciation of the Trust Fund since the immediately
preceding Valuation Date. For purposes of such adjustment, all assets
of the Trust Fund shall be valued at their fair market value as of
each Valuation Date. The determination of the valuation of assets and
the adjustment shall be made by the Trustee and shall be final and
binding.
2.03 Affiliate shall mean the Company and any corporation which is a
member of a controlled group of corporations (as defined in Code
Section 414(b)) which includes the Company; any trade or business
which is under common control (as defined in Code Section 414(c))
with the Company; any organization which is a member of an affiliated
service group (as defined in Code Section 414(m)) which includes the
Company; and any other entity required to be aggregated with the
Company pursuant to regulations under Code Section 414(o).
2.04 Affiliated Sponsor shall mean any corporation and any other entity
that wishes to adopt this Plan; provided, however, that any such
entity described in this paragraph must be designated by the
Committee as an Affiliated Sponsor under the Plan. See Section 17.13
for provisions relating to an Affiliated Sponsor's adoption of the
Plan. As of the Effective Date, there were no Affiliated Sponsor.
2.05 Annuity Starting Date shall mean the first day of the first period
for which an account is payable as an annuity or, in the case of a
benefit not payable in the form of an annuity, the first day on which
all events have occurred which entitle the Participant to such
benefit.
2.06 Authorized Leave of Absence shall mean any temporary layoff or any
absence authorized by the Employer under the Employer's standard
personnel practices provided that all persons under similar
circumstances must be treated alike in the granting of such
Authorized Leaves of Absence and provided further that the
Participant returns within the period of authorized absence. An
absence due to service in the Armed Forces of the United States shall
be considered an Authorized Leave of Absence to the extent required
by federal law.
2.07 Beneficiary shall mean:
(a) Unmarried Participants.
-----------------------
For unmarried Participants, any individual(s), trust(s),
estate(s), partnership(s), corporation(s) or other entity or
entities designated by the Participant in accordance with
procedures established by the Committee to receive any
distribution to which the Participant is entitled under the
Plan in the event of the Participant's death. The Committee
may require certification by a Participant in any form it
deems appropriate of the Participant's marital status prior
to accepting or honoring any Beneficiary designation. Any
Beneficiary designation shall be void if the Participant
revokes the designation or marries. Any Beneficiary
designation shall be void to the extent it conflicts with
the terms of a "qualified domestic relations order," as
defined in Code Section 414(p).
If an unmarried Participant fails to designate a Beneficiary
or if the designated Beneficiary fails to survive the
Participant and the Participant has not designated a
contingent Beneficiary, the Beneficiary shall be the
Participant's estate.
(b) Married Participant.
-------------------
A married Participant's Beneficiary shall be his Spouse at
the time of his death unless the Participant has designated
a non-Spouse Beneficiary (or Beneficiaries) with the written
consent of his Spouse given in the presence of a notary
public on a form provided by the Committee, or unless the
terms of a qualified domestic relations order require
payment to a non-Spouse Beneficiary. A married Participant's
designation of a non-Spouse Beneficiary in accordance with
the preceding sentence shall remain valid until revoked by
the Participant or until the Participant marries a Spouse
who has not consented to a designation in accordance with
the preceding sentence.
For the purposes of this Section, revocation of prior
Beneficiary designations will occur when a Participant (i)
files a subsequent valid designation with the Committee; or
(ii) files a signed statement with the Committee evidencing
his intent to revoke any prior designations.
2.08 Break in Service shall mean a period of five consecutive One-Year
Breaks in Service.
2.09 Board shall mean the Board of Directors of the Company.
2.10 Code shall mean the Internal Revenue Code of l986, as amended.
2.11 Committee.
---------
The Committee appointed by the Board or its designee under Article 10
to administer the Plan.
2.12 Company shall mean Seacoast Banking Corporation of Florida and its
successors and assigns which adopt this Plan.
2.13 Compensation
(a) Effective August 15, 1995, "Compensation" shall mean the
gross annual earnings required to be reported on a
Participant's Form W-2 (box 10) [box 1 effective 1993] under
Code Sections 6041(d) and 6051(a)(3).
(b) Prior to August 15, 1995, "Compensation" shall mean the
gross annual earnings required to be reported on a
Participant's Form W-2 (box 10) [box 1 effective 1993] under
Code Sections 6041(d) and 6051(a)(3), including commissions,
but excluding overtime, bonuses and incentives.
(c) The definitions of "Compensation" in subsection (a) or (b)
shall also (i) include Salary Savings Contributions, salary
reduction Salary Savings contributions to any Section 125
Plan maintained by the Employer, and salary deferrals under
Code Sections 402(a)(8), 402(h), 403(b), 457 and 414(h);
(ii) exclude reimbursements or other expense allowances,
fringe benefits (cash and non-cash), moving expenses,
deferred compensation (and for this purpose benefits under a
stock option plan is "deferred compensation") and welfare
benefits (and for this purpose, worker's compensation
payments of any type and severance pay of any type shall be
considered "welfare benefits," but sick pay, short term
disability and vacation pay are not considered "welfare
benefits"); (iii) ignore any income exclusions under Code
Section 3401(a) based on the nature or location of
employment.
(d) No more than $200,000 in Compensation ($150,000 in
Compensation for Plan Years on or after January 1, 1994)
(adjusted annually as provided in Code Section 401(a)(17))
shall be taken into account for any Participant during a
Plan Year.
(e) See also Section 10.04 for additional rules regarding
aggregation of Compensation for certain Family Members.
2.14 Disability shall mean an illness or injury of a potentially permanent
nature certified by a physician selected by or satisfactory to the
Company which prevents the Employee from engaging in any occupation
for wage or profit for which the Employee is reasonably fitted by
training, education or experience. An Employee requesting payment
under the Plan as a result of a Disability, must be eligible for and
receive disability benefits under the Social Security Act.
2.15 Effective Date shall mean January 1, 1993.
2.16 Elective Profit Sharing Contribution shall have the meaning set
forth in Section 5.02.
2.17 Eligible Employee. Except for those Employees identified in the
following sentence, all Employees employed by the Company or an
Affiliated Sponsor shall be considered Eligible Employees. The
following Employees shall not be considered Eligible Employees: (i)
any employee included in a collective bargaining unit for which a
labor organization is recognized as collective bargaining agent
unless such employee has been designated by the Board of Directors as
an "Eligible Employee" for the purposes of this Plan, (ii) any
Employee who is a nonresident alien and who does not receive earned
income from the Company which constitutes income from sources within
the United States, or (iii) any "leased employee," within the meaning
of Code ss. 414(n)(2), with respect to the Company or any Affiliated
Sponsor.
2.18 Employee. Any person employed by or on Authorized Leave of Absence
from the Company or an Affiliated Sponsor, and any person who is a
"leased employee" within the meaning of Code ss. 414(n)(2) with
respect to the Company or Affiliated Sponsor. However, if such
"leased employees" constitute less than 20 percent of the Company's
and Affiliated Sponsor's combined non-highly compensated work force,
within the meaning of Code ss. 414(n)(1)(C)(ii), the term "Employee"
shall not include "leased employees" covered by a plan described in
Code ss. 414(n)(5).
2.19 Employee Contribution shall mean Salary Savings Contributions
and/or Voluntary After-Tax Contributions.
2.20 Employer shall mean the Company or any Affiliated Sponsor which may
hereafter adopt this Plan for the benefit of its Eligible Employees.
2.21 Employer Contribution shall mean Employer Matching Contributions,
Profit Sharing Contributions, Retirement Contributions or Qualified
Non-Elective Contributions.
2.22 Employer Matching Contribution shall have the meaning defined in
Section 5.01.
2.23 Employer Matching Contribution Account shall mean the portion of a
Participant's total Account attributable to Employer Matching
Contributions, and the total of the Adjustments which have been
credited to or deducted from a Participant's Account with respect to
Employer Matching Contributions.
2.24 Entry Date shall mean the first day of the month coinciding with or
immediately following the date an Eligible Employee satisfies
eligibility requirements in Article 3.
2.25 ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time. Reference to a specific provision of
ERISA shall include any applicable regulations pertaining thereto.
2.26 Family Member shall have the meaning set forth in Section 13.04.
2.27 Fiduciary shall mean any party named as a Fiduciary in Article 10 of
the Plan. Any party shall be considered a Fiduciary of the Plan only
to the extent of the powers and duties specifically allocated to such
party under the Plan.
2.28 Former Participant shall have the meaning set forth in Section 3.03.
2.29 Highly Compensated Employee shall have the meaning set forth in
Section 13.02.
2.30 Hour of Service shall mean:
(a) Each hour for which an Employee is paid, or entitled to
payment, for performance of duties for an Employer. These
hours shall be credited to the Employee for the period
during which the duties were performed;
(b) Each hour for which an Employee is paid, or entitled to
payment, by an Employer, on account of a period of time
during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity, layoff, jury duty,
military duty, or leave of absence. No more than 501 Hours
of Service will be credited under this paragraph for any
single continuous period (whether or not such period occurs
in a single computation period).
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Employer.
These hours shall be credited to the Employee for the
computation period or period to which the award or agreement
pertains, rather than the computation period in which the
award, agreement, or payment is made.
(d) In lieu of the foregoing, an Employee who is not compensated
on an hourly basis (such as salary, commission or piecework
employees) shall be credited with 45 Hours of Service for
each week in which such Employee would be credited with
Hours of Service in hourly pay. However, this method of
computing Hours of Service may not be used for any Employee
whose Hours of Service is required to be counted and
recorded by any Federal law, such as the Fair Labor
Standards Act. Any such method must yield an equivalency of
at least 1,000 hours per computation period.
Hours of Service shall be credited for employment with the
Company and with any Affiliate.
The following rules shall apply in determining whether an Employee
completes an Hour of Service:
1. The same hours shall not be credited under subparagraphs (a)
or (b) above, as the case may be, and subparagraph (c)
above, nor shall the same hours credited under subparagraphs
(a) through (d) above be credited under subparagraph (e)
above.
2. The rules relating to determining Hours of Service for
reasons other than the performance of duties and for
crediting Hours of Service to particular periods of
employment shall be those rules stated in Department of
Labor Regulations Title 29, Chapter XXV, subchapter C, part
2530, Sections 200b2(b) and 200b2(c), respectively.
2.31 Investment Fund shall mean the separate funds under the Trust Fund
which are distinguished by their investment objectives, as
established by the Committee. See Section 6.03.
2.32 Non-Elective Profit Sharing Contribution shall have the meaning
as set forth in Section 5.02.
2.33 Normal Retirement Age shall mean age 65.
2.34 One-Year Break in Service shall mean any Plan Year during which an
Employee accrues 500 or fewer Hours of Service. A One-Year Break in
Service shall not occur during any Plan Year in which the Employee is
on an Authorized Leave of Absence, but only if the Employee returns
to active employment immediately upon expiration of such period.
2.35 Participant shall mean an Eligible Employee who becomes eligible to
participate in the Plan as provided in Article 3.
2.36 Plan shall mean the Retirement Savings Plan for Employees of First
National Bank & Trust Company of the Treasure Coast and any
amendments thereto.
2.37 Plan Administrator or Administrator, within the meaning of ERISA
Section 3(16) shall mean the Company.
2.38 Plan Year shall mean the calendar year.
2.38A Port St. Lucie Participant shall mean a participant in the Port St.
Lucie National Bank Retirement Savings Plan immediately prior to the
merger of such plan with this Plan.
2.39 Profit Sharing Contribution shall mean Elective Profit Sharing
Contributions and Non-Elective Profit Sharing Contributions.
See Section 5.02.
2.40 Profit Sharing Contribution Account shall mean the portion of a
Participant's total Account attributable to Profit Sharing
Contributions, and the total of the Adjustments which have been
credited to or deducted from a Participant's Account with respect to
Profit Sharing Contributions. Elective Profit Sharing Contributions
and Non-elective Profit Sharing Contributions shall be separately
accounted for under the Profit Sharing Contribution Account.
2.41 Qualified Nonelective Contribution. See Section 5.04.
2.42 Qualified Plan shall mean any pension, profit-sharing, stock bonus,
or other plan which meets the requirements of Section 401 of the Code
which includes a trust exempt from tax under Section 501(a) of the
Code; any annuity plan described in Section 403(a) of the Code.
2.43 RETIREMENT shall mean the Termination of Employment of a Participant
on or after his attaining age 55.
2.44 Retirement Contribution shall have the meaning provided in Section
5.03.
2.45 Retirement Contribution Account shall mean the portion of a
Participant's Account attributable to Retirement Contributions and
the total of the Adjustments which have been credited to or deducted
from a Participant's Account with respect to Retirement
Contributions.
2.46 Rollover Contribution shall have the meaning defined in Section 4.05.
2.47 Rollover Contribution Account shall mean the portion of a
Participant's Account attributable to Rollover Contributions and the
total of the Adjustments attributable to such Rollover Contributions.
2.48 Salary Savings Agreement shall mean an agreement between the Employer
and a participating Eligible Employee whereby such Eligible Employee
authorizes the Employer to withhold a specified percentage of his or
her Compensation for deposit to the Plan on behalf of such Eligible
Employee.
2.49 Salary Savings Contribution shall mean contributions made to the Plan
during the Plan Year by the Employer, at the election of the
Participant, in lieu of cash compensation and that are made pursuant
to a Salary Savings Agreement. Such contributions are fully vested
and nonforfeitable when made and distributable only as specified in
Article 8 below.
2.50 Salary Savings Contribution Account shall mean the portion of a
Participant's Account attributable to Salary Savings Contributions,
and the total of the Adjustments which have been credited to or
deducted from a Participant's Account with respect to Salary Savings
Contributions.
2.51 Spouse shall mean the person who is married to the Participant (in a
civil or religious ceremony recognized under the laws of the state
where the marriage was contracted) immediately prior to the date on
which payments to the Participant from the Plan begin. If the
Participant dies prior to the commencement of benefits, Spouse shall
mean a person who is married to a Participant (as defined in the
immediately preceding sentence) on the date of the Participant's
death. A Participant shall not be considered married to another
person as a result of any common law marriage whether or not such
common law marriage is recognized by applicable state law.
2.52 Termination of Employment shall mean that an Employee has ceased to
be employed by the Employer for any of the following reasons:
(i) Voluntary resignation from the service of the Employer;
(ii) Discharge from the service of the Employer by the Employer;
(iii) Retirement;
(iv) Death; or
(v) Disability.
Notwithstanding the foregoing, an Employee who ceases to be actively
employed by reason of an Authorized Leave of Absence shall not be
considered as having a Termination of Employment.
2.53 Transfer Contribution shall mean a non-taxable transfer of a
Participant's benefit directly from a Qualified Plan to this Plan.
2.54 Transfer Contribution Account shall mean the portion of a
Participant's Account holding Transfer Contributions and which are
not separately allocated to an existing account under the Plan.
Sub-accounts may be established as necessary to separately account
for pre-tax contributions, after-tax contributions, etc. Any
restriction or special rules applicable to the Transfer Contribution
Account (including optional forms of benefit that are protected under
Code Section 411(d)(6) shall be set forth in Appendix A.
2.55 Treasury Regulation means regulations pertaining to certain Sections
of the Code as issued by the Secretary of the Treasury.
2.56 Trust or Trust Agreement shall mean the separate trust agreement
entered into between the Employer and the trustee which governs the
creation of the Fund and all amendments thereto which may hereafter
be made.
2.57 Trust Fund or Fund shall mean the cash and other properties held and
administered by the Trustee in accordance with the Plan and Trust
Agreement.
2.58 TRUSTEE shall mean the Trust Department of the First National Bank &
Trust Company of the Treasure Coast.
2.59 VALUATION DATE shall mean the last day of each calendar quarter
(March 31, June 30, September 30 and December 31) or such other day
as selected by the Committee.
2.60 Voluntary After-Tax Contributions shall mean after-tax contributions
made to the Plan during the Plan Year by an Eligible Employee. Such
contributions are fully vested and nonforfeitable when made and
distributable only as specified in Article 8 below.
2.61 Voluntary After-Tax Contribution Account shall mean the portion of a
Participant's total Account attributable to Voluntary After-Tax
Contributions and the total of the Adjustments which have been
credited to or deducted from a Participant's Account with respect to
Voluntary After-Tax Contributions.
2.62 Year of Eligibility Service shall have the meaning as set forth in
Section 3.02.
2.63 Year of Vesting Service shall have the meaning as set forth in
Section 7.05.
Defined Terms. A defined term, such as "Retirement", will normally govern the
definitions of derivatives therefrom, such as "Retire", even though such
derivatives are not specifically defined and even if they are or are not
initially capitalized. The masculine gender, where appearing in the Plan, shall
be deemed to include the feminine gender, unless the context clearly indicates
to the contrary. Singular and plural nouns and pronouns shall be interchangeable
as the factual context may allow or require. The words "hereof", "herein",
"hereunder" and other similar compounds of the word "here" shall mean and refer
to the entire Plan and not to any particular provision or Section.
ARTICLE 3
PARTICIPATION
3.01 Participation
(a) Participation on Effective Date. An Eligible Employee who
was a Participant in the Prior Plan on the day preceding the
Effective Date shall automatically become a Participant in
this Plan on the Effective Date, provided he is employed on
the Effective Date.
(b) New Participant. An Eligible Employee who is not described
in subsection (a) above shall become a Participant in the
Plan on the Entry Date coinciding with or next following the
later of (i) the date on which the Employee has completed
one Year of Eligibility Service or (ii) the date the
Employee becomes a member of the class of Eligible
Employees. See Section 3.04 below for special rules that
apply to new Employees following an acquisition.
(c) Break in Service. If an Eligible Employee either (i) is not
employed or (ii) is no longer an Eligible Employee on the
earliest Entry Date on or after which such Employee
satisfied the requirements described above, but returns to
work or again becomes an Eligible Employee before incurring
a Break in Service, such Eligible Employee shall commence
participation on the date such Employee returns to work or
again becomes an Eligible Employee, whichever is later. If
the Employee returns to work or again becomes an Eligible
Employee after a Break in Service, such Employee must again
satisfy the requirements of Section 3.01(b).
(d) Enrollment in Plan. An Eligible Employee who becomes
eligible to participate in this Plan will be asked to follow
certain procedures to enroll in the Plan, and pursuant to
which he will designate Beneficiaries and may elect to make
Salary Savings Contributions. However, an Eligible
Employee's participation in the Plan shall not be contingent
upon completion of such enrollment process.
3.02 Year of Eligibility Service.
A Year of Eligibility Service is determined under the 1,000 Hours of
Service method. Accordingly, an Employee shall receive one Year of
Eligibility Service upon completing a twelve (12) consecutive month
period of employment during which the Employee earns at least 1,000
Hours of Service. The initial twelve month period shall be the twelve
consecutive month period commencing on the Employee's date of hire or
rehire. If the Employee fails to complete 1,000 Hours of Service
during this 12-month period, the Employee shall receive a Year of
Eligibility Service upon completing at least 1,000 Hours of Service
during a Plan Year (commencing with the Plan Year during which the
Employee's first anniversary of his date of hire occurs).
3.03 Participation and Rehire.
(a) Status as a Participant. A Participant's participation in
the Plan shall continue until the Participant's Termination
of Employment. On or after his Termination of Employment,
the Employee shall be known as a Former Participant and his
benefits shall thereafter be governed by the provisions of
Article 8. The individual's status as a Former Participant
shall cease as of the date the individual ceases to have any
balance in his Account.
(b) Rehire of Person who was a Participant in this Plan. An
Eligible Employee who was a Participant in this Plan at the
time of his Termination of Employment and who is
subsequently rehired by an Employer, shall be eligible to
immediately participate in this Plan on the date of his
rehire (provided he is an Eligible Employee on such date).
See Section 3.01(c) to determine if an Employee was a
Participant at the time of his Termination of Employment.
3.04 Acquisitions
If a group of persons becomes employed by an Employer (or any of its
subsidiaries or divisions) as a result of an acquisition of another
employer, the Committee shall determine whether and to what extent
employment with such prior employer shall be treated as Years of
Eligibility Service, the applicable Entry Date (or special entry
date) for such acquired employees, and any other terms and conditions
which apply to eligibility to participate in this Plan. Such terms
and conditions shall be set forth in an appendix to this Plan. Except
to the extent required by law, employees of an acquired business
which is not identified in an appendix shall be treated as having
first accrued an Hour of Service as of the date of the Employer's
acquisition of such business.
3.05 Not Contract for Employment.
Participation in the Plan shall not give any Employee the right to be
retained in the Employer's employ, nor shall any Employee, upon
dismissal from or voluntary termination of his employment, have any
right or interest in the Fund, except as herein provided.
ARTICLE 4
EMPLOYEE CONTRIBUTIONS
4.01 Employee Contributions.
Except during periods of suspension described in Section 4.03, a
Participant may elect to make Salary Savings Contributions, Voluntary
After-Tax Contributions, or both by means of payroll deduction as
provided below.
(a) Salary Savings Contributions. A Participant may contribute
as a Salary Savings Contribution any whole percentage from
1% to 18% (in 1% increments) of his Compensation during any
Plan Year. (However, see Section 4.03(a) for circumstances
where a Participant's Salary Savings Contribution may
increase to 100%). Because of the limitations described in
Section 4.02(c), a Participant may not be allowed to
contribute the maximum percentage.
(b) Voluntary After-Tax Contributions. A Participant may elect
to make Voluntary After-Tax Contributions. A Participant may
contribute as a Voluntary After-Tax Contribution any whole
percentage of his Compensation up to 10% during any Plan
Year.
4.02 Elections Regarding Employee Contributions.
(a) Procedure for Making Elections. A Participant may enter a
Salary Savings Agreement with the Employer authorizing the
Employer to withhold a portion of such Participant's
Compensation as a Salary Savings Contribution and/or
Voluntary After-Tax Contribution during each pay period. The
election to make Employee Contributions shall be effective
no later than the first day of the Participant's normal pay
period beginning at least 30 days after the Employer
receives the Salary Savings Agreement. The Committee may
prescribe rules and regulations regarding the manner and
timing of the Participant's election including a shorter or
longer period of required notice.
(b) Treatment as 401(k) Contributions. It is expressly intended
that, to the extent allowable by law, Salary Savings
Contributions shall not be included in the gross income of
the Employee for income tax purposes and shall be deemed
contributions under a cash or deferred arrangement pursuant
to Code Section 401(k).
(c) Additional Limitations of Salary Savings Contributions.
Salary Savings Contributions shall be subject to the
limitations described in Section 12.02 (maximum dollar
contribution limit), Section 12.03 (ADP non-discrimination
test) and Article 14 (Code Section 415 limit).
4.03 Change in Employee Contribution Percentage or Suspension of
Contributions.
(a) CHANGE OF CONTRIBUTION PERCENTAGE. A Participant may
increase or decrease the percentage of his Compensation
contributed as an Employee Contribution only on January 1,
April 1, July 1 or October 1 of each Plan Year by delivery
of written notice to the Committee. If a Participant has not
authorized the Employer to withhold at the maximum rate and
desires to increase the total withheld for a Plan Year, such
Participant may authorize the Employer to withhold a
supplemental amount up to 100% of his or her Compensation
for one or more pay periods. However, in no event shall the
total of all such supplemental contributions exceed 18% of
the Participant's year-to-date Compensation for Salary
Savings Contributions or 10% of the Participant's
year-to-date Compensation for Voluntary After-Tax
Contributions. In order to be effective, the Participant
must notify the Committee of such increase or decrease at
least 30 days prior to the date that the increase or
decrease will become effective or such other number of days
as determined by the Committee on a nondiscriminatory basis.
(b) SUSPENSION OF CONTRIBUTIONS. A Participant may suspend his
Employee Contributions at any time by properly completing a
form prescribed by the Committee. The suspension of Employee
Contributions will be effective on the first day of the
Participant's normal payroll period that begins 30 days
after the Participant delivers the completed form to the
Committee. A Participant may resume making Salary Savings
Contributions or Voluntary After-Tax Contributions only on
the next January 1, April 1, July 1 or October 1 which is at
least 90 days after the effective date of such suspension of
contributions and only after informing the Committee in
writing at least 30 days prior to the date on which the
Employee Contributions are to resume. The Committee, on a
nondiscriminatory basis, may prescribe a lesser number of
days on which the suspension or resumption of Employee
Contributions is to be effective. Employee Contributions
shall automatically be suspended beginning on the first
payroll period that commences after the Participant is not
in receipt of Compensation, the Participant's layoff or the
Participant's Authorized Leave of Absence without pay.
(c) Other Rules.
(1) See Section 9.03 for circumstances under which a
Participant's Salary Savings Contributions could be
suspended for a period of at least 12 months after such
Participant receives a hardship distribution.
(2) In order to satisfy the provisions of Article 12 and
Article 14, the Committee may from time to time either
temporarily suspend the Employee Contributions of
Highly Compensated Employees or reduce the maximum
permissible Employee Contribution that may be made to
the Plan by Highly Compensated Employees.
(3) Any reduction, increase, or suspension of Employee
Contributions described in this Section 4.03 shall be
made in such manner as the Committee may prescribe from
time to time consistent with the provisions of this
Section.
4.04 Deadline for Contribution and Allocation of Salary Savings
Contributions.
Employee Contributions shall be paid to the Trustee as promptly as
possible after the end of each regular pay period but in no event
later than 90 days after such Employee Contributions have been
retained by the Employer.
4.05 Rollover Contribution.
(a) Without regard to any limitation on contributions set forth
in this Article, a Participant shall be permitted, if the
Committee consents (based on non-discriminatory criteria),
to transfer to the Trustee during any Plan Year additional
property acceptable to the Trustee, provided such property:
(1) was received by the Participant from a Qualified Plan
maintained by a previous employer of the Participant
and qualifies as a Rollover Contribution within the
meaning of Code Section 402(a)(5) or
(2) was received by the Participant from an individual
retirement account or individual retirement annuity and
qualifies as a Rollover Contribution within the meaning
of Code Section 408(d)(3)(A)(ii).
(b) Such property shall be held by the Trustee in the
Participant's rollover Contribution Account. All such
amounts so held shall at all times be fully vested and
nonforfeitable. Such amounts shall be distributed to the
Participant upon Termination of Employment in the manner
provided in Article 8.
4.06 Transfer Contribution.
(a) If the Committee consents (based on nondiscriminatory
criteria), a trustee of another Qualified Plan may transfer
the account balance of a Participant held in such other
Qualified Plan to the Trustee of this Plan. After such
transfer, the Trustee of this Plan shall hold such
transferred account balance in an account designated by the
Committee.
(b) Transfers from another Qualified Plan directly to this Plan
shall be permitted only if the transferred assets are
acceptable to the Trustee and only if the transfer will not
adversely affect the tax Qualified status of this Plan. On a
nondiscriminating basis, the Trustee may refuse to accept a
transfer if the transfer will increase the administrative
burdens of the Plan (including the addition of new optional
forms of benefit).
(c) Information about the transferred assets and any limitations
or conditions imposed on sub-accounts held under the Plan
shall be specified in an appendix to this Plan. The
Committee may amend such appendix without the consent of the
Board or of any Employer.
ARTICLE 5
EMPLOYER CONTRIBUTIONS
5.01 Matching Employer Contribution.
(a) Eligibility to Receive Matching Contribution with respect to
Salary Savings Contributions. Each quarter the Employer
shall make an Employer Matching Contribution on behalf of
each Participant who (i) is employed on the last day of the
quarter for which the contribution is made (see Section
5.01(d)) and (ii) made Salary Savings Contributions during
the quarter or such other period selected by the Company. An
Employer will not match Voluntary After-Tax Contributions.
(b) Eligibility to Receive Matching Contribution with respect to
Elective Profit Sharing Contributions. Each Plan Year the
Employer shall make an Employer Matching Contribution on
behalf of each Participant who elected to contribute his
Elective Profit Sharing Contribution to the Plan for the
Plan Year.
(c) Amount of Match.
(1) Match on Salary Savings Contribution. A Participant's
Employer Matching Contribution with respect to Salary
Savings Contributions for a calendar quarter shall
equal the Participant's Salary Savings Contributions
made during the applicable quarter multiplied by the
Employer Matching Contribution Percentage determined by
the Company for such Plan Year. The Employer Matching
Contribution Percentage shall be a uniform percentage
of a Participant's Salary Savings Contribution up to 4%
of the Participant's Compensation for such calendar
quarter. The Employer Matching Contribution shall be
allocated to the Participant's Employer Matching
Contribution Account within a reasonable time after the
end of the quarter for which the Employer Matching
Contribution is made or such other period determined by
the Employer.
(2) Match on Elective Profit Sharing Contribution. A
Participant's Employer Matching Contribution with
respect to Elective Profit Sharing Contributions for a
Plan Year shall equal 100% of the Participant's
Elective Profit Sharing Contributions that the
Participant elects to contribute to the Plan for such
Plan Year. The Employer Matching Contribution shall be
allocated to the Participant's Employer Matching
Contribution Account within a reasonable time after the
end of the Plan Year or such other period determined by
the Employer.
(d) Employment on Last Day of Calendar Quarter. For purposes of
allocating an Employer Matching Contribution on Salary
Savings Contributions, any Participant who either has a
Termination of Employment during the quarter on account of
death, Disability or Retirement shall be deemed to be
employed on the last day of the quarter during which such
Termination of Employment occurred.
5.02 Profit Sharing Contributions.
(a) Eligibility To Receive Profit Sharing Contribution. Each
year the Employer may elect to make a discretionary Profit
Sharing Contribution to the Plan. This Profit Sharing
Contribution shall be allocated to the Profit Sharing
Account of each Participant who is employed on the last day
of the Plan Year or who had a Termination of Employment
during the Plan Year on account of death, Disability or
Retirement.
(b) NON-ELECTIVE AND ELECTIVE PROFIT SHARING CONTRIBUTION. Fifty
percent (50%) of the Profit Sharing Contribution (the
"Non-Elective Profit Sharing Contribution") shall be
allocated to each eligible Participant's Profit Sharing
Contribution Account in the same proportion that each such
Participant's Eligible Compensation (as defined below) for
the Plan Year bears to the total Eligible Compensation of
all such Participants for the Plan Year. The remaining fifty
percent (50%) may, at the election of the Participant, be
distributed immediately to the Participant in cash or be
contributed to the Plan (the "Elective Profit Sharing
Contribution"). See Section 5.01(c)(2) regarding a matching
contribution with respect to Elective Profit Sharing
Contributions.
(c) Eligible Compensation. For purposes of this Section 5.02,
"Eligible Compensation" shall mean a Participant's base
wages (including commissions, but excluding overtime,
bonuses and incentives) received while a Participant in the
Plan. Eligible Compensation received during a Plan Year but
prior to the time an Eligible Employee becomes a Participant
shall be excluded.
5.03 Retirement Contribution.
The Employer may (but shall not be required to) make an additional
contribution annually to the Plan each Plan Year on behalf of each
Participant who is employed on the last day of the Plan Year or who
had a Termination of Employment during the Plan Year on account of
death. Disability or Retirement. Such contribution shall be no more
than 2% (or such other percentage or amount as determined by the
Committee) of a Participant's Eligible Compensation (as defined in
Section 5.02(c) above). Such contribution shall be allocated to the
Participant's Retirement Contribution Account. Compensation received
during a Plan Year but prior to the time an Eligible Employee becomes
a Participant shall be excluded from a Participant's Eligible
Compensation.
5.04 Qualified Non-Elective Contributions.
In the sole discretion of the Employer, an additional Employer
Contribution may be made to the Plan which shall be known as a
"Qualified Non-Elective Contribution". Such contribution shall be
made in order to satisfy the requirements of Article 12, and shall be
allocated to the Qualified Non-Elective Contribution Accounts of
those Non-Highly Compensated Employees selected by the Committee at
the time such Qualified Non-Elective Contribution is made, or as soon
thereafter as possible.
5.05 Form and Timing of Contributions.
(a) Employer Contributions shall be made in cash or in property
acceptable to the Trustee valued at the property's fair
market value on the date the property is delivered to the
Trustee. Employer Matching Contributions, Profit Sharing
Contributions and Retirement Contributions shall be
delivered to the Trustee on or before the date prescribed by
the Code for filing the Employer's federal income tax
return, including authorized extensions. Qualified
Non-elective Contributions shall be delivered to the Trustee
on or before the first day of the twelfth month following
the close of the Plan Year to which the contribution
relates.
(b) Except as provided in this Section 5.05, all Employer
Contributions shall be irrevocable, shall never inure to the
benefit of any Employer, shall be held for the exclusive
purpose of providing benefits to Participants and their
Beneficiaries (and contingently for defraying reasonable
expenses of administering the Plan), and shall be held and
distributed by the Trustees only in accordance with this
Plan.
(c) A contribution which was made by a mistake in fact, or
conditioned upon the initial qualification of the Plan under
Code Section 401(a) or upon the deductibility of the
contribution under Section 404 of the Code shall be returned
to the Employer within one year after the payment of the
contribution, the denial of the Plan's initial
qualification, or the disallowance of the deduction (to the
extent disallowed) whichever is applicable. All
contributions made to this Plan are conditional upon the
deductibility of such contribution under Code Section 404.
5.06 Forfeitures.
Forfeitures shall first be applied to restore amounts previously
forfeited pursuant to Section 7.06(c) and then shall be allocated as
an additional Non-Elective Profit Sharing Contribution (see Section
5.02). See Section 7.06 to determine when a forfeiture of a
Participant's Account occurs.
5.07 Employment on Last Day of Plan Year.
To the extent necessary to comply with Code Sections 410(b),
401(a)(26), 401(a)(4) or any other applicable requirement, Employees
who were not otherwise eligible to receive an Employer Contribution
shall be deemed to be eligible. The Committee (in a nondiscriminatory
manner) shall determine which Employees may participate in the Plan,
the extent of such participation and the allocation of any Employer
Contribution.
ARTICLE 6
ACCOUNTS AND ALLOCATIONS
6.01 Participant Accounts.
(a) Individual Account Plan. This Plan is an "individual account
plan", as that term is used in ERISA. A separate Account
shall be maintained for each Participant, Former Participant
or Beneficiary, so long as he has an interest in the Trust
Fund.
(b) Sub-Accounts. Each Account shall be divided (as appropriate)
into the following parts and sub-parts:
(1) The Salary Savings Contribution Account;
(2) The Employer Matching Contribution Account (which
Account shall be divided into two subparts -- one
subpart tracking Employer Matching Contributions on
Salary Savings Contributions and the second subpart
tracking Matching Contributions on Elective Profit
Sharing Contributions);
(3) The Profit Sharing Contribution Account (which Account
shall be divided into two subparts -- one subpart
tracking Elective Profit Sharing Contributions and the
second subpart tracking Non-Elective Profit Sharing
Contributions);
(4) The Qualified Non-Elective Contribution Account;
(5) The Rollover Contribution Account;
(6) Voluntary After-Tax Contribution Account;
(7) Retirement Contribution Account; and
(8) Transfer Contribution Account.
In addition, the Committee may divide such sub-accounts into such
additional sub-portions as the Committee deems to be necessary or
advisable under the circumstances or to establish other accounts
or sub-accounts as needed.
(c) Value of Account as of Valuation Date. As of each Valuation
Date, each Participant's Account shall equal:
(1) his total Account as determined on the immediately
preceding Valuation Date, plus
(2) his Employee Contributions added to his Account since
the immediately preceding Valuation Date, plus
(3) his Employer Contributions added to his Account since
the immediately preceding Valuation Date, plus
(4) his Rollover Contributions and Transfer Contributions
since the immediately preceding Valuation Date, minus
(5) his distributions, if any, since the immediately
preceding Valuation Date, plus or minus
(6) his allocable share of Adjustments.
6.02 Allocation of Adjustments.
The Adjustment for each Investment Fund shall be calculated as of
each Valuation Date. The Adjustment for a given Investment Fund shall
be allocated to each Account invested in such Investment Fund in the
proportion that each such Account bears to the total of all such
Accounts. Such Valuation shall occur prior to the allocation of
Employer Contributions but after taking into account all
distributions and all Employee Contributions since the prior
Valuation Date. Any Rollover Contribution or Transfer Contribution
made during the Plan Year shall be weighted to reflect the number of
full months such Rollover Contribution or Transfer Contribution was
held in the Plan. The Committee may direct that expenses attributable
to general Plan administration be allocated among the Accounts of all
Participants in proportion to their Account balances. The Adjustment
that is allocable to the Participant's directed investment of his
loan shall be the interest payments made by the Participant with
respect to such loan since the immediately preceding Valuation Date.
6.03 Investment Funds and Elections.
(a) ELECTION OF INVESTMENT FUNDS. Except for the Participant's
Retirement Contribution Account and the Non-elective Profit
Sharing Contribution portion of his Profit Sharing Contribution
Account, each Participant shall direct, following such procedures
as may be specified by the Committee, to have his Account
allocated or reallocated in 10% increments among the Investment
Funds. References to a Participant's investment of his "Account"
in this Section 6.03 and other related portions of this Plan
shall mean the Participant's Account other than the Participant's
Retirement Contribution Account and the Non-elective Profit
Sharing Contribution portion of his Profit Sharing Contribution
Account. See Section 6.03(e) for the investment of the
Participant's non-directed Account.
(b) Initial Investment Direction. A Participant's initial investment
election must allocate his entire Account in 10% increments among
the Investment Funds, as of the date of the directive, and all
subsequent contributions to each sub-account for so long as the
election remains in effect. An Employee who fails to make a
proper investment election by the deadline established by the
Committee for such purpose, shall be deemed to have elected to
allocate 100% of his Account in the Investment Fund which, in the
opinion of the Committee, best preserves the principal amount of
the Participant's Account.
(c) Subsequent Elections. Investment elections will remain in effect
until changed by a new election. New elections may be made in 10%
increments by a Participant effective on the first day of any
calendar quarter in a manner determined by the Committee,
provided that new elections must be received at least 30 days (or
a shorter period established by the Committee) prior to the
desired effective date. New elections may change future
allocations to the Participant's Account, may reallocate between
the Investment Funds any amounts previously credited to the
Participant's Account, or may leave the allocation of such prior
amounts unchanged. Trust transactions reflecting investment
elections among the Investment Funds will occur as of the January
1, April 1, July 1, or October 1 which immediately follows the
timely receipt of such investment election when such allocation
or re-allocation can be made and all Investment Fund values shall
be determined as of such dates.
(d) Investment Options. The Committee is authorized to select new
Investment Funds or to eliminate any Investment Fund as the
Committee shall deem appropriate from time to time. Any change in
Investment Funds shall be noted in the minutes of the Committee.
The creation of an Investment Fund shall not be effective until
the Trustee has consented in writing to the creation of such new
Investment Fund. Any creation or deletion of an Investment Fund
shall not be effective until such change is communicated to
Participants and new investment elections are solicited from
Participants, if appropriate.
(e) Non-directed Accounts. The Participant may not direct the
investment of his Retirement Contribution Account nor the
Non-elective Profit Sharing Contribution portion of his Profit
Sharing Contribution Account. Instead such amounts shall be
invested at all times (unless the Committee determines otherwise
and communicates its decision to the Trustee) in the Balanced
Fund described in Section 6.03(d) above.
6.04 Errors.
Where an error or omission is discovered in any Participant's
Account, the Committee shall make appropriate corrective adjustments
as of the end of the Plan Year in which the error or omission is
discovered. If it is not practical to correct the error
retroactively, then the Committee shall take such action in its sole
discretion as may be necessary to make such corrective adjustments,
provided that any such actions shall treat similarly situated
Participants alike and shall not discriminate in favor of Highly
Compensated Employees.
6.05 Valuation For Purposes of Distributions.
(a) For the purposes of Article 8, each Participant's Account
shall be valued as of the Valuation Date immediately
preceding the distribution of the Participant's Account.
(b) Notwithstanding the foregoing, if the Committee in its
discretion determines that there has been a significant
change in the market value of the assets held in the Fund
since the Valuation Date which precedes the proposed date of
distribution, the Committee in its discretion and on a
non-discriminatory basis may postpone the distribution until
a reasonable time following the next Valuation Date and
shall use the value of the Account computed as of the later
Valuation Date in determining the amount of the
distribution.
(c) No person entitled to a distribution shall receive interest
or other earnings on the Account from the applicable
Valuation Date described in subsection (a) or subsection (b)
above, to the date of actual distribution to such person.
(d) This Section 6.06 shall not apply to the valuation of
Accounts for purposes of in-service withdrawals or loans.
Instead, see Section 9.15.
ARTICLE 7
VESTING
7.01 Retirement.
A Participant who has a Termination of Employment on or after
attaining age 55 shall be 100% vested in his Account. Such Account
will be distributed on the date and in the form specified in Article
8.
7.02 Disability.
A Participant who has a Termination of Employment on account of
Disability shall become 100% vested in his Account as of the date of
such Disability and shall be entitled to a distribution of his
Account on the date and in the form specified in Article 8.
7.03 Death.
A Participant who has a Termination of Employment on account of death
shall become 100% vested in his Account. The Participant's
Beneficiary shall receive a distribution of such Account on the date
and in the form specified in Article 8.
7.04 Other Termination of Employment.
(a) In General. Upon a Participant's Termination of Employment
for any reason other than Retirement, Disability or death,
the Participant shall be entitled to the vested portion of
his Account, which shall be distributed on the date and in
the form specified in Article 8.
(b) 100% Vesting in Certain Sub-Accounts. A Participant shall
always be one hundred percent (100%) vested in his Salary
Savings Contribution Account, Voluntary After-Tax
Contributions Account, the Elective Profit Sharing
Contribution portion of the Participant's Profit Sharing
Contribution Account and Rollover Contributions Account.
(c) Four Year Vesting For Certain Sub-Accounts. Any Participant
who ceases to be an Employee shall have a vested interest in
his Employer Matching Contribution Account, Retirement
Contribution Account and the Non-Elective Profit Sharing
Contribution portion of the Participant's Profit Sharing
Contribution Account as follows:
Years of Vesting Service as of
Termination of Employment Vested Percentage
Less than 1 year 0%
1 year 25%
2 years 50%
3 years 75%
4 years 100%
(d) Forfeiture. That portion of the Participant's Account which
is not vested upon such Termination of Employment shall be
forfeited in accordance with Section 7.06.
(e) Transfer Contribution Account. See an appendix to this Plan
for the vesting schedule applicable to a Transfer
Contribution Account upon a Participant's Termination of
Employment.
7.05 Year of Vesting Service.
(a) Vesting Credit Prior to Effective Date. An Employee's
Vesting Service prior to the Effective Date shall be
determined under the terms of the Prior Plan.
(b) Vesting Credit After Effective Date. On or after the
Effective Date, an Employee shall receive one Year of
Vesting Service for any Plan Year during which the Employee
is credited with 1,000 or more Hours of Service. An Employee
shall not receive a Year of Vesting Service for any period
of employment during any Plan Year if the Employee is
credited with less than 1,000 Hours of Service during such
Plan Year.
(c) Forfeiture of Vesting Service. A Year of Vesting Service
shall not include any period of employment which precedes a
Break in Service if as of the first day of the Break in
Service, the Employee does not have a vested interest in his
Employer Contributions or Salary Savings Contributions.
(d) Employment with Affiliates. Any period of employment with an
Affiliate shall be considered service with the Employer for
purposes of determining whether the Employee has a Year of
Vesting Service.
(e) Authorized Leave of Absence. A Year of Vesting Service shall
not include any period of Authorized Leave of Absence or
service in the military except to the extent such service is
required to be credited under applicable federal law.
(f) Employment with Affiliated Sponsors or Predecessor
Businesses. A Participant shall not receive a Year of
Vesting Service for any employment with any Affiliated
Sponsor prior to its designation as an Affiliated Sponsor or
any period of employment with a predecessor business prior
to its acquisition by Employer except to the extent
specifically set forth in an appendix to this Plan.
7.06 Forfeitures.
(a) No Distribution of Account Prior to Break In Service. A
Participant who incurs a Termination of Employment but who
does not receive a distribution of his vested Account prior
to incurring a Break in Service shall, upon incurring the
Break in Service, forfeit the non-vested portion of his
Account. If the terminated Participant resumes employment
with the Employer prior to incurring a Break in Service,
then the Participant's entire Account, unreduced by any
forfeiture, shall become his beginning Account on the date
he resumes participation in the Plan.
(b) Distribution of Vested Account Prior to Break in Service. A
Participant who incurs a Termination of Employment and
receives a distribution of his entire vested Account prior
to incurring a Break in Service, shall, upon such
distribution, forfeit the non-vested portion of his Account.
A Participant who is not vested in any portion of his
Account shall be deemed to have received a distribution of
his entire vested account upon his Termination of Employment
and the Participant's non-vested Account shall be
immediately forfeited.
(c) REPAYMENT OF ACCOUNT; RESTORATION OF NON-VESTED ACCOUNT.
Except as provided below, a Participant who is re-hired by
the Employer shall have the right to repay to the Plan the
portion of the Participant's Account which was previously
distributed to him. In the event the Participant repays the
entire distribution he received from the Plan, the Employer
shall restore the non-vested portion of the Participant's
Account. A Participant's Account shall first be restored, to
the extent possible, out of forfeitures under the Plan in
the Plan Year in which the distribution was restored. To the
extent such forfeitures are insufficient to restore the
Participant's Account, restoration shall be made from
Employer Contributions. A Participant who was deemed to have
received a distribution of his vested Account (see
subsection (b) above) shall be deemed to have repaid such
vested Account if such Participant is rehired before
incurring a Break in Service.
(d) RESTRICTIONS OF REPAYMENT ACCOUNT. Notwithstanding anything
to the contrary in this Plan, a Participant shall not have
the right to repay to the Plan the portion of his Account
which was previously distributed to him after any of the
following events: (i) the Participant incurs a Break in
Service before returning to employment, (ii) the Participant
fails to repay the prior distribution within five (5) years
after the Participant is re-employed by the Employer, or
(iii) the Participant received a distribution of his entire
Account balance at the time of such earlier distribution.
7.07 Amendment of Vesting Schedule.
If the vesting schedule of the Plan is amended, or the Plan is
amended in any way that directly or indirectly affects the
computation of any Participant's nonforfeitable percentage, or if the
Plan is deemed amended by an automatic change to or from a Top-Heavy
vesting schedule, each Participant with at least three (3) Years of
Vesting Service with the Employer (or for Plan Years before 1989,
with at least five (5) Years of Vesting Service with the Employer),
may elect, within a reasonable period after the adoption of the
amendment, to have his or her nonforfeitable percentage computed
under the Plan without regard to such amendment. The period during
which the election may be made shall commence with the date the
amendment is adopted and shall end on the later of:
(a) 60 days after the amendment is adopted;
(b) 60 days after the amendment becomes effective; or
(c) 60 days after the Participant is issued written notice of
the amendment by the Employer or Trustee.
ARTICLE 8
DISTRIBUTIONS
8.01 Commencement of Distribution.
(a) Distribution Following Termination of Employment. A Participant's
Account shall be distributed as soon as practicable after the
later of (i) the Valuation Date coinciding with or immediately
following the Participant's Termination of Employment or (ii) any
later Valuation Date which is at least 30 days (or such number of
days as selected by the Committee on a nondiscriminatory basis)
after the Committee receives the Participant's written request
for a distribution. Except as provided in Section 8.01(b), the
Participant's Account shall not be distributed without the
Participant's consent.
(b) Consent of Participant. A Participant's consent to a distribution
of his Account shall not be required in the circumstances
described below, and the Committee shall direct the Trustee to
distribute the Participant's Account as provided below:
(i) Account Less Than $3,500. If the Participant's vested
Account balance is less than or equal to $3,500 at the
time of the distribution, such Account will be
distributed in a lump sum no later than ninety (90)
days after the end of the Plan Year in which such
Termination of Employment occurred. This Section
8.01(b)(i) shall not apply if the Participant's vested
Account balance as of an Annuity Starting Date exceeds
$3,500.
(ii) Age 70-1/2. If a distribution is required under Section
8.05 (relating to mandatory distributions for
Participants age 70-1/2), the Participant's Account
will be distributed as provided in such Section.
(iii)Attainment of Age 65. If a Participant has incurred a
Termination of Employment and is age 65 or older
(except in the case of a Port St. Lucie Participant, as
described below), the Plan shall begin distribution of
the Participant's Account no later than 60 days
following the end of the Plan Year in which the
Participant attains age 65 or, if later, within 60 days
following the end of the Plan Year in which the
Participant has a Termination of Employment.
Notwithstanding the foregoing, the distribution to a
Port St. Lucie Participant described in the preceding
sentence shall not begin before the fifth anniversary
of the date as of which the Participant first became
eligible to participate in the Port St. Lucie Bank
Retirement Savings Plan. If no election is made prior
to the Participant's Annuity Starting Date, the
Participant's Account will be distributed in a lump sum
or, if the provisions of Section 8.03 apply, as
provided in Appendix A.
(iv) Death of Participant. If the Participant dies, the
Participant's Account balance shall be distributed
within 90 days after such death unless the particular
facts and circumstances require a longer waiting
period.
(c) HARDSHIP WITHDRAWALS. Hardship withdrawals (see Article 9) shall
commence no later than ninety (90) days after such request is
approved by the Committee.
(d) DIRECTION TO TRUSTEE. The Committee shall issue directions to the
Trustee concerning the recipient and the distribution date of
benefits which are to be paid from the Trust pursuant to the
Plan.
(e) ESTABLISHMENT OF GUIDELINES. The Committee may establish for
administrative purposes, uniform and nondiscriminatory guidelines
concerning the commencement of benefits.
(f) VALUE OF ACCOUNT. See Section 6.06 for the method of determining
the value of a Participant's Account prior to its distribution
pursuant to this Article 8.
8.02 Method of Distribution. The Participant's Account shall be distributed
in accordance with one of the following forms of payment as selected by
the Participant (or Beneficiary if applicable).
(a) Lump Sum Payment is a single lump sum payment of the
Participant's entire vested Account.
(b) Single Life Annuity is a annuity which may be purchased with the
Participant's vested Account or paid directly from the Trust that
provides level monthly payments during the Participant's
lifetime, with payments ceasing upon the Participant's death.
(c) Joint and Survivor Annuity is an annuity which may be purchased
with the Participant's vested Account or paid directly to the
Participant for his life, and upon the Participant's death, 50%
of such monthly payment shall be payable on a monthly basis to
the Participant's Spouse for the Spouse's life. Payments under
the Joint and Survivor Annuity shall cease on the later of the
death of the Participant or the death of the Participant's
Spouse.
(d) Installment Payment is a form of distribution where equal
installments are made over a period not to exceed the life
expectancy of the Participant and his or her Beneficiary. The
payments will be made in monthly, quarterly, semi-annual or
annual payments.
(e) WRITTEN EXPLANATION OF BENEFIT OPTIONS. At least thirty (30) days
and no more than ninety (90) days prior to the Annuity Starting
Date, the Committee shall provide the Participant with a written
explanation of the optional forms of payment described in Section
8.02. Such explanation shall provide a general description of the
eligibility conditions (if any) and other material features of
the optional forms of payment including sufficient information
regarding the relative values of the optional forms of payment.
The written explanation must also inform the Participant of his
rights (if any) to defer receipt of the distribution until his
Normal Retirement Age. This written explanation is not required
if the Participant's Account is distributed without his consent
as provided in subsection (b) above.
8.03 Special Rules Applicable to Annuity Distributions.
(a) Application of Section 8.03. This Section 8.03 shall apply to
a Participant only if and when the Participant elects to
receive an annuity distribution. After a Participant elects to
receive a distribution of his Account in the form of an
annuity, the Participant's form of distribution and
Beneficiary designation shall be governed by Appendix A to the
extent inconsistent with this Article 8. In addition, the
notice requirements of Appendix A shall apply.
(b) Hardship Withdrawals. Hardship withdrawals (see Article 9) are
payable only in a single lump sum. Thus, a married Participant
whose Account is subject to Section 8.03 must obtain his
Spouse's consent to such distribution. The Spouse's consent
must be obtained within 90 days of the Participant's Annuity
Starting Date and must be in the form described in Appendix A.
8.04 Death Benefits.
(a) Death Benefits If Section 8.03 Applies. If the provisions of
Section 8.03 apply to the Participant (i.e., the Participant
previously elected to receive a distribution of his Account in
the form of an annuity) and the Participant dies prior to his
Annuity Starting Date, the Participant's Account shall be
distributed in accordance with the Pre-Retirement Survivor
Annuity rules contained in Appendix A.
(b) Death Benefits If Section 8.03 Does Not Apply. If the
provisions of Section 8.03 do not apply (i.e., the Participant
has never elected to receive a distribution of his Account in
the form of an annuity) and the Participant dies, the
Participant's vested Account shall be distributed to the
Participant's Beneficiary in the form previously selected by
the Participant on behalf of the Beneficiary or if the
Participant made no such election, in the form selected by the
Beneficiary. The Participant's Account will not be distributed
in the form of a Joint and Survivor Annuity.
8.05 Special Distribution Rules For Participants Age 70-1/2
(a) SCOPE OF SECTION. To the extent that the distribution rules
described in this Section provide a limitation upon distribution
rules stated elsewhere in this Plan, the distribution rules
stated in this Section shall take precedence over such
conflicting rules. However, under no circumstances shall the
rules stated in this Section be deemed to provide distribution
rights to Participants or their Beneficiaries which are more
expansive or greater than the distribution rights stated
elsewhere in this Plan. For example, if the only distribution
method permitted under the Plan is a lump sum, then distributions
under this Section may only be made in a lump sum. In addition,
if the Plan requires distributions to commence at age 65 for
Participants who have terminated Employment, distributions must
commence at age 65 and may not be delayed to age 70-1/2.
(b) Distributions Must Commence Before Age 70-1/2. In no event may
the distribution of a Participant's Account commence later than
April 1 following the calendar year in which the Participant
attains age 70-1/2 (the "required beginning date"). However, if a
Participant attained age 70-1/2 prior to January 1, 1988 and is
not a 5% owner of an Employer (as defined in Code ss. 401(a)(9)
and the Treasury Regulations thereunder), such Participant's
Account shall commence to be distributed no later than April 1
following the calendar year in which incurs his Termination of
Employment.
(c) Method of Distribution. The entire Account of each Participant
shall be distributed, beginning not later than the required
beginning date, in the manner elected by the Participant.
However, if the Participant fails to elect a distribution option
by the required beginning date, the Participant's vested Account
will be distributed in a lump sum, or if the provisions of
Section 8.03 apply, in the manner described in Appendix A.
(d) Death After Required Beginning Date. If distribution of a
Participant's Account has begun in accordance with paragraph (b),
and if the Participant dies before his entire vested Account has
been distributed to him, then the remaining portion of such
vested Account will be distributed at least as rapidly as under
the method of distribution being used under paragraph (b) as of
the date of the Participant's death.
(e) Death Before Required Beginning Date. If a Participant dies
before distribution of the Participant's Account has begun in
accordance with paragraph (b) above, the Participant's entire
vested Account must be distributed in a lump sum within 90 days
of the Participant's death unless:
(i) the Participant's Account is payable to or for the
benefit of his Beneficiary;
(ii) such portion will be distributed or the life of the
Spouse or in installments over a period certain not
extending beyond the life expectancy of the Spouse or
Beneficiary; and
(iii)such distributions begin not later than one year after
the date of the Participant's death or such later date
as may be prescribed in Treasury Regulations.
If the conditions stated in clauses (i), (ii) and (iii) are
met, then the portion referred to in clause (i) shall be
treated as distributed on the date on which distributions
begin. Furthermore, if the Beneficiary is the Participant's
Spouse, the date on which the Distributions are required to
begin under clause (iii) above shall not be earlier than the
date on which the Participant would have attained age 70-1/2,
and if the surviving Spouse dies before distributions to such
Spouse begin, this paragraph shall be applied as if the
surviving Spouse were the Participant.
The Participant's Beneficiary may elect whether the
Participant's entire vested Account will be distributed in a
lump sum immediately following the Participant's death or
pursuant to the provisions of paragraph (i)-(iii) above. Such
election must be made within the time limits described in
Treasury Regulation ss. 1.401(a)(9)-1, C-4. If no election is
made and the Beneficiary is the Participant's Spouse, the
Committee shall distribute the Participant's entire vested
Account pursuant to the provisions of paragraphs (i)-(iii)
above. If no election is made and the Beneficiary is not the
Participant's Spouse, the Participant's entire vested Account
will be distributed in a lump sum.
(f) No Recalculation of Life Expectancy. For the purposes of this
Section, the life expectancy of the Participant and the
Participant's Beneficiary shall not be recomputed once
benefits have commenced under this Section.
(g) Minimum Distribution Rules. Notwithstanding anything to the
contrary herein, Distributions under the Plan will comply with
Treasury Regulations issued under Code Section 401(a)(9) and
any other provisions reflecting Code Section 401(a)(9) as
prescribed by the Commissioner of the Internal Revenue
Service, including the minimum distribution incidental benefit
rules under Code Section 401(a)(9)(G) and Treasury Regulations
issued thereunder.
8.06 Application for Benefits.
The Committee may require a Participant or Beneficiary to complete and
file with the Committee certain forms as a condition precedent to the
payment of benefits. The Committee may rely upon all such information
given to it, including the Participant's current mailing address. It is
the responsibility of all persons interested in distributions from the
Trust Fund to keep the Committee informed of their current mailing
addresses.
8.07 Distributions Pursuant to Qualified Domestic Relations Orders.
Notwithstanding anything to the contrary in this Plan, a "qualified
domestic relations order", as defined in Code Section 414(p), may
provide that any amount to be distributed to an alternate payee may be
distributed immediately even though the Participant is not yet entitled
to a distribution under the Plan. The intent of this Section is to
provide for the distribution of benefits to an alternate payee as
permitted by Treasury Regulation 1.401(a)-13(g)(3).
8.08 Direct Transfer of Account to an Eligible Retirement Plan.
(a) In General. If a Participant is entitled to a distribution of his
or her Account, the Participant may elect to have all or part of
such Distribution paid directly to an "Eligible Retirement Plan"
in the form of a direct trustee-to-trustee transfer.
(b) Election. The Participant must make the election described in
paragraph (a) above within ninety (90) but no later than thirty
(30) days (or such shorter period of time as determined by the
Committee and permitted by law) prior to the Participant's
Annuity Starting Date in the manner and on the form provided by
the Committee. The Participant must provide all information
requested by the Committee for the Trustee to make the transfer.
Failure to provide such information will void the Participant's
election.
(c) Definition of Eligible Retirement Plan. The term "Eligible
Retirement Plan" shall mean:
(i) an individual retirement account (as described in Code
ss. 408(a));
(ii) an individual retirement annuity (as described in Code
ss. 408(b), other than an endowment contract);
(iii)a defined contribution plan qualified under Code ss.
401(a) that by its terms accepts rollover
contributions; or
(iv) an annuity plan described in Code ss. 403(a).
(d) Exceptions. The Committee is not required to offer a direct
transfer of a Participant's Account if:
(i) The distribution is a series of substantially equal
periodic payments made at least annually for the life
(or life expectancy) of the Participant or for the
joint lives (or joint life expectancies) of the
Participant and his or her Beneficiary;
(ii) The distribution is a series of substantially equal
periodic payments made at least annually for a period
of at least ten years; or
(iii) The distribution is required under Section 8.05
(required minimum distribution).
(iv) The distribution is less than $200 in a lump sum form
(or any higher amount as established by the Internal
Revenue Code or other applicable authority) and
withholding is therefore not required.
(e) Income Tax Withholding. Under the Internal Revenue Code, the
Committee is generally required to withhold for federal income
taxes on a distribution made directly to a Participant.
Federal income tax withholding is not required for any direct
transfer of a Participant's Account to an Eligible Retirement
Plan or for any distribution described in paragraph (d) above.
ARTICLE 9
HARDSHIP WITHDRAWALS; LOANS
9.01 Hardship Withdrawal of Account.
(a) In General. Any Participant may request the Committee to
distribute to him part or all of his (i) Salary Savings
Contributions Account, (ii) the Elective Profit Sharing
Contribution portion of his Profit Sharing Contribution
Account, and (iii) the vested Employer Matching
Contributions on Elective Profit Sharing Contributions held
in his Employer Matching Contribution Account. Such Account
shall be valued in accordance with Section 9.15.
(b) No Distribution of Earnings. Notwithstanding the above,
income or gain that is allocated to the Participant's Salary
Savings Contribution Account and to the Participant's
Elective Profit Sharing Contributions held in his Profit
Sharing Contribution Account may not be distributed in a
hardship withdrawal.
9.02 Definition of Hardship.
Hardship shall mean an immediate and heavy financial need experienced
by reason of:
(a) Expenses of any accident to or sickness of such Participant,
his Spouse or his dependents or expenses necessary to
provide medical care for such Participant, his Spouse or his
dependents;
(b) Purchase of a primary residence for such Participant;
(c) Payment of tuition and related educational fees for the next
twelve months of post-secondary education for the
Participant, his Spouse, children or dependents;
(d) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the Participant's
principal residence; or
(e) Other financial hardships as permitted by Treasury
Regulations or other regulatory or judicial authority and
approved by the Committee.
9.03 Maximum Hardship Distribution.
(a) Maximum Hardship. A hardship distribution cannot exceed the
amount required to meet the immediate financial need created
by the hardship (after taking into account applicable
federal, state, or local income taxes and penalties) and not
reasonably available from other resources of the
Participant. In order to ensure compliance with this
requirement, the Committee may require the Participant to
satisfy any or all of the provisions described below in (1),
(2), or (3) below as a condition precedent to the
Participant receiving a hardship distribution:
(1) No Other Sources Available. Certification by the Participant
on a form provided by the Committee for such purpose that
the financial need cannot be relieved (1) through
reimbursement or payment by insurance; (2) by reasonable
liquidation of the Participant's assets; (3) by ceasing
Salary Savings Contributions under the Plan; (4) by other
in-service distributions (including loans) under the Plan
and under any other plan maintained by the Employer; or (5)
by borrowing from commercial lenders on reasonable
commercial terms.
(2) Receipt Of All Distributions Available; Suspension of Future
Contributions. Receipt by the Participant of all
distributions that he is eligible to receive (including
loans) under this Plan and under any other plan maintained
by the Employer.
In addition, the Participant must agree to the following
limitations and restrictions:
(A) The Participant's Salary Savings Contributions shall
automatically be suspended beginning on the first
payroll period that commences after such Participant
requests and receives a hardship distribution. Such
Participant may resume making Salary Savings
Contributions only on the January 1, April 1, July 1,
or October 1 which is at least 12 months after the
effective date of such suspension and only after
informing the Committee in writing at least 30 days (or
such lesser time as specified by the Committee) prior
to the date on which the Salary Savings Contributions
are to resume.
(B) The maximum Salary Savings Contribution the Participant
may make for the calendar year following his hardship
distribution shall be reduced by the amount of Salary
Savings Contributions made by the Participant during
the calendar year in which he received his hardship
distribution.
(C) The Participant shall be prohibited under a legally
enforceable agreement from making an Employee
contribution to any other plan maintained by the
Employer for at least 12 months after the receipt of
the hardship distribution. For this purpose, the phrase
"any other plan" includes all qualified and
nonqualified plans of deferred compensation, stock
option plans and stock purchase plans. It does not
include a health or welfare plan including one that is
part of a Section 125 cafeteria plan.
(3) Other. Any other condition or method approved by the
Internal Revenue Service.
9.04 Procedure to Request Hardship.
The request to receive a hardship distribution shall be made in
writing to the Committee explaining the nature of the financial
hardship and stating the amount needed to meet the immediate need.
Under no circumstances shall the Committee permit a Participant to
repay to the Plan the amount of any hardship withdrawal by a
Participant under this Section.
9.05 Authority to Establish Loan Program.
(a) The Committee and its designated agent is authorized and directed
to administer the loan program.
(b) Effective August 15, 1995, the loan program shall be terminated,
and no new loans shall be made available to Participants under
the Plan. Participant's with existing loans as of August 15,
1995, shall be allowed to repay their loans in accordance with
the terms of the Plan and loan rules in effect as of August 14,
1995.
9.06 Eligibility for Loans.
Loans shall be available to all Participants on a reasonably
equivalent basis. To request the loan, the Participant must make
application on such forms and following such procedures as the
Committee may prescribe.
9.07 Loan Amount.
A loan to any Participant (determined immediately after the
origination of the loan) shall not exceed the lesser of:
(1) Fifty percent (50%) of the Participant's balance in his
Account as of the Valuation Date with respect to which the
loan is processed; or
(2) $50,000 reduced by the excess (if any) of (A) the highest
outstanding balance of loans from the plan during the
one-year period ending on the day before the date on which
such loan was made, over (B) the outstanding loan balance of
loans from the Plan on the date on which the loan was made.
9.08 Assignment of Account.
Each loan shall be supported by the Participant's promissory note for
the amount of the loan, including interest, payable to the order of
the Trustee. In addition, each loan shall be supported by an
assignment of fifty percent (50%) of the Participant's right, title
and interest in and to his Account and shall be supported by any
other reasonable security required by the Trustee. If the provisions
of Appendix A apply, the Participant must obtain the consent of his
or her Spouse, if any, within the 90 day period before the time his
or her account balance is used as security for the loan. A new
consent is required if the account balance is used for any increase
in the amount of the security.
9.09 Interest.
Interest shall be charged on any such loan at a rate established from
time to time by the Trustee provided such rate is equivalent to a
rate that would be charged by a commercial lender for a similar loan.
9.10 Term of Loan.
The maximum repayment term of any loan is five (5) years unless the
loan is used to acquire any dwelling unit which within a reasonable
time after the loan is made is to be used by the principal residence
of the Participant. The maximum repayment term for a loan used to
acquire a dwelling unit shall be a reasonable time, as determined by
the Committee, that may exceed five (5) years but shall not exceed
thirty (30) years. The term of the loan may not exceed beyond the
Participant's Termination of Employment. A Participant's loan shall
immediately become due and payable if such Participant terminates
employment for any reason or fails to make a principal and/or
interest payment as provided in the loan agreement. However, no
foreclosure on the Participant's note or attachment of the
Participant's account balance will automatically occur. The Committee
may, in its discretion, establish a shorter repayment term than the
maximum repayment term otherwise permitted under the Plan.
9.11 Level Amortization.
Each loan shall provide for level amortization with payments to be
made at such regular intervals as the Committee determines in its
discretion, but not less frequently than once every three months over
the term of the loan.
9.12 Directed Investment.
A Participant who requests a loan shall be deemed to have directed
the Committee to reduce his Investment Funds by the amount of the
loan, and until such loan is repaid, such loan shall be considered a
directed investment of the Participant's Account hereunder. The Plan
monies which are used to fund the Participant loan shall be withdrawn
from the Participant's Account on a pro rata basis according to the
value of the Investment Funds in which such Account was invested,
determined in the manner set forth in Section 9.15. Principal and
interest payments on the loan will be allocated to the Participant's
Investment Funds according to the Participant's investment election
at the time of the repayment.
9.13 Other Requirements.
The Committee may establish such additional guidelines and rules as
it deems necessary. Such guidelines and rules shall be set forth in
the loan application and the terms specified in such loan application
are hereby incorporated by reference in the Plan. The Committee may
amend or modify the loan application as it deems necessary to carry
out the provisions of this Article 9.
9.14 Distribution of Loan.
Loan proceeds will be distributed as soon as practicable after the
loan is approved and after the Participant completes all
documentation necessary to make such loan.
9.15 Valuation for Purposes of Withdrawals; Loans.
The Participant's Account for purposes of determining the amount of a
hardship withdrawal or loan shall be determined as of the Valuation
Date preceding the date the Committee approves the hardship
distribution or loan. However, if the Committee in its discretion
determines that there has been a significant change in the market
value of the assets held in the Fund since the Valuation Date which
precedes the proposed date of distribution or loan, the Committee in
its discretion and on a non-discriminatory basis may postpone the
hardship distribution loan until a reasonable time following the next
Valuation Date and shall use the value of the Account computed as of
the later Valuation Date in determining the amount of the
distribution or loan. Alternatively, the Committee may implement such
other measures as it deems appropriate, including suspension of
withdrawals or loans or special valuations, to insure that each
Participant's Account receives an appropriate allocation of income or
loss.
ARTICLE 10
ADMINISTRATION OF THE PLAN
10.01 Named Fiduciaries.
The following parties are named as Fiduciaries of the Plan
and shall have the authority to control and manage the operation and
administration of the Plan:
(a) The Company;
(b) The Board;
(c) The Trustee;
(d) The Committee.
The Fiduciaries named above shall have only the powers and duties
expressly allocated to them in the Plan and in the Trust Agreement
and shall have no other powers and duties in respect of the Plan;
provided, however, that if a power or responsibility is not expressly
allocated to a specific named fiduciary, the power or responsibility
shall be that of the Company. No Fiduciary shall have any liability
for, or responsibility to inquire into, the acts and omissions of any
other Fiduciary in the exercise of powers or the discharge of
responsibilities assigned to such other Fiduciary under this Plan or
the Trust Agreement.
10.02 Board of Directors.
The Board shall have the power to appoint and remove the Trustee and
the members of the Committee. The Board may delegate its authority to
appoint or remove the Trustee and the members of the Committee to an
officer of the Company. The Board shall have no other
responsibilities with respect to the Plan.
10.03 Trustee.
The Trustee shall exercise all of the powers and duties assigned to
the Trustee as set forth in the Trust Agreement. The Trustee shall
have no other responsibilities with respect to the Plan.
10.04 Committee.
(a) A committee of one or more individuals may be appointed by and
serve at the discretion of the Board to administer the Plan. Any
Participant, officer, or director of the Employer shall be
eligible to be appointed a member of the Committee and all
members shall serve as such without compensation. Upon
termination of his employment with the Employer, or upon ceasing
to be an officer or director, if not an employee, he shall cease
to be a member of the Committee. The Board shall have the right
to remove any member of the Committee at any time, with or
without cause. A member may resign at any time by written notice
to the Committee and the Board. If a vacancy in the Committee
should occur, a successor shall be appointed by the Board. The
Committee shall by written notice keep the Trustee notified of
current membership of the Committee, its officers and agents. The
Committee shall furnish the Trustee a certified signature card
for each member of the Committee and for all purposes hereunder
the Trustee shall be conclusively entitled to rely upon such
certified signatures.
(b) The Board or the Chief Executive Officer shall appoint a Chairman
and a Secretary from among the members of the Committee. All
resolutions, determinations and other actions shall be by a
majority vote of all members of the Committee. The Committee may
appoint such agents, who need not be members of the Committee, as
it deems necessary for the effective performance of its duties,
and may delegate to such agents such powers and duties, whether
ministerial or discretionary, as the Committee deems expedient or
appropriate. The compensation of such agents shall be fixed by
the Committee; provided, however, that in no event shall
compensation be paid if such payment violates the provisions of
Section 406 of ERISA and is not exempted from such prohibitions
by Section 408 of ERISA.
(c) The Committee shall have complete control of the administration
of the Plan with all powers necessary to enable it to properly
carry out the provisions of the Plan. In addition to all implied
powers and responsibilities necessary to carry out the objectives
of the Plan and to comply with the requirements of ERISA, the
Committee shall have the following specific powers and
responsibilities:
(1) To construe the Plan and Trust Agreement and to determine
all questions arising in the administration, interpretation
and operation of the Plan;
(2) To amend any or all of the provisions of the Plan and to
terminate the Plan in whole or in part pursuant to the
procedures provided hereunder;
(3) To decide all questions relating to the eligibility of
Employees to participate in the benefits of the Plan and
Trust Agreement;
(4) To determine the benefits of the Plan to which any
Participant, Beneficiary or other person may be entitled;
(5) To keep records of all acts and determinations of the
Committee, and to keep all such records, books of accounts,
data and other documents as may be necessary for the proper
administration of the Plan;
(6) To prepare and distribute to all Plan Participants and
Beneficiaries information concerning the Plan and their
rights under the Plan, including, but not limited to, all
information which is required to be distributed by ERISA,
the regulations thereunder, or by any other applicable law;
(7) To file with the Secretary of Labor such reports and
additional documents as may be required by ERISA and
regulations issued thereunder, including, but not limited
to, summary plan description, modifications and changes,
annual reports, terminal reports and supplementary reports;
(8) To file with the Secretary of the Treasury all reports and
information required to be filed by the Code, ERISA and
regulations issued under each; and
(9) To do all things necessary to operate and administer the
Plan in accordance with its provisions and in compliance
with applicable provisions of federal law.
(d) To enable the Committee to perform its functions, the Employer
shall supply full and timely information of all matters relating
to the compensation and length of service of all Participants,
their Retirement, death or other cause of termination of
employment, and such other pertinent facts as the Committee may
require. The Committee shall advise the Trustee of such facts and
issue to the Trustee such instructions as may be required by the
Trustee in the administration of the Plan. The Committee and the
Employer shall be entitled to rely upon all certificates and
reports made by a Certified Public Accountant selected or
approved by the Employer. The Committee, the Employer and its
officers shall be fully protected in respect of any action
suffered by them in good faith in reliance upon the advice or
opinion of any accountant or attorney, and all action so taken or
suffered shall be conclusive upon each of them and upon all other
persons interested in the Plan. 10.04 Standard of Fiduciary Duty.
Any Fiduciary, or any person designated by a Fiduciary to carry
out fiduciary responsibilities with respect to the Plan, shall
discharge his duties solely in the interests of the Participants
and Beneficiaries for the exclusive purpose of providing them
with benefits and defraying the reasonable expenses of
administering the Plan. Any Fiduciary shall discharge his duties
with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matter would use in the conduct
of an enterprise of a like character and with like aims. Any
Fiduciary shall discharge his duties in accordance with the
documents and instruments governing the Plan insofar as such
documents and instruments are consistent with the provisions of
ERISA. Notwithstanding any other provisions of the Plan, no
Fiduciary shall be authorized to engage in any transaction which
is prohibited by Sections 406 and 2003(a) of ERISA or Section
4975 of the Code in the performance of its duties hereunder.
10.05 Claims Procedure.
Any Participant, former Participant, Beneficiary, or Spouse or
authorized representative thereof (hereinafter referred to as
"Claimant"), may file a claim for benefits under the Plan by
submitting to the Committee a written statement describing the nature
of the claim and requesting a determination of its validity under the
terms of the Plan. Within ninety (90) days after the date such claim
is received by the Committee, it shall issue a ruling with respect to
the claim. If special circumstances require an extension of time for
processing the claim, the Committee shall send the Claimant written
notice of the extension prior to the termination of the 90-day
period. The written notice shall indicate the special circumstances
requiring an extension and the date by which the Committee believes a
decision will be made. In no case, however, shall the extension of
time delay the Committee's decision on such appeal request beyond 180
days following receipt of the claim for benefits. If the claim is
wholly or partially denied, written notice shall be furnished to the
Claimant, which notice shall set forth in a manner calculated to be
understood by the Claimant:
(1) The specific reason or reasons for denial;
(2) Specific reference to pertinent Plan provisions on which the
denial is based;
(3) A description of any additional material or information
necessary for the Claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
(4) An explanation of the claims review procedures.
Any Claimant whose claim for benefits has been denied, may appeal
such denial by resubmitting to the Committee a written statement
requesting a further review of the decision within sixty (60) days of
the date the Claimant receives notice of such denial. Such statement
shall set forth the reasons supporting the claim, the reasons such
claim should not have been denied, and any other issues or comments
which the Claimant deems appropriate with respect to the claim.
If the Claimant shall request in writing, the Committee shall make
copies of the Plan documents pertinent to his claim available for
examination of the Claimant. Within sixty (60) days after the request
for further review is received, the Committee shall review its
determination of benefits and the reasons therefor and notify the
Claimant in writing of its final decision. Such written notice shall
include specific reasons for the decision, written in a manner
calculated to be understood by the Claimant, with specific references
to the pertinent Plan provisions on which the decision is based. If
special circumstances require an extension of time for processing the
appeal, the Committee shall send the Claimant written notice of the
extension prior to the termination of the 60-day period. In no case,
however, shall the extension of time delay the Committee's decision
on such appeal request beyond 120 days following receipt of the
appeal request.
10.06 Indemnification of Committee; Board.
To the extent permitted under ERISA, the Plan shall indemnify the
Board and the Committee against any cost or liability which they may
incur in the course of administering the Plan and executing the
duties assigned pursuant to the Plan. The Employer shall indemnify
the Committee against any personal liability or cost not provided for
in the preceding sentence which they may incur as a result of any act
or omission in relation to the Plan or its Participants.
Notwithstanding the foregoing, however, no person shall be
indemnified for any act or omission which results from that person's
intentional or willful misconduct, or illegal activity. The Employer
may purchase fiduciary liability insurance to insure its obligation
under this Section. The Company shall have the right to select
counsel to defend the Board or Committee in connection with any
litigation arising from the execution of their duties under the Plan.
ARTICLE 11
AMENDMENT AND TERMINATION
11.01 Right to Amend.
The Company intends for the Plan to be permanent so long as the
corporation exists; however, it reserves the right to modify, alter,
or amend this Plan or the Trust Agreement, from time to time, to any
extent that it may deem advisable, including, but not limited to any
amendment deemed necessary to insure the continued qualification of
the Plan under Sections 40l(a) and 401(k) of the Code or to insure
compliance with ERISA; provided, however, that the Company shall not
have the authority to amend this Plan in any manner which will:
(a) Permit any part of the Fund (other than such part as is
required to pay taxes and administrative expenses) to be
used for or diverted to purposes other than for the
exclusive benefit of the Participants or their
Beneficiaries;
(b) Cause or permit any portion of the funds to revert to or
become the property of the Employer;
(c) Change the duties, liabilities, or responsibilities of the
Trustee without its prior written consent.
11.02 Termination and Discontinuance of Contributions.
The Company shall have the right at any time to terminate this Plan
or to discontinue permanently its contributions hereunder
(hereinafter referred to as "Plan Termination"). Upon termination of
the Plan, the Committee shall direct the Trustee with reference to
the disposition of the Fund, after payment of any expenses properly
chargeable against the Fund. The Trustee shall distribute all amounts
held in Trust to the Participants and others entitled to
distributions in proportion to the Accounts of such Participants and
other distributees as of the date of such Plan Termination. In the
event that this Plan is partially terminated, the provisions of this
Section 11.02 shall apply solely with respect to the Employees
affected by the partial termination. If the Plan is terminated or
partially terminated, or if the Employer permanently discontinues its
contributions to the Plan, then all Participants (in the case of
complete plan termination or permanent discontinuance of
contributions) or the affected Participants (in the event of partial
Plan termination), shall become 100% vested in all of their Accounts
under the Plan immediately upon such event.
11.03 IRS Approval of Termination.
Notwithstanding Section 11.02, the Trustee shall not be required to
make any distribution from this Plan in the event of complete or
partial termination until the Internal Revenue Service has issued a
favorable determination with respect to the Plan's termination.
ARTICLE 12
SPECIAL DISCRIMINATION RULES
12.01 Definitions.
Actual Contribution Percentage or ACP shall mean the ratio (expressed
as a percentage) of (i) the sum of the Employer Matching
Contributions and Voluntary After-Tax Contributions on behalf of the
Participant for the Plan Year and, to the extent permitted in
Treasury Regulations and elected by the Employer, the Participant's
Qualified Elective Deferrals and Qualified Non-Elective Contributions
to (ii) the Participant's Compensation for the Plan Year. The
Employer, on an annual basis, may elect to include or not to include
Qualified Elective Deferrals and Qualified Non-Elective Contributions
in computing the ACP for a Plan Year. An Employer may elect on an
annual basis to count a Participant's Employer Matching Contribution
toward satisfying the required minimum contribution under Section
15.03 (minimum contribution for Non-Key Employees in a Top-Heavy
plan) in lieu of including such contributions in the ACP. If a
Participant (as defined below) does not receive an allocation of
Employer Contributions for a Plan Year, such Participant's ACP for
the Plan Year shall be zero.
Actual Deferral Percentage or ADP shall mean the ratio (expressed as
a percentage) of (i) the sum of Salary Savings Contributions and
Elective Profit Sharing Contributions contributed to the Plan on
behalf of a Participant for the Plan Year (excluding any Excess
Deferrals by a Non-Highly Compensated Employee) and, to the extent
permitted in Treasury Regulations and elected by the Employer, the
Participant's Qualified Non-Elective Contributions to (ii) the
Participant's Compensation for the Plan Year. The Employer, on an
annual basis, may elect to include or not to include Qualified
Non-Elective Contributions in computing the ADP for a Plan Year. In
the case of a Participant (as defined below) who does not make a
Salary Savings Contribution for a Plan Year and is not allocated a
Qualified Non-Elective Contribution for such Plan Year, such
Participant's ADP for the Plan Year shall be zero.
Average Actual Contribution Percentage shall mean the average
(expressed as a percentage) of the Actual Contribution Percentages of
the Participants in a group. The percentage shall be rounded to the
nearest one-hundredth of one percent (four decimal places).
Average Actual Deferral Percentage shall mean the average (expressed
as a percentage) of the Actual Deferral Percentages of the
Participants in a group. The percentage shall be rounded to the
nearest one-hundredth of one percent (four decimal places).
Combined ADP and ACP Test shall have the meaning as defined in
Section 12.10.
Compensation for purposes of this Article 12 shall be that definition
selected by the Committee that satisfies the requirements of Code
Sections 414(s) and 401(a)(17). Such definition may change from year
to year but must apply uniformly among all Eligible Employees being
tested under the Plan for a given Plan Year and among all Employees
being tested under any other plan that is aggregated with this Plan
during the Plan Year. If the Committee fails to select a definition
of Compensation for purposes of this Article 12, Compensation (for
purposes of Article 12) shall have the same meaning as defined in
Article 2.
Employer Matching Contributions. For purposes of this Article 12, an
Employer Matching Contribution for a particular Plan Year includes
only those contributions that are (i) allocated to the Participant's
Account under the Plan as of any date within such Plan Year, (ii)
contributed to the Trust no later than the end of the 12-month period
following the close of such Plan Year, and (iii) made on account of
such Participant's Salary Savings Contributions for the Plan Year.
Excess Deferrals shall have that meaning as defined in Section 12.02.
Excess ACP Contributions shall have that meaning as defined in
Section 12.09.
Excess ADP Deferrals shall have that meaning as defined in Section
12.05.
Family Member. See Article 13.
Highly Compensated Employee. See Article 13.
Maximum Combined Percentage shall have the meaning as defined in
Section 12.11(c).
Non-Highly Compensated Employee. See Article 13.
Participant. For purposes of this Article 12, a Participant shall
mean any Employee who (i) is eligible to receive an allocation of an
Employer Matching Contribution, even if no Employer Matching
Contribution is allocated due to the Employee's failure to make a
required Salary Savings Contribution, (ii) is eligible to make a
Salary Savings Contribution, including an Employee whose right to
make Salary Savings Contribution has been suspended because of an
election not to participate or a hardship distribution, and (iii) is
unable to receive an Employer Matching Contribution or make a Salary
Savings Contribution because his Compensation is less than a stated
amount.
Salary Savings Contributions. For purposes of this Article 12, a
Salary Savings Contribution is taken into account only if the
contribution (i) is allocated to the Participant's Account under the
terms of the Plan as of any date within the Plan Year, and (ii)
relates to Compensation that would have been received by the
Participant during the Plan Year or within 2 1/2 months after the
Plan Year but for the deferral election. A Salary Savings
Contribution is considered to be allocated as of a date within a Plan
Year only if the allocation is not contingent on participation in the
Plan or performance of service after the Plan Year to which the
Salary Savings Contribution relates.
Qualified Elective Deferral shall mean Salary Savings Contributions
or Elective Profit Sharing Contributions designated by the Committee
as Qualified Elective Deferrals in order to meet the ACP testing
requirements of Section 12.07. In addition, the following
requirements must be satisfied:
(1) The aggregate of all Salary Savings Contributions and
Elective Profit Sharing Contributions for the Plan Year
(including the Qualified Elective Deferrals) must satisfy
the ADP testing requirements set forth in Section 12.03(a).
(2) The aggregate of all Salary Savings Contributions and
Elective Profit Sharing Contributions for the Plan Year
(excluding the Qualified Elective Deferrals) must satisfy
the ADP testing requirements set forth in Section 12.03(a).
(3) Qualified Elective Deferrals must satisfy all other
provisions of this Plan applicable to Salary Savings
Contributions and Elective Profit Sharing Contributions and
shall remain part of the Participant's Salary Savings
Contribution Account or the Elective Profit Sharing
Contribution portion of the Participant's Profit Sharing
Contribution Account.
(4) Except as provided by this definition, Qualified Elective
Deferrals shall be excluded in determining whether any other
contribution or benefit satisfies the nondiscrimination
requirements of Code Sections 401(a)(4) and 401(k)(3).
Qualified Non-Elective Contribution shall mean an Employer
contribution designated by the Committee as a Qualified Non-Elective
Contribution in order to meet the ADP testing requirements of Section
12.03 or the ACP testing requirements of Section 12.07. In addition,
the following requirements must be satisfied:
(1) The Qualified Non-Elective Contribution, whether or not used
to satisfy the requirements of Sections 12.03 or 12.07, must
meet the requirements of Code Section 401(a)(4).
(2) Qualified Non-Elective Contributions which are taken into
account in order to meet the requirements of Section 12.03
or 12.07 (as applicable) shall not be counted in determining
whether the testing requirements of any of such other
Sections are met.
(3) The Qualified Non-Elective Contributions shall be subject to
all provisions of this Plan applicable to Salary Savings
Contributions (except that Qualified Non-Elective
Contributions cannot be distributed in a hardship
distribution).
(4) Except as provided in this paragraph, the Qualified
Non-Elective Contributions shall be excluded in determining
whether any other contribution or benefit satisfies the
nondiscrimination requirements of Code Sections 401(a)(4)
and 401(k)(3).
12.02 $7,000 Limit on Salary Savings Contributions.
(a) Notwithstanding any other provision of the Plan to the contrary,
the aggregate of a Participant's Salary Savings Contributions and
Elective Profit Sharing Contributions actually contributed to the
Plan during a calendar year may not exceed $8,994 (for 1993) (or
such greater amount as established by the Secretary of the
Treasury pursuant to Code Section 402(g)(5). Any Salary Savings
Contributions or Elective Profit Sharing Contributions in excess
of the foregoing limit ("Excess Deferral"), plus any income and
minus any loss allocable thereto, may be distributed to the
applicable Participant no later than April 15 following the
calendar year in which such contributions were made.
(b) Any Participant who has an Excess Deferral during a calendar year
may receive a distribution of the Excess Deferral during such
calendar year plus any income or minus any loss allocable
thereto, provided (1) the Participant requests (or is deemed to
request) the distribution of the Excess Deferral, (2) the
distribution occurs after the date the Excess Deferral arose, and
(3) the Committee designates the distribution as a distribution
of an Excess Deferral.
(c) If a Participant makes a Salary Savings Contribution or Elective
Profit Sharing Contribution under this Plan and in the same
calendar year makes a contribution to a Code Section 401(k) plan
containing a cash or deferred arrangement (other than this Plan),
a Code Section 408(k) plan (simplified employee pension plan) or
a Code Section 403(b) plan (tax sheltered annuity) and, after the
return of any Excess Deferral pursuant to Section 12.02(a) and
(b) the aggregate of all such contributions exceed the
limitations contained in Code Section 402(g), then such
Participant may request that the Committee return all or a
portion of the Participant's Salary Savings Contributions or
Elective Profit Sharing Contributions for the calendar year plus
any income and minus any loss allocable thereto. The amount by
which such contributions exceed the Code Section 402(g)
limitations will also be known as an Excess Deferral.
(d) Any request for a return of Excess Deferrals arising out of
contributions to a plan described in Section 12.02(c) above which
is maintained by an entity other than the Employer must:
(1) be made in writing;
(2) be submitted to the Committee not later than the March 1
following the Plan Year in which the Excess Deferral arose;
(3) specify the amount of the Excess Deferral; and,
(4) contain a statement that if the Excess Deferral is not
distributed, it will, when added to amounts deferred under
other plans or arrangements described in Sections 401(k),
408(k),or 403(b) of the Code, exceed the limit imposed on
the Participant by Section 402(g) of the Code for the year
in which the Excess Deferral occurred.
In the event an Excess Deferral arises out of contributions to a
plan (including this Plan) described in Section 12.02(c) above
which is maintained by the Employer, the Participant making the
Excess Deferral shall be deemed to have requested a return of the
Excess Deferral.
(e) Salary Savings Contributions and Elective Profit Sharing
Contributions may only be returned to the extent necessary to
eliminate a Participant's Excess Deferral. Excess Deferrals shall
be treated as Annual Additions under the Plan. In no event shall
the returned Excess Deferrals for a particular calendar year
exceed the Participant's aggregate Salary Savings Contributions
and Elective Profit Sharing Contributions for such calendar year.
(f) The income or loss allocable to a Salary Savings Contribution or
Elective Profit Sharing Contribution that is returned to a
Participant pursuant to Section 12.02(a) or (c) shall be
determined by multiplying the income or loss allocable to the
Participant's Account for the calendar year in which the Excess
Deferral arose by a fraction. The numerator of the fraction is
the Excess Deferral. The denominator of the fraction is the value
of the Participant's Account balance on the last day of the
calendar year in which the Excess Deferral arose reduced by any
income allocated to the Participant's Account for such calendar
year and increased by any loss allocated to the Participant's
Account for such calendar year.
(g) The income or loss allocable to an Excess Deferral that is
returned to a Participant pursuant to Section 12.02(b) shall be
determined using any reasonable method adopted by the Plan to
measure income earned or loss incurred during the Plan Year or
any other method authorized by the Internal Revenue Service to
compute the income earned or loss incurred for the period
commencing on January 1 of the calendar year in which the Salary
Savings Contribution or Elective Profit Sharing Contribution was
made and ending on the date the Excess Deferral was distributed.
(h) Any Employer Matching Contribution allocable to an Excess
Deferral that is returned to a Participant pursuant to this
Section 12.02 shall be forfeited notwithstanding the provisions
of Article 7 (vesting). For this purpose, however, the Salary
Savings Contributions that are returned to the Participant as an
Excess Deferral shall be deemed to be first those Salary Savings
Contributions for which no Employer Matching Contribution was
made and second those Salary Savings Contributions for which an
Employer Matching Contribution was made. Accordingly, if the
Salary Savings Contributions that are returned to the Participant
as Excess Deferrals were not matched, no Employer Matching
Contribution will be forfeited. Salary Savings Contributions
shall be returned as an Excess Deferral before Elective Profit
Sharing Contributions.
12.03 Average Actual Deferral Percentage.
(a) The Average Actual Deferral Percentage for Highly
Compensated Employees for each Plan Year and the Average
Actual Deferral Percentage for Non-Highly Compensated
Employees for the same Plan Year must satisfy one of the
following tests:
(1) The Average Actual Deferral Percentage for Participants who
are Highly Compensated Employees for the Plan Year shall not
exceed the Average Actual Deferral Percentage for
Participants who are Non-Highly Compensated Employees for
the Plan Year multiplied by 1.25; or
(2) The excess of the Average Actual Deferral Percentage for
Participants who are Highly Compensated Employees for the
Plan Year over the Average Actual Deferral Percentage for
Participants who are Non-Highly Compensated Employees for
the Plan Year is not more than two percentage points, and
the Average Actual Deferral Percentage for Participants who
are Highly Compensated Employees is not more than the
Average Actual Deferral Percentage for Participants who are
Non-Highly Compensated Employees multiplied by two.
(b) The permitted disparity between the Average Actual Deferral
Percentage for Highly Compensated Employees and the Average
Actual Deferral Percentage for Non-Highly Compensated
Employees may be further reduced as required by Section
12.11.
(c) If at the end of the Plan Year, the Plan does not comply
with the provisions of Section 12.03(a), the Employer may do
any or all of the following, except as otherwise provided in
the Code or Treasury Regulations:
(1) Distribute Salary Savings Contributions to certain
Highly Compensated Employees as provided in Section
12.05;
(2) Recharacterize the Participant's Salary Savings
Contributions as Voluntary After-Tax Contributions as
provided in Section 12.06; or
(3) Make a Qualified Non-Elective Contribution on behalf of
any or all of the Non-Highly Compensated Employees and
aggregate such contributions with the Non-Highly
Compensated Employees' Salary Savings Contributions
Deferrals as provided in Section 12.01 (definition of
ADP).
12.04 Special Rules For Determining Average Actual Deferral Percentage.
(a) The Actual Deferral Percentage for any Highly Compensated
Employee for the Plan Year who is eligible to have Salary
Savings Contributions allocated to his Account under two or
more arrangements described in Section 401(k) of the Code
that are maintained by an Employer or its Affiliates shall
be determined as if such Salary Savings Contributions were
made under a single arrangement.
(b) If two or more plans maintained by the Company or its
Affiliates are treated as one plan for purposes of the
nondiscrimination requirements of Code Section 401(a)(4) or
the coverage requirements of Code Section 410(b) (other than
for purposes of the average benefits test), all Salary
Savings Contributions that are made pursuant to those plans
shall be treated as having been made pursuant to one plan.
(c) For purposes of determining the ADP of a Highly Compensated
Employee who is either a 5% or more owner of an Employer or
one of the ten highest paid Highly Compensated Employees
during the Plan Year, the Salary Savings Contributions,
Elective Profit Sharing Contribution and Compensation of
such Participant shall include the Salary Savings
Contributions, Elective Profit Sharing Contribution and
Compensation of his Family Members. Any person who is a
Family Member shall not be treated as a separate Employee in
determining the Average Actual Deferral Percentage for
either Non-Highly Compensated Employees or for Highly
Compensated Employees.
(d) The determination and treatment of the Salary Savings
Contributions, Elective Profit Sharing Contribution and
Actual Deferral Percentage of any Participant shall be in
accordance with such other requirements as may be prescribed
from time to time in Treasury Regulations.
12.05 Distribution of Excess ADP Deferrals.
(a) Salary Savings Contributions and Elective Profit Sharing
Contributions exceeding the limitations of Section 12.03(a)
("Excess ADP Deferrals") and any income or loss allocable to such
Excess ADP Deferral shall be designated by the Committee as
Excess ADP Deferrals and shall be distributed to Highly
Compensated Employees whose Accounts were credited with Excess
ADP Deferrals in the preceding Plan Year. In determining the
amount of Excess ADP Deferrals for each Highly Compensated
Employee, the Committee shall reduce the ADP for each Highly
Compensated Employee as follows:
(1) The ADP for the Highly Compensated Employee(s) with the
highest ADP will be reduced until equal to the second
highest ADPs under the Plan; then
(2) The ADP for the two (or more) Highly Compensated
Employees with the highest ADPs under the Plan will be
reduced until equal to the third highest ADP level
under the Plan; then
(3) The steps described in (1) and (2) shall be repeated
with respect to the third and successive highest ADP
levels under the Plan until the Plan complies with one
or both of the ADP tests described in Section 12.03(a).
(b) To the extent administratively possible, the Committee shall
distribute all Excess ADP Deferrals and any income or loss
allocable thereto prior to 2 1/2 months following the end of the
Plan Year in which the Excess ADP Deferrals arose. In any event,
however, the Excess ADP Deferrals and any income or loss
allocable thereto shall be distributed prior to the end of the
Plan Year following the Plan Year in which the Excess ADP
Deferrals arose. Excess ADP Deferrals shall be treated as Annual
Additions under the Plan.
(c) The income or loss allocable to Excess ADP Deferrals shall be
determined by multiplying the income or loss allocable to the
Participant's Account for the Plan Year in which the Excess ADP
Deferrals arose by a fraction. The numerator of the fraction is
the Excess ADP Deferral. The denominator of the fraction is the
value of the Participant's Account balance on the last day of the
Plan Year in which the Excess ADP Deferrals arose reduced by any
income allocated to the Participant's Account for such Plan Year
and increased by any loss allocated to the Participant's Account
for the Plan Year.
(d) If an Excess Deferral has been distributed to the Participant
pursuant to Section 12.02(a) or (b) for any taxable year of a
Participant, then any Excess ADP Deferral allocable to such
Participant for the same Plan Year in which such taxable year
ends shall be reduced by the amount of such Excess Deferral.
(e) Distribution of Excess ADP Deferrals to Participants described in
Section 12.04(c) shall be made in accordance with the provisions
of Treasury Regulation Section 1.401(k)-1(f)(5)(ii) or any
successor Treasury Regulation thereto.
(f) Any Employer Matching Contribution allocable to an Excess ADP
Deferral that is returned to the Participant pursuant to this
Section 12.05 shall be forfeited notwithstanding the provisions
of Article 7 (vesting). For this purpose, however, the Salary
Savings Contributions that are returned to the Participant shall
be deemed to be first those Salary Savings Contributions for
which no Employer Matching Contribution was made and second those
Salary Savings Contributions for which an Employer Matching
Contribution was made. Accordingly, unmatched Salary Savings
Contributions shall be returned as an Excess ADP Deferral before
matched Salary Savings Contributions. Salary Savings
Contributions shall be returned as an Excess ADP Deferral before
Elective Profit Sharing Contributions.
12.06 Salary Savings Contributions Recharacterized as Voluntary After-Tax
Contributions.
(a) A Participant's Excess ADP Deferrals may be reduced or
eliminated by recharacterizing, to the extent necessary,
part or all of the Participant's Salary Savings
Contributions or Elective Profit Sharing Contributions as
Voluntary After-Tax Contributions. Such recharacterized
Salary Savings Contributions or Elective Profit Sharing
Contributions shall be allocated to a sub-account of the
Participant's Voluntary After-Tax Contribution Account. Such
recharacterization shall be permitted only to the extent the
Participant could have originally contributed such amounts
as a Voluntary After-Tax Contribution under the Plan
(ignoring the provisions of Section 12.07).
(b) The decision to recharacterize Salary Savings Contributions
or Elective Profit Sharing Contributions as Voluntary
After-Tax Contributions must be made within 2 1/2 months
after the close of the Plan Year in which the Excess ADP
Deferral arose. The Committee shall notify the Participant
and the Internal Revenue Service that all or part of the
Participant's Salary Savings Contributions or Elective
Profit Sharing Contributions have been recharacterized as
Voluntary After-Tax Contributions. Such notification shall
be made in the form and in the manner prescribed by the
Internal Revenue Service.
(c) Salary Savings Contributions or Elective Profit Sharing
Contributions that are recharacterized as Voluntary
After-Tax Contributions shall be ignored in computing the
Participant's Actual Deferral Percentage. However, such
amounts shall be considered in computing the Participant's
Average Contribution Percentage.
(d) Notwithstanding the recharacterization of Salary Savings
Contributions or Elective Profit Sharing Contributions as
Voluntary After-Tax Contributions under this Section 12.06,
Salary Savings Contributions or Elective Profit Sharing
Contributions recharacterized as Voluntary After-Tax
Contributions shall continue to be considered as Salary
Savings Contributions or Elective Profit Sharing
Contributions for the purposes of Article 14 (Maximum
Benefits), Article 7 (Vesting), Article 8 (Distributions),
and Article 15 (Top Heavy Rules).
(e) Salary Savings Contributions or Elective Profit Sharing
Contributions recharacterized as Voluntary After-Tax
Contributions are includable in the Participant's gross
income for the calendar year in which such recharacterized
Salary Savings Contributions or Elective Profit Sharing
Contributions were contributed to the Plan. For this
purpose, Salary Savings Contributions or Elective Profit
Sharing Contributions are deemed recharacterized in the
order such Salary Savings Contributions were contributed to
the Plan beginning with the earliest such Salary Savings
Contributions or Elective Profit Sharing Contributions for
the Plan Year in which the Excess ADP Deferral arose.
(f) The Committee may, but is not required to, permit Highly
Compensated Employees to elect whether to correct an Excess
ADP Deferral by recharacterizing Salary Savings
Contributions or Elective Profit Sharing Contributions as
Voluntary After-Tax Contributions or by distributing the
Excess ADP Deferral as described in Section 12.05.
(g) Salary Savings Contributions shall be recharacterized as
Voluntary After-Tax Contributions before Elective Profit
Sharing Contributions are recharacterized.
(h) Any Employer Matching Contribution allocable to a Salary
Savings Contribution or Elective Profit Sharing Contribution
that is recharacterized as a Voluntary After-Tax
Contribution pursuant to this Section 12.06 shall be
forfeited notwithstanding the provisions of Article 7
(vesting). For this purpose, however, the Salary Savings
Contributions that are recharacterized shall be deemed to be
first those Salary Savings Contributions for which no
Employer Matching Contribution was made and second those
Salary Savings Contributions for which an Employer Matching
Contribution was made. Accordingly, unmatched Salary Savings
Contributions shall be recharacterized before matched Salary
Savings Contributions.
12.07 Average Actual Contribution Percentage.
(a) The Average Actual Contribution Percentage for Highly
Compensated Employees for each Plan Year and the Average
Actual Contribution Percentage for Non-Highly Compensated
Employees for the same Plan Year must satisfy one of the
following tests:
(1) The Average Actual Contribution Percentage for
Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the Average Actual
Contribution Percentage for Participants who are
Non-Highly Compensated Employees for the Plan Year
multiplied by 1.25; or
(2) The excess of the Average Actual Contribution
Percentage for Participants who are Highly Compensated
Employees for the Plan Year over the Average Actual
Contribution Percentage for Participants who are
Non-Highly Compensated Employees for the Plan Year is
not more than two percentage points, and the Average
Actual Contribution Percentage for Participants who are
Highly Compensated Employees is not more than the
Average Actual Contribution Percentage for Participants
who are Non-Highly Compensated Employees multiplied by
two.
(b) If at the end of the Plan Year, the Plan does not comply
with the provisions of Section 12.07(a), the Employer may do
any or all of the following in order to comply with such
provision as applicable (except as otherwise provided in the
Code or in Treasury Regulations):
(1) Aggregate Qualified Elective Deferrals with the
Employer Matching Contributions or Voluntary After-Tax
Contributions of Non-Highly Compensated Employees as
provided in Section 12.01 (definition of ACP).
(2) Distribute vested Employer Matching Contributions
and/or Voluntary After-Tax Contributions to certain
Highly Compensated Employees as provided in Section
12.09.
(3) Make a Qualified Non-Elective Contribution on behalf of
any or all of the Non-Highly Compensated Employees and
aggregate such contributions with the Non-Highly
Compensated Employees' Employer Matching Contributions
or Voluntary After-Tax Contributions as provided in
Section 12.01 (definition of ACP).
(4) Forfeit non-vested Employer Matching Contributions of
certain Highly Compensated Employees as provided in
Section 12.10.
12.08 Special Rules For Determining Average Actual Contribution Percentages
(a) The Actual Contribution Percentage for any Highly
Compensated Employee for the Plan Year who is eligible to
have Employer Matching Contributions or Voluntary After-Tax
Contributions allocated to his Account under two or more
arrangements described in Sections 401(a) or 401(m) of the
Code that are maintained by an Employer or its Affiliates
shall be determined as if such contributions were made under
a single arrangement.
(b) If two or more plans maintained by the Employer or its
Affiliates are treated as one plan for purposes of the
nondiscrimination requirements of Code Section 401(a)(4) or
the coverage requirements of Code Section 410(b) (other than
for purposes of the average benefits test), all Employer
Matching Contributions and Voluntary After-Tax Contributions
that are made pursuant to those plans shall be treated as
having been made pursuant to one plan.
(c) For purposes of determining the Actual Contribution
Percentage of a Highly Compensated Employee who is a 5% or
more owner of an Employer or one of the ten highest paid
Highly Compensated Employees during the Plan Year, the
Employer Matching Contributions or Voluntary After-Tax
Contributions and Compensation of such Participant shall
include all Employer Matching Contributions or Voluntary
After-Tax Contributions and Compensation of Family Members.
Family Members shall not be treated as separate Employees
for purposes of determining the Average Actual Contribution
Percentage for either Non-Highly Compensated Employees or
for Highly Compensated Employees.
(d) The computation of the Average Actual Contribution
Percentage shall be performed after any recharacterization
of Salary Savings Contributions or Elective Profit Sharing
Contributions as Voluntary After-Tax Contributions pursuant
to Section 12.06.
(e) The determination and treatment of the Actual Contribution
Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
12.09 Distribution of Employer Matching Contributions.
(a) Employer Matching Contributions and Voluntary After-Tax
Contributions exceeding the limitations of Section 12.07(a)
("Excess ACP Contributions") and any income or loss allocable to
such Excess ACP Contribution may be designated by the Committee
as Excess ACP Contributions and may be distributed in the Plan
Year following the Plan Year in which the Excess ACP
Contributions arose to those Highly Compensated Employees whose
Accounts were credited with Excess ACP Contributions in the
preceding Plan Year. The amount of Excess ACP Contributions to be
distributed to a Highly Compensated Employee shall be determined
using the procedure described in Section 12.05(a).
(b) To the extent administratively possible, the Committee shall
distribute all Excess ACP Contributions and any income or loss
allocable thereto prior to 2 1/2 months following the end of the
Plan Year in which the Excess ACP Contributions arose. In any
event, however, the Excess ACP Contributions and any income or
loss allocable thereto shall be distributed prior to the end of
the Plan Year following the Plan Year in which the Excess ACP
Contributions arose.
(c) The income or loss allocable to Excess ACP Contributions shall be
determined by multiplying the income or loss allocable to the
Participant's Account for the Plan Year in which the Excess ACP
Contribution arose by a fraction. The numerator of the fraction
is the Excess ACP Contributions. The denominator of the fraction
is the value of the Participant's Account on the last day of the
Plan Year reduced by any income allocated to the Participant's
Account by such Plan Year and increased by any loss allocated to
the Participant's Account for the Plan Year. However, any income
allocable to an Excess ACP Contribution resulting from the
distribution of a Salary Savings Contribution or Elective Profit
Sharing Contribution that was recharacterized as a Voluntary
After-Tax Contribution (See Section 12.06) shall be determined as
if such recharacterized Salary Savings Contribution or Elective
Profit Sharing Contribution were an Excess ADP Deferral (See
Section 12.05).
(d) Amounts distributed to Highly Compensated Employees under this
Section 12.09 shall be treated as annual additions with respect
to the Employee who received such amount.
(e) Distribution of Excess ACP Contributions to Participants
described in Section 12.08(c) shall be made in accordance with
the provisions of Treasury Regulation Section
1.401(m)-1(e)(2)(iii) or any successor Treasury Regulations
thereto.
(f) Unless specifically identified to the contrary, any distributions
of Excess ACP Contributions shall be made first from Voluntary
After-Tax Contributions and second from Employer Matching
Contributions.
12.10 Forfeiture of Excess ACP Contributions.
(a) A nonvested Employer Matching Contribution and any income or
loss allocable to such nonvested Employer Matching
Contribution for the Plan Year may be forfeited and used to
reduce an Excess ACP Contribution. Such forfeited Employer
Matching Contribution shall be allocated as a forfeiture in
accordance with Section 5.06.
(b) The amount of any Employer Matching Contribution to be
forfeited by a particular Highly Compensated Employee shall
be determined pursuant to the procedure described in Section
12.05(a).
(c) The income or loss allocable to Excess ACP Contributions
shall be determined pursuant to the formula described in
Section 12.09(c).
(d) Participants described in Section 12.08(c) shall forfeit
their Excess Contributions in accordance with Treasury
Regulation Section 1.401(m)-1(e)(2)(iii) or any successor
Treasury Regulation thereto.
(e) Amounts forfeited by Highly Compensated Employees under this
Section shall be treated as Annual Additions with respect to
the Participant who forfeited such amount and with respect
to any Participant to whose account the forfeiture was
allocated.
(f) Vested Employer Matching Contributions may not be forfeited
to correct an Excess ACP Contribution.
12.11 Combined ACP and ADP Test.
(a) The Plan must satisfy the Combined ACP and ADP Test
described in this Section 12.11 only if (1) the Average
Actual Deferral Percentage of the Highly Compensated
Employees exceeds 125% of the Average Actual Deferral
Percentage of the Non-Highly Compensated Employees and (2)
the Average Actual Contribution Percentage of the Highly
Compensated Employees exceeds 125% of the Average Actual
Contribution Percentage of the Non-Highly Compensated
Employees.
(b) The Combined ACP and ADP Test is satisfied if the sum of the
Highly Compensated Employees' Average Actual Deferral
Percentage and Average Actual Contribution Percentage is
equal to or less than the Maximum Combined Percentage
defined in paragraph (c) below.
(c) The Maximum Combined Percentage shall be determined by
adjusting the Non-Highly Compensated Employees' Average
Actual Deferral Percentage and Average Actual Contribution
Percentage in the following manner:
(1) The greater of the two percentages shall be multiplied
by 1.25; and
(2) The lesser of the two percentages shall be increased by
two percentage points; however, in no event shall such
adjusted percentage exceed twice the original
percentage.
The sum of (1) and (2) shall be the Maximum Combined
Percentage.
Notwithstanding the foregoing, the Maximum Combined
Percentage shall be determined in the following manner if
such calculation results in a higher Maximum Combined
Percentage than the formula specified above:
(1) The lesser of the Average Actual Deferral Percentage
and Average Actual Contribution Percentage of the
Non-Highly Compensated Employees shall be multiplied by
1.25; and
(2) The greater of such two percentages shall be increased
by two percentage points; however, in no event shall
such percentage exceed twice the original percentage.
(d) In the event the Plan does not satisfy the Combined ADP and
ACP Test, the Highly Compensated Employees' Average Actual
Contribution Percentage shall be decreased using any of the
methods described in Section 12.07(b) until the sum of such
percentage and the Highly Compensated Employees' Average
Actual Deferral Percentage equals the Maximum Combined
Percentage.
(e) If Employer Matching Contributions or Voluntary After-Tax
Contributions are distributed or forfeited (if applicable)
to satisfy the Combined ADP and ACP Test, income or loss
allocable to such contributions shall also be distributed.
The income or loss shall be determined using the same
procedures as Section 12.05(c).
(f) To the extent administratively possible, the Committee shall
make the necessary corrections prior to 2 1/2 months
following the end of the Plan Year for which the Combined
ADP and ACP Test is computed. In any event, however, all
corrections must occur by the end of the Plan Year following
the Plan Year for which the Combined ADP and ACP Test is
computed. Employer Matching Contributions that are
distributed or forfeited pursuant to this Section 12.10
shall be treated as annual additions under the Plan.
12.12 Order of Applying Certain Sections of Article.
In applying the provisions of this Article 12, the determination and
distribution of Excess Deferrals shall be made first, the
determination and elimination of Excess ACP Deferrals shall be made
second, the determination and elimination of Excess ADP Contributions
shall be made third and finally the determination and any necessary
adjustment related to the Combined ADP and ACP Test shall be made.
However, if the Committee determines to recharacterize Salary Savings
Contributions or Elective Profit sharing Contributions as Voluntary
After-Tax Contributions (see Section 12.06), then the determination
and elimination of Excess ADP Deferrals shall be made before the
determination and elimination of Excess ACP Contributions.
ARTICLE 13
HIGHLY COMPENSATED EMPLOYEES
13.01 In General.
For the purposes of this Plan, the term "Highly Compensated Employee"
is any active Employee described in Section 13.02 below and any
Former Employee described in Section 13.03 below. Various definitions
used in this Article are contained in Section 13.05. A Non-Highly
Compensated Employee is an Employee who is neither a Highly
Compensated Employee nor a Family Member of a Highly Compensated
Employee.
13.02 Highly Compensated Employees.
(a) An Employee is a Highly Compensated Employee if during the
Determination Year the Employee:
(1) is a 5 Percent Owner;
(2) receives Compensation in excess of $75,000;
(3) receives Compensation in excess of $50,000 and is a member
of the Top Paid Group; or
(4) is an Includable Officer.
The dollar amounts described above shall be increased annually as
provided in Code Section 414(q)(1).
(b) Calendar Year Election. The Employer hereby elects the calendar
year calculation election described in Temporary Regulation
Section 1.414(q)-1T, Q&A-14(b) or any successor regulation
thereto. Because the Plan uses the calendar year as its Plan
Year, there is no separate Look Back Year calculation. This
election is binding on all other qualified retirement Plans
maintained by the Employer until the election is withdrawn. (c)
Election to Use Simplified Method.
(i) If elected by the Committee (which election may change from
year to year), an Employee's status as a Highly Compensated
Employee shall be determined pursuant to the simplified
method described in Code Section 401(k)(12).
(ii) If the Committee elects to use the simplified method for the
Determination Year, an Employee's status for the
Determination Year shall be determined by substituting
"$50,000" for "$75,000" in subsection (a)(2) and by ignoring
the provisions of subsection (a)(3).
(iii)The simplified method may not be elected for a given year
unless (i) at all times during such year the Employer
maintained significant business activities and employed
Employees in at least two significantly separate geographic
areas and (ii) the Employer satisfies all other conditions
prescribed by the Secretary of the Treasury or his delegate
as a prerequisite for electing the simplified method.
13.03 Former Highly Compensated Employee.
A Former Employee is a Highly Compensated Employee if (applying the
rules of Section 13.02(a) or (b)) the Former Employee was a Highly
Compensated Employee during a Separation Year or during any
Determination Year ending on or after the Former Employee's 55th
birthday. With respect to a Former Employee whose Separation Year was
prior to January 1, 1987, such Former Employee will be treated as a
Highly Compensated Employee only if the Former Employee was a 5%
Owner or received Compensation in excess of $50,000 during (i) the
Former Employee's Separation Year (or the year preceding such
Separation Year); or (ii) any year ending on or after such Former
Employee's 55th birthday (or the last year ending before such Former
Employee's 55th birthday).
13.04 Family Aggregation Rules.
(a) For purposes of this Article 13, an Employee who is, for a given
Determination Year or Look Back Year, either (i) a 5 Percent
Owner, or (ii) a Highly Compensated Employee who is one of the
ten most highly compensated Employees ranked on the basis of
Compensation paid during such year, shall be aggregated with such
Employee's Family Members.
(b) For purposes of this Section 13.04, the term "Family Member"
means, with respect to an Employee described in Section 13.04(a),
a person who is, on any day during the given Determination Year
or Look Back Year:
(1) his Spouse; or
(2) his lineal ascendant or descendant; or
(3) the Spouse of his lineal ascendant or descendant.
(c) The determination of Employees and Family Members who must be
aggregated for purposes of this Article 13 shall be made in
accordance with Temporary Regulation Section 1.414(q)-1T, Q&A-11
and Q&A-12.
(d) For purposes of applying the limits of Code Section 401(a)(17)
(i.e., the $200,000 limit on compensation, as adjusted) with
respect to Compensation under Articles 12 (401(k)/401(m) tests)
and 14 (Section 415 limits), the Compensation for any Employee
described in Section 13.04(a) and for any Family Member who is
such Employee's Spouse or lineal descendant under age 19, shall
be aggregated. In such event, the deemed Compensation for each
such Employee shall be an amount equal to the Section 401(a)(17)
limit for the Plan Year (as adjusted) multiplied by a fraction,
the numerator of which is the Employee's actual Compensation for
the Plan Year, and the denominator of which is the aggregate
Compensation of the Employee and the aggregated Family Member for
the Plan Year. The same procedure shall then be used to determine
the deemed Compensation of the aggregated Family Member.
13.05 Definitions.
The following special definitions shall apply to this Article 13:
Compensation for purposes of this Article 13 shall mean the gross
annual earnings reported on the Participant's IRS Form W-2 (box 10 or
its comparable location as provided on Form W-2 in future years) as
required by Code Sections 6041(d) and 6051(a)(3). In addition,
Compensation shall include compensation which is not includable in
the Participant's IRS Form W-2 (Box 10) by reason of Code Section
402(a)(8) (employee Salary Savings contributions under a Code Section
401(k) plan) or Code Section 125 (salary deferrals under a cafeteria
plan). Compensation shall not include amounts paid or reimbursed by
the Employer as moving allowances if, at the time of the payment of
such moving allowance, it is reasonable to believe that the moving
expenses will be deductible by the Participant under Code Section
217. Compensation shall be determined by ignoring any income
exclusions under Code Section 3401(a) based on the nature or location
of employment. In no event shall more than $200,000 (as adjusted
annually pursuant to Code Section 401(a)(17)) in Compensation be
taken into account for any Employee.
Determination Year shall mean the Plan Year for which the ACP and the
ADP are computed.
Employer for purposes of this Article 13 shall mean the Company and
its Affiliates.
5 Percent Owner shall mean any Employee who owns or is deemed to own
(within the meaning of Code Section 318), more than five percent of
the value of the outstanding stock of the Employer or stock
possessing more than five percent of the total combined voting power
of the Employer.
Former Employee shall mean an Employee (i) who has incurred a
Severance from Service or (ii) who remains employed by the Employer
but who has not performed services for the Employer during the
Determination Year (e.g., an Employee on Authorized Leave of
Absence).
Includable Officer shall mean any officer of the Employer who, during
the applicable year, receives Compensation in excess of 50% of the
dollar limitations under Code Section 415(b)(1)(A)(as adjusted by the
Secretary of the Treasury for cost of living increases). The Employer
shall be deemed to have a minimum of 3 officers or, if greater, a
number equal to 10 percent of all Employees. However, no more than 50
officers shall be considered Includable Officers under this Article
13. If the Employer does not have any Includable Officers because no
officer receives Compensation in excess of the dollar limitations of
Code Section 415(b)(1)(A), the Employer's highest paid officer shall
be considered an Includable Officer.
Look Back Year shall mean the Plan Year preceding the Determination
Year, or if the Employer elects, the calendar year ending with or
within the determination year.
Separation Year shall mean any of the following years:
(1) An Employee who incurs a Termination of Employment shall
have a Separation Year in the Determination Year in which
such Termination of Employment occurs;
(2) An Employee who remains employed by the Employer but who
temporarily ceases to perform services for the Employer
(e.g., an Employee on Authorized Leave of Absence) shall
have a Separation Year in the calendar year in which he last
performs services for the Employer;
(3) An Employee who remains employed by the Employer but whose
Compensation for a calendar year is less than 50% of the
Employee's average annual Compensation for the immediately
preceding three calendar years (or the Employee's total
years of employment, if less) shall have a Separation Year
in such calendar year. However, such Separation Year shall
be ignored if the Employee remains employed by the Employer
and the Employee's Compensation returns to a level
comparable to the Employee's Compensation immediately prior
to such Separation Year.
Top Paid Group shall mean the top 20% of all Employees ranked on the
basis of Compensation received from the Employer during the
applicable year. The number of Employees in the Top Paid Group shall
be determined by ignoring Employees who are non-resident aliens and
Employees who do not perform services for the Employer during the
applicable year. The Employer elects to compute the Top Paid Group
without the age and service exclusion provided in applicable Treasury
Regulations.
13.06 Other Methods Permissible.
To the extent permitted by the Code, judicial decisions, Treasury
Regulations and IRS pronouncements, the Committee may (without
further amendment to this Plan) take such other steps and actions or
adopt such other methods or procedures (in addition to those methods
and procedures described in this Article 13) to determine and
identify Highly Compensated Employees (including adopting alternative
definitions of Compensation which satisfy Code Section 414(q)(7) and
are uniformly applied).
ARTICLE 14
MAXIMUM BENEFITS
14.01 General Rule.
(a) Notwithstanding any other provision of this Plan, for any Plan
Year, the Annual Additions to a Participant's Account, when
combined with the Annual Additions to the Participant's Account
under all other Qualified individual account plans maintained by
the Employer or its Affiliates shall not exceed the lesser of (i)
$30,000 or (ii) twenty-five percent (25%) of the Participant's
Compensation for such Plan Year (the "maximum permissible
amount").
(b) The Employer hereby elects that the Limitation Year for purposes
of Code Section 415 shall be the Plan Year.
(c) For purposes of determining the limit on Annual Additions under
paragraph (a) of this Section, the dollar limit described
therein, to wit, $30,000, shall be increased for each Plan Year
to the extent permitted by law.
(d) If the amount to be allocated to a Participant's Account exceeds
the maximum permissible amount (and for this purpose Employer
Contributions shall be deemed to be allocated after Employee
Contributions), the excess will be disposed of as follows. First,
if the Participant's Annual Additions exceed the maximum
permissible amount as a result of (i) a reasonable error in
estimating the Participant's Compensation, (ii) a reasonable
error in estimating the amount of Employee Contributions that the
Participant could make under Codess.415 (iii) the allocation of
forfeitures or (iv) other facts and circumstances that the
Internal Revenue Service finds justifiable, the Committee may
direct the Trustee to return to the Participant his Employee
Contributions (and any income allocable to such Employee
Contributions) for such Plan Year to the extent necessary to
reduce the excess amount. Such returned Employee Contributions
shall be ignored in performing the discrimination tests of
Article 12. Second, any excess Annual Additions still remaining
after the return of Employee Contributions shall be reallocated
as determined by the Committee among the Participants whose
accounts have not exceeded the limit in the same proportion that
the Compensation of each such Participant bears to the
Compensation of all such Participants. If such reallocation would
result in an addition to another Participant's Account which
exceeds the permitted limit, that excess shall likewise be
reallocated among the Participants whose Accounts do not exceed
the limit. However, if the allocation or reallocation of the
excess amounts pursuant to these provisions causes the
limitations of Section 415 of the Code to be exceeded with
respect to each Participant for the limitation year, then any
such excess shall be held unallocated in a 415 Suspense Account.
If the 415 Suspense Account is in existence at any time during a
limitation year, other than the Limitation Year described in the
preceding sentence, all amounts in the 415 Suspense Account shall
be allocated and reallocated to Participants' Accounts (subject
to the limitations of Code Section 415) before any Contributions
which would constitute Annual Additions may be made to the Plan
for that Limitation Year.
(e) If the Participant is covered under another qualified defined
contribution plan maintained by an Employer during any Limitation
Year, the Annual Additions which may be credited to a
Participant's account under this Plan for any such Limitation
Year shall not exceed the maximum permissible amount reduced by
the Annual Additions credited to a Participant's account under
all such plans for the same Limitation Year. If a Participant's
Annual Additions under this Plan and such other plans would
result in an excess amount for a Limitation Year, the excess
amount will be deemed to consist of the Annual Additions last
allocated (and for this purpose, Employer Contributions shall be
deemed to be allocated after Employee Contributions). If an
excess amount is allocated to a Participant on an allocation date
of this Plan which coincides with an allocation date of another
plan, the excess amount attributed to this Plan will be the
product of
(i) the total excess amount as of such date, times
(ii) the ratio of (A) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under
this Plan to (B) the total Annual Additions allocated to the
Participant for the Limitation Year as of such date under
this and all the other qualified defined contribution plans
maintained by the Employer.
Any excess amount attributed to this Plan will be disposed in the
manner described in this Section 14.01 above.
14.02 Combined Plan Limitation.
If the Company or its Affiliates maintains, or at any time
maintained, a qualified defined benefit plan covering any Participant
in this Plan, the sum of the Participant's defined benefit plan
fraction and defined contribution plan fraction shall not exceed 1.0
in any Limitation Year and the annual benefit otherwise payable to
the Participant under such defined benefit plan shall be frozen or
reduced to the extent necessary so that the sum of such fractions
shall not exceed 1.0.
14.03 Definitions.
For the purposes of this Article 14, the following definitions shall
apply:
(a) "Annual Addition" shall mean the sum of:
(1) Employee Contributions;
(2) Employer Contributions;
(3) Forfeitures; and
(4) Amounts described in Code Sections 415(l)(1) and
419A(d)(2).
Annual Additions shall not include any amounts credited to
the Participant's Account resulting from Rollover
Contributions.
(b) "Affiliates" shall have that meaning contained in Article 2
except that for purposes of determining who is an Affiliate
the phrase "more than 50 percent" shall be substituted for
the phrase "at least 80 percent" each place it appears in
Code Section 1563(a)(1).
(c) "Compensation" shall have the same meaning as defined in
Article 12 except that Compensation for purposes of Article
14 shall not include Salary Savings Contributions and
Elective Profit Sharing Contributions contributed to this
Plan and shall not include salary deferrals under a Code
Section 125 Cafeteria Plan.
(d) "Defined Benefit Fraction" means a fraction, the numerator
of which is the sum of the Participant's projected annual
benefits under all the defined benefit plans (whether or not
terminated) maintained by the Company or its Affiliates, and
the denominator of which is the lesser of (i) 125 percent of
the dollar limitation in effect for the Limitation Year
under Section 415(b)(1)(A) of the Code or (ii) 140 percent
of the Highest Average Compensation. Notwithstanding the
foregoing, if the Participant was a Participant as of the
first day of the first Limitation Year beginning after
December 31, 1986, in one or more defined benefit plans
maintained by the Employer or its Affiliates which were in
existence on May 6, 1986, the denominator of this fraction
will not be less than 125 percent of the sum of the annual
benefits under such plans which the Participant had accrued
as of the end of the last Limitation Year beginning before
January 1, 1987, but determined without regard to any
changes in the terms and conditions of the Plan occurring
after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and in the aggregate
satisfied the requirements of Section 415 for all Limitation
Years beginning before January 1, 1987.
(e) "Defined Contribution Fraction" means a fraction, the
numerator of which is the sum of the Annual Additions to the
Participant's account under all the defined contribution
plans (whether or not terminated) maintained by the Company
or its Affiliates for the current and all prior Limitation
Years, and the denominator of which is the sum of the
"Maximum Aggregate Amounts" for the current and all prior
Limitation Years of service with the Company or its
Affiliates (regardless of whether a defined contribution
plan was maintained by the Employer or its Affiliates). The
"Maximum Aggregate Amount" in any Limitation Year is the
lesser of (i) 125 percent of the dollar limitation in effect
under Section 415(c)(1)(A) of the Code; or (ii) 35 percent
of the Participant's compensation for such year. If the
Employee was a Participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Company or
its Affiliates which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of
this fraction and the defined benefit fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (i) the excess
of the sum of the fractions over 1.0 times and (ii) the
denominator of this fraction, will be permanently subtracted
from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as
of the end of the Limitation Year beginning before January
1, 1987, and disregarding any changes in the terms and
conditions of the plans made after May 5, 1986, but using
the Section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987. The
annual addition for any Limitation Year beginning before
January 1, 1987 shall not be recomputed to treat employee
contributions as Annual Additions.
(f) "Highest Average Compensation" means the average
compensation for the three consecutive years of service with
the employer that produces the highest average.
(g) "Projected Annual Benefit" means the annual retirement
benefit (adjusted to an actuarially equivalent straight life
annuity if such benefit is expressed in a form other than a
straight life annuity or qualified joint and survivor
annuity) to which the Participant would be entitled under
the terms of the plan assuming (i) the Participant will
continue employment until Normal Retirement Age under the
Plan (or current age, if later), and (ii) the Participant's
compensation for the current Limitation Year and all other
relevant factors used to determine benefits under the plan
will remain constant for all future Limitation Years.
ARTICLE 15
TOP HEAVY RULES
15.01 General.
The provisions of this Article of the Plan shall become effective in
any Plan Year in which the Plan is determined to be Top Heavy and
shall supersede any conflicting provision of this Plan.
15.02 Definitions.
(a) TOP HEAVY. The Plan shall be Top Heavy for the Plan Year if,
as of the Valuation Date which coincides with or immediately
precedes the Determination Date, the value of the
Participant Accounts of Key Employees exceeds 60% of the
value of all Participant Accounts. If the Employer maintains
more than one plan, all plans in which any Key Employee
participates and all plans which enable this Plan to satisfy
the anti-discrimination requirements of Code Sections
401(a)(4) and 410 must be combined with this Plan ("Required
Aggregation Group") for the purposes of applying the 60%
test described in the preceding sentence. Plans maintained
by the Employer which are not in the required aggregation
group may be combined at the Employer's election with this
Plan for the purposes of determining Top Heavy status if the
combined plan satisfies the requirements of Code Section
401(a)(4) and 410 ( "Permissive Aggregation Group"). In
determining the value of Participant Accounts, all
distributions made during the five-year period ending on the
Determination Date shall be included and any unallocated
Employer Contributions or forfeitures attributable to the
Plan Year in which the Determination Date falls shall also
be included. The Account of (i) any Employee who at one time
was a Key Employee but who is not a Key Employee for any of
the five Plan Years ending on the Determination Date; and
(ii) any Employee who has not performed services for the
Employer or a related employer maintaining a plan in the
aggregation group for the five Plan Years ending on the
Determination Date, shall be disregarded in determining Top
Heavy status.
If the Employer maintains a defined benefit plan during the
Plan Year which is subject to aggregation with this Plan,
the 60% test shall be applied after calculating the present
value of the Participants' accrued benefits under the
defined benefit plan in accordance with the rules set forth
in that plan and combining the present value of such accrued
benefits with the Participant's account balances under this
Plan.
Solely for the purpose of determining if the Plan, or any
other plan included in the Required Aggregation Group, is
Top-Heavy, a Non-Key Employee's accrued benefit in a defined
benefit plan shall be determined under (i) the method, if
any, that uniformly applies for accrual purposes under all
plans maintained by the Affiliates, or (ii) if there is no
such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional
accrual rate of Code Section 411(b)(1)(C).
(b) KEY EMPLOYEE. Any employee of the Employer who, during the
Plan Year or the four preceding Plan Years was an officer
receiving Compensation in excess of 50% of the limit
described in Code Section 415(b)(1)(A), one of the ten
employees of the Employer owning the largest interests in
the Employer and receiving Compensation equal to or greater
than the dollar limit described in Code Section
415(c)(1)(A), a greater than 5% owner of the Employer, a
greater than 1% owner of the Employer receiving Compensation
in excess of $150,000, or the Beneficiary of a Key Employee.
The Code Section 415(b)(1)(A) and 415(c)(1)(A) limits
referred to in the preceding sentence shall be the specified
dollar limit plus any increases reflecting cost of living
adjustments specified by the Secretary of the Treasury.
(c) DETERMINATION DATE. The last day of the Plan Year
immediately preceding the Plan Year for which Top Heavy
status is determined. For the first Plan Year, the
Determination Date shall be the last day of the first Plan
Year.
(d) Non-Key Employee. Any Participant who is not a Key Employee.
(e) Employer. The term "Employer" shall include any Affiliate of
such Employer.
(f) Compensation. The term "Compensation" shall have that
meaning as defined in Article 14.
15.03 Minimum Benefit.
(a) Except as provided below, the Employer Contributions
allocated on behalf of any Non-Key Employee who is employed
by the Employer on the Determination Date shall not be less
than the lesser of (i) 3% of such Non-Key Employee's
Compensation or (ii) the largest percentage of Employer
Contributions, Salary Savings Contributions and Elective
Profit Sharing Contributions, as a percentage of the Key
Employee's Compensation, allocated on behalf of any Key
Employee for such Plan Year. Salary Savings Contributions
and Elective Profit Sharing Contributions allocated to the
Accounts of Non-Key Employees and Employer Matching
Contributions allocated to the Accounts of Non-Key Employees
that are used to satisfy the provisions of Article 12 shall
not be considered in determining whether a Non-Key Employee
has received the minimum contribution required by this
Section 15.03.
(b) The minimum allocation is determined without regard to any
Social Security contribution and shall be made even though,
under other Plan provisions, the Non-Key Employee would have
received a lesser allocation or no allocation for the Plan
Year because of the Non-Key Employee's failure to complete
1,000 Hours of Service, his failure to make mandatory
employee contributions, or his earning compensation less
than a stated amount.
(c) If the Employer maintains a defined benefit plan in addition
to this Plan, the minimum contribution and benefit
requirements for both plans in a Top Heavy Plan Year may be
satisfied by an allocation of Employer Contributions to the
Account of each Non-Key Employee in the amount of 5% of the
Non-Key Employee's compensation.
15.04 Combined Plan Limitation For Top Heavy Years.
In any Plan Year during which more than 90% of the Participant
Account balances are attributable to Key Employees, 100% or an
equivalent factor shall be substituted for 125% or an equivalent
factor in the combined plan fraction denominators set forth in the
Section of this Plan which limits maximum benefits pursuant to
Section 415 of the Code. In any Plan Year during which more than 60%
but not more than 90% of the Participant Account balances are
attributable to Key Employees, 100% or an equivalent factor shall be
substituted for 125% or an equivalent factor in the combined plan
fraction denominators unless the Account of each Non-Key Employee
participating in the Plan receives an allocation which satisfies
Section 15.03 above, except that for this purpose the figure "4%"
shall be substituted for "3%" where it appears in Section 15.03(a)
and the figure "7.5%" shall be substituted for "5%" where it appears
in Section 15.03(c).
ARTICLE 16
TRUST FUND AND TRUSTEE
16.01 General Nature of Trustee's Responsibilities.
(a) To the extent acceptable to it, the Trustee shall receive
such sums of money or other property as shall from time to
time be paid or delivered by the Employer to hold for
management and distribution under the terms of the Plan. All
such money and property so held, together with all
investments made therewith and proceeds thereof, and such
earnings, profits, increments, and accruals thereon as may
occur from time to time, less any payments which the
Trustee, from time to time, may be authorized to make
therefrom, shall constitute the Trust Fund .
(b) The Fund shall be held by the Trustee in trust and shall be
administered, controlled and invested in accordance with the
Plan and Trust. In the management of the Fund and the
discharge of its duties hereunder, the Trustee shall act
solely in the interests of the Participants, Former
Participants and their Spouses or Beneficiaries. The Trustee
shall discharge its duties in accordance with this Plan and
Trust with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with
like aims. The Trustee's obligations relate solely to the
Trust Fund and it shall have no responsibility whatsoever
for the control, management, administration or revision of
the Plan itself or for procuring contributions required in
the Plan.
(c) Anything contained in this Plan and Trust to the contrary
notwithstanding, it shall be impermissible at any time prior
to the satisfaction of all liabilities with respect to
Participants, Former Participants and their Spouses, except
for payments of benefits under the terms of the Plan, for
any part of this Fund to be used for or diverted to any
purpose other than the exclusive benefit of such
Participants, former Participants and their Spouses or
Beneficiaries, except for payments of expenses and charges
properly payable out of the Fund as set forth herein.
16.02 Investment Powers.
(a) All investment determinations made by the Trustee shall be made
in conformity with the standard of fiduciary duty (especially the
prudent man rule) set forth in ERISA.
(b) The Trustee shall cause the investments of the Trust Fund to be
diversified to the extent necessary to minimize the risk of large
losses (unless such diversification would be imprudent).
(c) In no event shall the Trustee maintain the indicia of ownership
of any assets of the Fund outside the jurisdiction of the United
States District Courts.
(d) The Trustee shall exercise its investment discretion so as to
provide sufficient cash assets as the Committee may suggest will
be necessary from time to time to meet the liquidity requirements
for the administration of the Plan.
(e) The foregoing paragraphs of this Section 16.02 are limitations on
the investment powers of the Trustee and (except as expressly
provided) take precedence over the powers set forth in this
paragraph (e). Except as specifically limited above, the Trustee
is authorized and empowered to retain, invest and reinvest any
and all of the trust funds as it shall deem to be in the best
interests of the Participants and there shall be no other
additional restrictions--whether by law or otherwise--on the
investment powers of the Trustee. Consequently the Trustee may
invest the Fund in property (or a part interest therein) which is
real or personal, tangible or intangible, wherever located,
whether or not productive of income or consisting of wasting
assets, as the Trustee shall deem best for the Participants,
Former Participants and their Spouses and Beneficiaries.
Furthermore, the Trustee may, without regard to any law now or
hereafter in force limiting investments by fiduciaries, invest in
a range of investments which includes, inter alia, real estate
(whether income-producing or not) or securities issued by any
Employer which has adopted the Plan provided that such
investments are in conformity with ERISA Sections 406, 407 and
408; speculative common stocks; any common trust fund or mutual
fund held or administered by the Trustee, any of its
subsidiaries, or any other corporation; any real estate
investment trust in which the Trustee or any other corporation
may have any interest whatsoever; low risk bonds; mortgages on
real or personal property wherever situated; equipment trust
certificates; notes or other evidence of indebtedness; shares of
investment companies and mutual funds; interests in partnerships
and trusts; insurance policies and contracts; option contracts
such as those traded on an option exchange; and any other
property or joint or other part interest in property (including
without limitation, part interests in bonds and mortgages or
notes and mortgages), real or personal, of any kind, class or
character, which the Trustee may in its discretion deem suitable
for the Fund, and irrespective (except to the extent specifically
set forth above) of whether any Trustee, individually or as
Trustee, is acting as a participator of any part interest in
property that may be acquired.
(1) The Trustee is explicitly authorized to acquire and hold
"qualifying employer securities" and "qualifying employer
real property", as those terms are defined in ERISA, to the
maximum of such amounts and percentages allowed by ERISA.
(2) The Trustee is explicitly authorized to invest all or part
of the Fund in deposits which bear a reasonable rate of
interest in any bank, or trust company or other financial
institution, (including the Trustee).
(3) The Trustee is explicitly authorized to engage in a
transaction with a common or collective trust fund or pooled
investment fund maintained now or created and maintained at
a future time by any bank or trust company (including the
Trustee or its affiliates) supervised by a State or Federal
agency provided that such transaction is a sale or a
purchase of an interest in such common or collective trust
and further provided that such bank or trust company
receives not more than reasonable compensation. This general
power is meant to be broad enough to avoid specific
identification of all such funds in this document; and any
officer of the Employer, is authorized (A) to certify to
bank examiners and other parties which specific funds are
included in this general power and (B) to adopt any
Declarations or enter into any Agreements required so that
the Trustee may make investments in such funds.
16.03 Valuation.
The fair market value of the Fund shall be determined by the Trustee
as of each Valuation Date and on such other dates as the Trustee are
directed by the Employer.
16.04 Other Powers.
In the management, care and disposition of the Fund, the Trustee, and
its successors, may do all things and execute such instruments as may
be deemed necessary or proper in order to carry out the provisions of
the Plan, including the following powers (in addition to the
Investment powers set forth above), all of which may be exercised
without order of or report to any court and without giving bond:
(a) To sell, exchange, or otherwise dispose of any property at
any time held in the Fund at public or private sale, for
cash or on terms without advertisement; and no person
dealing with the Trustee shall be bound to see to the
application of monies paid;
(b) To retain, manage, operate, repair and improve and to
mortgage and/or lease and/or grant options to sell (for any
period whatsoever) any real or personal property held by the
Trustee;
(c) To compromise, compound, and settle any debt or obligation
due to or from it as Trustee hereunder and to reduce the
rate of interest on, to extend or otherwise modify, or to
foreclose upon default or otherwise enforce, and to abandon,
if it shall deem it advisable, any property, whether real or
personal, which may at any time be held by it, and in
general to protect in every way the interest of the Fund,
either before or after default;
(d) To vote in person or by proxy on any stocks or other
securities held by it, unless by law or regulatory authority
the right to vote be proscribed as to it but vested in
Participants of the Fund, in which latter event the vote
shall be only by the Participants or as directed by them;
(e) To join in, or to dissent from or oppose, the
reorganization, capitalization, consolidation, sale or
merger of corporations or properties in which the Trustee
may be interested as Trustee, upon such terms and conditions
as it may deem wise, and to accept any securities which may
be issued upon any such reorganization, recapitalization,
consolidation, sale or merger and thereafter to hold the
same;
(f) To register any stocks, bonds, or other securities except
interests in real property, held in the Fund in its own name
as Trustee or in the name of a nominee and to hold any
investment in bearer form, or to combine certificates
representing such investments with certificates of the same
issue held by the Trustee in other fiduciary capacities, or
to deposit or to arrange for the deposit of such securities
in a qualified central depository even though, when so
deposited such securities may be merged and held in bulk in
the name of the nominee of such depository with other
securities deposited therein by any other person, or to
deposit or to arrange for the deposit of any securities
issued by the United States Government, or any agency or
instrumentality thereof, with a federal reserve bank,
provided that the books and records of the Trustee shall at
all times show that all such investments are part of the
Fund;
(g) To borrow or raise monies for purposes deemed appropriate by
the Trustee, including the making of distributions under the
Plan in such amount and upon such terms and conditions as in
its absolute discretion the Trustee may deem advisable; and
for any sums so borrowed to issue its promissory note as
Trustee and to secure the repayment thereof by pledging all
or any part of the Fund; and no person lending money to the
Trustee shall be bound to see to the application of the
money loaned or to inquire into the validity, expediency or
propriety of any such borrowing, it being intended that the
Trustee shall also have the power to borrow from the
Trustee's lending department, provided in such case the
interest charged on the loan does not exceed the prevailing
interest rates for a loan of the type made;
(h) To employ agents from time to time, at the expense of the
Fund, and to delegate to them such ministerial and limited
duties as the Trustee sees fit;
(i) To consult with counsel, who may be counsel to the
undersigned Employer, actuaries and other professional
advisors, and to act upon the legal advice of such counsel;
(j) To make, execute, and acknowledge and deliver any and all
deeds, leases, assignments and instruments and to do all
acts which they may deem necessary or proper to carry out
the investment provisions of the Plan;
(k) To make distributions wholly or partly in cash or in kind;
and
(l) To reserve from investment and keep unproductive of income
any amounts or part of the Fund as it may from time to time
deem advisable.
16.05 Prohibited Transaction.
Anything in this Plan and Trust to the contrary notwithstanding (and
especially the powers granted to the Trustee herein), the Trustee
shall not be authorized to engage in any transaction which is
prohibited by Sections 406 and/or 2003(a) of ERISA or Section 4975 of
the Code unless the Trustee determines that such transaction is
exempt under the terms of ERISA and the Code therefrom.
16.06 Administration of the Plan; Payments of Benefits; Reliance on Committee.
The Committee shall have the exclusive authority and responsibility
for communicating to the Trustee any and all decisions and directions
concerning the administration of the Plan and the payment of benefits
thereunder (including payees, amounts, addresses, dates of payments,
etc.). In the event the Trustee shall deem it necessary to withhold
any payments or distributions pending compliance with legal
requirements with respect to probate of Wills, appointment of
personal representative, payment of or provision for estate or
inheritance taxes, or for death duties or otherwise, the Trustee
shall notify the Committee and shall thereafter take no action
pending compliance, or pending receipt of the Committee's
instructions to distribute. Orders and directions from the Committee
need not specify the purpose of the payment so ordered, and the
Trustee shall not be responsible in any way respecting the purpose or
propriety of such payments or for the administration of the Plan and
Trust. The Trustee shall not be responsible in any respect for the
adequacy of the Fund to meet or discharge any payments or liabilities
under the Plan; and payments shall be limited to amounts available in
the Fund. Any order or direction from the Committee shall constitute
a certification to the Trustee that the action directed is one which
is in conformity with the provisions of the Plan and of ERISA. To the
extent permitted by law, the Trustee shall not be liable for any
action taken (especially any payment made from the Fund) at the
direction of the Committee or for any failure to act, if such action
can under the terms of the Plan and Trust be taken only after receipt
from the Committee of specific directions or for failure to act
pending receipt of directions from the Committee when direction is
required or is requested in writing by the Trustee.
16.07 Directing the Trustee.
(a) The Committee may from time to time direct the Trustee as to the
investment of all or part of the Trust Fund. The Committee may
also from time to time appoint an investment manager or managers,
or may give the Trustee sole responsibility to appoint an
investment manager for all, or any part, of the Trust Fund;
provided that no investment manager shall be appointed unless it
qualifies as an investment manager within the meaning of Section
3(38) of ERISA. Any such investment manager shall be a named
fiduciary of the Plan and shall qualify by accepting its
appointment as investment manager in writing. The Employer shall
advise the Trustee in writing regarding the retention of
investment powers to the Trustee. Any investment directive
hereunder shall be made in writing by the Employer or investment
manager, as the case may be. In the absence of such written
directive, the Trustee shall automatically invest the available
cash in its discretion in an appropriate interim investment until
specific investment directions are received. Such instructions
regarding the delegation of investment responsibility shall
remain in force until revoked or amended in writing. The Trustee
shall not be responsible for the propriety of any directed
investment made hereunder and shall not be required to consult
with or advise the Employer regarding the investment quality of
any directed investment held hereunder. If the Employer fails to
designate an investment manager, the Trustee shall have full
investment authority. If the Employer does not issue investment
directions, the Trustee shall have authority to invest the fund
in its sole discretion. While the Employer may direct the Trustee
with respect to Plan investments, the Employer may not: (a)
borrow from the Fund or pledge any of the assets of the Fund as
security for a loan;
(b) buy property or assets from or sell property or assets to
the Fund;
(c) charge any fee for services rendered to the Fund; or
(d) receive any services from the Fund on a preferential basis.
(b) Upon the appointment and qualification of an investment manager,
the investment manager shall have, subject to any guidelines
issued by the Committee, exclusive power and authority for the
investment and reinvestment of the portion of the Trust Fund
designated by the Committee and shall have the power to direct
the acquisition and disposition of any and all assets and
investment of the Trust Fund. The Trustee shall be relieved from
any liability for the making, retention, or sale of any
investment by or at the direction of an investment manager
appointed in the manner herein set forth or by or at the
direction of the Employer. If the Committee and the Trustee
consist of the same individuals, nothing herein shall be
construed to relieve the Committee of its obligation to review
the performance of the investment manager from time to time.
16.08 Records and Reports.
(a) The Trustee shall keep accurate and detailed accounts of all
investments, receipts and disbursements, and other transactions
hereunder. Within ninety (90) days following the close of each
fiscal year, the Trustee shall file a written report with the
Employer or the Committee setting forth all investments, receipts
and disbursements, and other transactions effected by the Trustee
during such fiscal year. Upon the expiration of ninety (90) days
from the date of filing such annual or other account, the Trustee
shall be forever released and discharged from any liability or
accountability to the Employer as respects the propriety of its
acts or transactions shown in such accounts (other than liability
for acts of fraud or willful misconduct), except with respect to
any such acts or transactions as to which the Employer shall
within such ninety (90) day period file with the Trustee a
written statement claiming a breach of the Trustee's fiduciary
duties or failure to fulfill the Trustee's obligations under the
Plan and Trust. The Trustee shall never be required to file any
inventory or appraisals, or any annual or other returns to any
court or to post bond.
(b) The Trustee shall be entitled to have a judicial settlement of
any account for which it is responsible. In any such proceeding
or for any judicial instructions required in connection with the
Fund, the only necessary parties thereto in addition to the
Trustee will be the Employer and the Committee. However, the
Trustee may bring in other persons as a party or party defendant.
16.09 Notification to Trustee.
(a) Any notice, direction, order, request, certification or
instruction of the Committee to the Trustee shall be in writing
signed by a member of the Committee or shall be presented at a
meeting with the Trustee. To the extent that the Trustee and the
Committee are the same individuals this requirement shall be
inapplicable. Any action by the Employer pursuant to any of the
provisions of the Plan or of this Article 16 shall be authorized
or evidenced by a resolution of the Board or by an officer of the
Employer authorized by resolution of the Board to take actions in
connection with this Plan and Trust. The Trustee and every other
person shall be entitled to rely conclusively upon any and all
such notices, directions, orders, requests, certifications and
instructions received from the Committee or from the Employer and
reasonably believed to be properly executed, and shall act and be
fully protected in acting in accordance therewith.
(b) The Trustee from time to time may request and be entitled to
certified copies of resolutions of the Employer, evidencing the
appointment and termination of office of any members of the
Committee and of successors to such members together with
specimens of their signatures, and the Trustee shall be entitled
to rely conclusively upon such resolutions and signatures as
evidence of the identity of the members of the Committee and
shall not be charged with notice of any change with respect
thereto until the Employer shall have furnished the Trustee with
certified copies of resolutions relative to such change.
16.10 Expenses.
All Plan expenses and expenses of making purchases and sales, other
expenses of managing the Fund (including the employment of agents and
advisors and the Trustee's compensation) and any taxes levied or
assessed against the Trustee in respect of the Fund shall constitute
a lien against the assets of the Fund and may be paid by the Trustee
(without approval of the Committee). No Trustee receiving
compensation from an Employer or Affiliate shall be paid compensation
for services as Trustee from the Fund. The Employer is authorized to
reimburse the Fund for all expenses and fees incurred in the
administration of the Plan or Trust and paid out of the assets of the
Fund.
16.11 Trustee's Tenure and Succession.
(a) Any Trustee may be removed at any time upon sixty (60) days
notice in writing to the Trustee signed by an authorized officer
of the Employer.
(b) Any Trustee may resign at any time upon sixty (60) days notice in
writing to an authorized officer of the Employer. Within ninety
(90) days after such removal or resignation of a Trustee, the
removed or resigning Trustee shall file with the Employer or the
Committee a written account setting forth all investments,
receipts and disbursements, and other transactions in which such
Trustee has participated since the end of the latest fiscal year
in which such an accounting was filed with the Employer or
Committee and containing an exact description of all securities
purchased and sold, the cost or net proceeds of sale, and showing
the securities and investments held at the date of such removal
or resignation and the cost of each item thereof as carried on
the books of the Trustee. Except with respect to any such acts or
transactions as to which the Employer or Committee shall within
such ninety (90) day period file with the Trustee a written
statement claiming a breach of fiduciary duty or failure to
observe the terms of this Article 16, upon the expiration of
ninety (90) days from the date of filing such report, the Trustee
participating in such accounting shall be forever released and
discharged from any liability or accountability to the Employer
as respects the propriety of the Trustee's acts or transactions
shown in such report (other than liability for acts of fraud or
willful misconduct) and the Employer shall thereafter reimburse,
indemnify, and hold harmless the Trustee of and from any and all
costs, claims, losses, demands, or liabilities in respect of its
acts, transactions, duties, obligations or responsibilities as
Trustee during the period covered by such account except those
arising from the Trustee's breach of its fiduciary responsibility
under ERISA.
(c) Any party entitled to written notice or accounting may waive the
written notice and accounting required under this Section and
shall be deemed to waive the notice requirements by failing to
notify the party required to give notice of the intent to enforce
the requirements within the required notice period.
16.12 Successor Trustee.
Upon the removal or resignation of a Trustee acting under this Plan
and Trust, the Company shall appoint a successor Trustee. The Trustee
who has resigned or has been removed shall do anything required so
that the successor Trustee shall be able to carry out the rights,
duties and obligations of the Trustee set forth herein. The Trustee
shall deliver the Fund to its successor on the effective date of the
resignation or removal. A successor Trustee shall not be responsible
for any act or omission of a predecessor Trustee, and shall not be
required to make any claim or demand against a predecessor Trustee
unless the Committee shall in writing request the successor Trustee
to participate in a claim against a predecessor Trustee. A successor
Trustee shall have and may exercise all the rights, powers and duties
given to an original Trustee named herein, as such rights, powers and
duties may be amended from time to time. Such rights, powers and
duties attach to the office of Trustee and are not personal to any
specific Trustee which may be serving as Trustee under this Plan and
Trust at any given time.
If the Company fails to appoint a successor trustee, custodian, or
other funding agent within the said 60 days, or such longer period as
the Trustee may specify in writing, the Company shall be deemed the
successor trustee.
16.13 Bond and Security.
The Trustee shall not be required to give any bond or any other
security for the faithful performance of the Trustee's duties under
this Plan and Trust, except such as may be required by any law which
prohibits the waiver thereof.
16.14 Commingling.
If the Committee consents or directs, the trust assets of the
Employer which are held by the Trustee may be commingled with the
trust assets of any Affiliated Sponsor which adopts this Plan and
Trust. No individual Employer shall at any time own any specific
assets in such commingled Fund, its interest being an undivided
interest of its pro rata portion of the entire Fund.
16.15 Voting of Shares.
Notwithstanding any other provision of this Plan to the contrary, the
Trustee shall have no discretion or authority to vote Employer
Securities held in the Trust by the Trustee on any matter presented
for a vote by the shareholders of the Company, except in accordance
with timely directions received by the Trustee from Participants who
have Employer Securities allocated to their Accounts under the Plan,
or in the case of unallocated or nonvoted shares, as set forth below.
(a) "Employer Securities," for purposes of this Section 16.15, means
shares of common stock of Seacoast Banking Corporation of
Florida, or any corporate successor thereto, which are held in
the Seacoast Stock Fund described in Section 6.03(d)(iv). For
purposes of this Section 16.15, "Participant" shall include a
Beneficiary, in the case of a deceased Participant, or an
alternate payee under a qualified domestic relations order as
defined in Code Section 414(p).
(b) Each Participant, as a named fiduciary within the meaning of
Section 403(a)(1) of ERISA, shall be entitled to vote, at any
meeting of shareholders of the Company, all of the full and
fractional shares of Employer Securities allocated to a
Participant's Account in the Plan, as shown on the records of the
Plan as of the most recent valuation date for which information
is available prior to the record date for determining
shareholders entitled to vote at such meeting. The Company or the
Committee shall promptly deliver or cause to be delivered a copy
of all proxy solicitation materials to each Participant who is
entitled to vote one or more shares of Employer Securities before
each annual or special meeting of shareholders of the Company,
together with a form requesting confidential instructions on how
the shares which such Participant is entitled to vote are to be
voted at such meeting.
(c) The Trustee shall vote, or not vote, in its sole discretion, all
shares of Employer Securities which are (i) allocated to
Participants but for which timely voting instructions (within the
meaning of Section 16.15(d)) were not received, and (ii) held in
the Plan but which are not allocated to a Participant Account.
(d) For purposes of this Section, the Trustee shall follow the
directions of those Participants who provide voting instructions
to the Trustee at least three (3) business days before the
shareholders' meeting. Voting instructions from the individual
Participants (including information as to the Participant's act
of voting or failure to vote) shall be held by the Trustee in
strictest confidence and neither the name of, nor the voting
instructions given by, any individual Participant who chooses to
give voting instructions shall be divulged by the Trustee to the
Company or any Affiliate, or to any director, officer or employee
thereof, or to the Committee; provided, however, that to the
extent necessary for the operation of the Plan, such instructions
may be relayed by the Trustee to an independent recordkeeper,
auditor or other person providing services to the Plan if such
person agrees not to divulge such directions to any other person,
including employees, officers and directors of the Company or its
Affiliates.
ARTICLE 17
MISCELLANEOUS
17.01 Headings.
The headings and sub-headings in this Plan have been inserted for
convenience of reference only and are to be ignored in any
construction of the provisions hereof.
17.02 Action by Employer.
Any action by an Employer under this Plan shall be by resolution of
its Board of Directors, or by any person or persons duly authorized
by resolution of said Board to take such action.
17.03 Spendthrift Clause.
Except as otherwise required by a "qualified domestic relations
order" as defined in Code Section 414(p), none of the benefits,
payments, proceeds or distributions under this Plan shall be subject
to the claim of any creditor of any Participant or Beneficiary, or to
any legal process by any creditor of such Participant or Beneficiary,
and none of them shall have any right to alienate, commute,
anticipate or assign any of the benefits, payments, proceeds or
distributions under this Plan except for the extent expressly
provided herein to the contrary.
17.04 Distributions Upon Special Occurrences.
(a) Subject to Section 12.03, Salary Savings Contributions,
Elective Profit Sharing Contributions and any income
attributable thereto, shall be distributed to Participants
or their Beneficiaries after the termination of the Plan,
provided that neither the Company nor its Affiliates
maintain a successor plan.
(b) Salary Savings Contributions, Elective Profit Sharing
Contributions and any income attributable thereto shall be
distributed to Participants after the sale, to an entity
that is not an Affiliate, of substantially all of the assets
used by the Company in the trade or business in which the
Participant is employed.
(c) After the sale of an incorporated Affiliate's interest in a
subsidiary to an entity that is not an Affiliate, Salary
Savings Contributions, Elective Profit Sharing Contributions
and any income attributable thereto of a Participant who
continues to work for such subsidiary shall be distributed.
(d) The provisions of this Section 17.04 including the
definitions of terms such as "successor plan" and
"substantially all of the assets" shall be governed by
Treasury Regulation Section 1.401(k)-1(d).
17.05 Discrimination.
The Employer, the Committee, the Trustee and all other persons
involved in the administration and operation of the Plan shall
administer and operate the Plan and Trust in a uniform and consistent
manner with respect to all Participants similarly situated and shall
not permit discrimination in favor of Highly Compensated Employees.
17.06 Release.
Any payment to a Participant or Beneficiary, or to their legal
representatives, in accordance with the provisions of this Plan,
shall to the extent thereof be in full satisfaction of all claims
hereunder against the Trustee, Committee, Committee and the Employer,
any of whom may require such Participant, Beneficiary, or legal
representative, as a condition precedent to such payment, to execute
a receipt and release therefor in such form as shall be determined by
the Trustee, the Committee, or the Employer, as the case may be.
17.07 Compliance with Applicable Laws.
The Company, through the Committee, shall interpret and administer
the Plan in such manner that the Plan and Trust shall remain in
compliance with the Code, with ERISA, and all other applicable laws,
regulations, and rulings.
17.08 Merger.
In the event of any merger or consolidation of the Plan with any
other Plan, or the transfer of assets or liabilities by the Plan to
another Plan, each Participant must receive (assuming that the Plan
would terminate) the benefit immediately after the merger,
consolidation, or transfer which is equal to or greater than the
benefit such Participant would have been entitled to receive
immediately before the merger, consolidation, or transfer (assuming
that the Plan had then terminated), provided such merger,
consolidation, or transfer took place after the date of enactment of
ERISA.
17.09 Governing Law.
The Plan and Trust shall be governed by the laws of the State of
Florida to the extent that such laws are not preempted by Federal
law.
17.10 Legally Incompetent.
If any Participant, former Employee or Beneficiary is a minor or, in
the judgment of the Committee is otherwise legally incapable of
personally receiving and giving a valid receipt for any payment due
him hereunder, the Committee may, unless and until a claim shall have
been made by a duly appointed guardian or committee of such person,
direct that such payment or any part thereof be made to such person's
Spouse, child, parent, brother, sister, or such other person deemed
by the Committee to have incurred expense for or assumed
responsibility for the expense of such person. Such payment shall
fully discharge the Trustee, Employer, Committee and Committee from
further liability on account thereof.
17.11 Location of Participant or Beneficiary Unknown.
In the event that all or any portion of the distribution payable to a
Participant or his Beneficiary shall remain unpaid solely by reason
of the Committee's inability to ascertain the whereabouts of such
Participant or Beneficiary, the amount unpaid shall be forfeited.
However, such forfeiture shall not occur until five (5) years after
the amount first became payable. The Committee shall make a diligent
effort to locate the Participant or Beneficiary including the mailing
of a registered letter, return receipt requested, to the last known
address of such Participant or Beneficiary. In the event a
Participant or Beneficiary is located subsequent to his benefit being
forfeited, such benefit shall be restored and distributed.
17.12 Protected Benefits.
Early retirement benefits, retirement-type subsidies, or optional
forms of benefits protected under Code Section 411(d)(6) ("Protected
Benefits") shall not be reduced or eliminated with respect to
benefits accrued under such Protected Benefits unless such reduction
or elimination is permitted under the Code authority issued by the
Internal Revenue Service, or judicial authority.
17.13 Adoption of Plan by Affiliated Sponsor.
(a) The Committee shall determine which employers shall become
Affiliated Sponsors within the terms of the Plan. In order
for the Committee to designate an Employer as an Affiliated
Sponsor, the Committee must designate in writing that the
business enterprise is an Affiliated Sponsor. The Committee
may also specify such terms and conditions pertaining to the
adoption of the Plan by the Affiliated Sponsor as the
Committee deems appropriate. An Affiliated Sponsor is
entitled to adopt the Plan with respect to certain of its
Employees, while not adopting the Plan with respect to the
remainder of its Employees.
(b) The Plan of the Affiliated Sponsor and of the Company shall
be considered a single plan for purposes of Treasury
Regulationsss.1.414(1)-1(b)(1). All assets contributed to
the Plan by the Affiliated Sponsor shall be held in a single
fund together with the assets contributed by the Company
(and with the assets of any other Affiliated Sponsors); and
so long as the Affiliated Sponsor continues to be designated
as such, all assets held in such fund shall be available to
pay benefits to all Participants and Beneficiaries covered
by the Plan irrespective of whether such Employees are
employed by the Company or by the Affiliated Sponsor.
Nothing contained herein shall be construed to prohibit the
separate accounting of assets contributed by the Company and
the Affiliated Sponsors for purposes of cost allocation if
directed by the Committee or the holding of Plan assets in
more than one Trust Fund with more than one Trustee.
(c) So long as the Affiliated Sponsor's designation as such
remains in effect, the Affiliated Sponsor shall be bound by,
and subject to all provisions of the Plan and the Trust
Agreement. The exclusive authority to amend the Plan and the
Trust Agreement shall be vested in the Committee and no
Affiliated Sponsor shall have any right to amend the Plan or
the Trust Agreement. Any amendment to the Plan or the Trust
Agreement adopted by the Committee shall be binding upon
every Affiliated Sponsor without further action by such
Affiliated Sponsor.
(d) Each Affiliated Sponsor shall be solely responsible for
making an Employer Contribution with respect to its
Employees and solely responsible for making any contribution
required by Article 15. Furthermore, if an Affiliated
Sponsor determines to make a Qualified Nonelective
Contribution on behalf of its Employees, such Affiliated
Sponsor shall be solely responsible for making such
contribution. Neither the Company nor any other Affiliated
Sponsor is obligated to make an Employer Contribution or
Employee Contribution on behalf of the Employees of a
different Affiliated Sponsor.
(e) The Company and each Affiliated Sponsor which is an
Affiliate will be tested on a combined basis to determine
whether the Company and such Affiliated Sponsors satisfy the
Average Actual Deferral Percentage Test described in Section
12.03 and the Average Actual Contribution Percentage test
described in Section 12.07. An Affiliated Sponsor which is
not an Affiliate shall be tested separately from the Company
and those Affiliated Sponsors that are Affiliates for
purposes of the ADP test and ACP test described in Article
12.
(f) No Affiliated Sponsor other than the Company shall have the
right to terminate the Plan. However, any Affiliated Sponsor
may withdraw from the Plan by action of its board of
directors provided such action is communicated in writing to
the Committee. The withdrawal of an Affiliated Sponsor shall
be effective as of the last day of the Plan Year following
receipt of the notice of withdrawal (unless the Committee
consents to a different effective date). In addition, the
Committee may terminate the designation of an Affiliated
Sponsor to be effective on such date as the Committee
specifies. Any such Affiliated Sponsor which ceases to be an
Affiliated Sponsor shall be liable for all cost accrued
through the effective date of its withdrawal or termination
and any contributions owing as a result of Employee
Contributions by its Employees or any other contribution as
provided in paragraphs (d) and (e). In the event of the
withdrawal or termination of an Affiliated Sponsor as
provided in this paragraph, such Affiliated Sponsor shall
have no right to direct that assets of the Plan be
transferred to a successor plan for its Employees unless
such a transfer is approved by the Committee in its sole
discretion.
IN WITNESS WHEREOF, the Company has caused this Plan to be duly
executed and adopted on behalf of the Company effective as of January 1, 1993.
COMPANY:
SEACOAST BANKING CORPORATION
OF FLORIDA
By:_______________________________
Title:____________________________
Attest: Date: ____________________________
- -----------------------
TRUSTEE
FIRST NATIONAL BANK & TRUST COMPANY
OF THE TREASURE COAST
By:_______________________________
Title:____________________________
Attest: Date: ____________________________
- -----------------------
<PAGE>
APPENDIX A
SPECIAL RULES APPLICABLE
TO ANNUITY DISTRIBUTIONS
(a) Automatic Form of Payment
If a Participant does not have a Spouse on his Annuity Starting Date,
the Participant's vested Account shall be distributed in the form selected by
the Beneficiary unless the Participant elects otherwise under Paragraph(b). If a
Participant has a Spouse on his Annuity Starting Date, the Participant's vested
Account shall be distributed in the form of a Joint and Survivor Annuity unless
the Participant (with spousal consent) otherwise elects under Paragraph (b).
(b) Participant Election of an Optional Form of Payment
(i) Within 90 days prior to the Participant's Annuity Starting Date,
the Committee shall provide an election form on which the Participant may elect
an optional form of benefit. In addition to the election form, the Committee
shall provide each Participant a written explanation of the applicable automatic
form of payment described in Paragraph (a) and of the optional forms of payment
described in Section 8.02. Such explanation shall describe the circumstances
under which the Joint and Survivor Annuity will be provided and explanation of
the financial effect of electing not to have such form. Furthermore, the written
explanation shall provide a general description of the eligibility conditions
(if any) and other material features of the optional forms of payment including
sufficient information regarding the relative values of the optional forms of
payment and the automatic form of payment. If payment is scheduled to commence
prior to the Participant's Normal Retirement Age, the written explanation must
also inform the Participant of is rights (if any) to defer receipt of the
distribution until his Normal Retirement Age. If a Participant makes a request
for additional information that is received 90 days prior to the Annuity
Starting Date, such information must be furnished within 30 days. The
Participant will then be entitled to a 90 day period in which to make or change
an election, even if such 90-day period extends beyond the Participant's Annuity
Starting Date and, in such case, the Participant's first payment shall be made
after such election form has been received, on a retroactive basis, if
necessary.
(ii) A married Participant's election to receive an optional form of
payment shall be valid only if the Participant's Spouse (after receipt of the
written explanation described in Paragraph (b)(i) consents in writing on a form
provided by the Committee in the presence of a notary public or Plan
representative to the Participant's election. The Spouse's consent must be made
within 90 days of the Participant's Annuity Starting Date and must acknowledge
the effect of such consent. However, if the Participant establishes to the
satisfaction of the Committee that his Spouse's consent cannot be obtained
because he has no Spouse, because his Spouse cannot be located, or because of
other circumstances as determined by applicable Treasury Regulations, The
Committee may treat the Participant's election as an election for which spousal
consent was obtained. A Spouse's consent pursuant to this paragraph shall be
irrevocable.
(iii) A Participant may revoke his election of an optional form of payment
or make a new election (provided any required spousal consent is obtained) at
any time prior to his Annuity Starting Date. Furthermore, the Participant's
election shall cease to be valid upon the marriage of the Participant or upon
the remarriage of the Participant following the death or divorce of the Spouse
giving the consent to the Participant's election. If the Participant revokes his
election or if such election otherwise ceases to be valid, the Participant's
vested Account shall be payable under the applicable automatic form of payment
described in Paragraph (a).
(c) Pre-Retirement Survivor Annuity
(i) Except as provided in subparagraph (iii) below, if a married
Participant dies prior to his Annuity Starting Date, the Participant's vested
Account shall be paid to the Participant's Spouse in the form of a Single Life
Annuity payable for the life of the Spouse (the "Pre-Retirement Survivor
Annuity"). The Spouse may, however, elect to receive the Participant's vested
Account in a lump sum as provided in Section 8.04. The election of an optional
distribution form must be made within ninety (90) days of the Participant's
death on a form provided by the Committee for such purpose.
(ii) During the Applicable Period (defined below), the Plan shall provide
each Participant with a written explanation of the Pre-Retirement Survivor
Annuity. Such explanation shall contain comparable information as provided in
the notice described in paragraph (b)(i). The "Applicable Period" shall mean
whichever of the following periods ends last:
(A) The period beginning with the first Plan Year in which the
Participant attains age 32 and ending with the close of the Plan Year in which
the Participant attains age 34;
(B) A reasonable period of time ending after the Employee becomes a
Participant; or
(C) A reasonable period after Participant first becomes subject to Code
Section 417.
However, if a Participant terminates his employment prior to the
attainment of age 35, the "Applicable Period" shall mean the one-year
period immediately preceding and immediately following the Participant's
Termination Date. If the Participant is subsequently re-hired on or after
the attainment of age 35, the Participant shall receive a new explanation
within the "Applicable Period" descried in the preceding paragraph.
(iii) A married Participant may waive the Pre-Retirement Survivor Annuity
by properly completing and filing a form with the Committee during the period
beginning on the first day of the Plan Year during which the Participant attains
age 35 and ending on the Participant's death. In addition, the married
Participant may name a non-Spouse Beneficiary to receive the death benefit.
However, the married Participant's waiver of the Pre-Retirement Survivor Annuity
shall be void unless the Participant's Spouse (after receipt of the explanation
of the Pre-Retirement Survivor Annuity described in subparagraph (ii) above)
consents in writing on a form provided by the Committee in the presence of a
notary public or Plan representative to the Participant's waiver of the
Pre-Retirement Survivor Annuity. The Spouse's consent must acknowledge the
effect of such consent and must specifically state the non-Spouse beneficiary,
if any, selected by the Participant. However, if the Participant establishes to
the satisfaction of the Committee that his Spouse's consent cannot be obtained
because he has no Spouse, because his Spouse cannot be located, or because of
other circumstances as determined by applicable Treasury Regulations, the
Committee may treat the Participant's election as an election for which spousal
consent was obtained. A Spouse's consent pursuant to this paragraph shall be
irrevocable.
(iv) If the Participant waives the Pre-Retirement Survivor Annuity (with
spousal consent), the Participant's Account will be distributed to the
Participant's Beneficiary as provided in Section 8.04. A married Participant may
revoke his waiver of the Pre-Retirement Survivor Annuity at any time prior to
his death. Furthermore, the Participant's waiver shall cease to be valid upon
the remarriage of the Participant following the death or divorce of the Spouse
giving the consent to the waiver of the Pre-Retirement Survivor Annuity. If the
Participant revokes his waiver or if such election otherwise ceases to be valid,
any death benefit payable to the Participant's Spouse shall be determined
pursuant to subparagraph (i) above.
(v) If a nonmarried Participant dies prior to his Annuity Starting Date,
the Participant's vested Account shall be distributed to the Beneficiary as
provided in Section 8.04.
(vi) If a Participant dies on or after his Annuity Starting Date, no
death benefits will be paid under this Paragraph (c) or under Section 8.04.
Instead, any death benefits will be determined in accordance with the
distribution option selected by the Participant. The Beneficiary may elect to
accelerate any death benefit into a lump sum by notifying the Committee within
ninety days of the Participant's death on a form provided by the Committee for
such purpose.
<PAGE>
APPENDIX B
CREDIT FOR SERVICE WITH AFFILIATED SPONSORS
Pursuant to a resolution of the Committee, effective June 1, 1997, Port
St. Lucie National Bank and The Spirit Mortgage Corporation shall become
Affiliated Sponsors of the Plan, subject to the terms and conditions set forth
in the Plan. Each Employee of Port St. Lucie National Bank and The Spirit
Mortgage Corporation shall be credited with Vesting Service and Eligibility
Service under the Plan equal to such Employee's Years of Service under the Port
St. Lucie National Bank Retirement Savings Plan as of May 31, 1997.
