SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file
MARCH 31, 2000 No.0-13660
SEACOAST BANKING CORPORATION OF FLORIDA
(Exact name of registrant as specified in its charter)
Florida 59-2260678
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(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
815 Colorado Avenue, Stuart FL 34994
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(Address of principal executive offices) (Zip code)
(561) 287-4000
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(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Class A Common Stock, Par Value $.10
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(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of March 31, 2000:
Class A Common Stock, $.10 Par Value - 4,449,555 shares
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Class B Common Stock, $.10 Par Value - 360,588 shares
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<PAGE>
INDEX
SEACOAST BANKING CORPORATION OF FLORIDA
Part I FINANCIAL INFORMATION PAGE #
Item 1 Financial Statements (Unaudited)
Condensed consolidated balance sheets -
March 31, 2000, December 31, 1999 and
March 31, 1999 3 - 4
Condensed consolidated statements of income -
Three months ended March 31, 2000 and 1999 5 - 6
Condensed consolidated statements of cash flows -
Three months ended March 31, 2000 and 1999 7 - 9
Notes to condensed consolidated financial
statements 10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 19
Part II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 20
SIGNATURES 21
Article 9 - Financial Data Schedule 22 - 23
<PAGE>
Part I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
March 31, December 31, March 31,
(Dollars in thousands) 2000 1999 1999
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ASSETS
Cash and due from banks $ 40,381 $ 39,992 $ 36,442
Federal funds sold 20,000 19,950 1,000
Securities:
Held for sale (at market) 192,501 196,215 254,823
Held for investment (market values:
$20,762 at March 31, 2000,
$17,464 at December 31, 1999
& $21,311 at March 31, 1999) 20,597 17,439 20,756
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TOTAL SECURITIES 213,098 213,654 275,579
Loans available for sale 959 938 4,996
Loans 809,105 778,164 724,599
Less: Allowance for loan losses (7,004) (6,870) (6,576)
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NET LOANS 802,101 771,294 718,023
Bank premises and equipment, net 16,773 16,557 17,478
Other assets 16,686 18,647 15,930
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$1,109,998 $1,081,032 $1,069,448
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LIABILITIES
Deposits $ 949,382 $ 905,960 $ 939,405
Federal funds purchased and
securities sold under agreements
to repurchase, maturing within
30 days 27,414 24,970 24,970
Other Borrowings 49,970 24,970 24,970
Other liabilities 4,810 6,027 5,827
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1,031,576 1,003,921 993,649
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
March 31, December 31, March 31,
(Dollars in thousands) 2000 1999 1999
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SHAREHOLDERS' EQUITY
Preferred stock 0 0 0
Class A common stock 482 482 481
Class B common stock 36 36 37
Additional paid-in capital 27,743 27,785 27,370
Retained earnings 68,034 66,174 61,305
Less: Treasury stock (12,089) (11,640) (12,372)
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84,206 82,837 76,821
Securities valuation allowance (5,784) (5,726) (1,022)
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TOTAL SHAREHOLDERS' 78,422 77,111 75,799
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$1,109,998 $1,081,032 $1,069,448
=========================================
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Note: The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date. See notes to condensed
consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Ended
March 31,
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(Dollars in thousands, except per share data) 2000 1999
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Interest and dividends on securities $ 3,396 $ 3,898
Interest and fees on loans 15,498 13,867
Interest on federal funds sold 159 258
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TOTAL INTEREST INCOME 19,053 18,023
Interest on deposits 2,167 1,857
Interest on time certificates 5,203 4,889
Interest on borrowed money 954 627
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TOTAL INTEREST EXPENSE 8,324 7,373
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NET INTEREST INCOME 10,729 10,650
Provision for loan losses 150 360
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NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 10,579 10,290
Noninterest income
Securities gains 1 227
Other income 3,443 3,127
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TOTAL NONINTEREST INCOME 3,444 3,354
TOTAL NONINTEREST EXPENSES 9,006 9,225
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INCOME BEFORE INCOME TAXES 5,017 4,419
Provision for income taxes 1,910 1,708
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NET INCOME $ 3,107 $ 2,711
====================
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Ended
March 31,
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(Dollars in thousands, except per share data) 2000 1999
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PER SHARE COMMON STOCK:
Net income diluted $ 0.64 $ 0.55
Net income basic 0.64 0.55
Cash Dividends Declared:
Class A 0.26 0.24
Class B 0.236 0.218
Average shares outstanding - Diluted 4,870,539 4,953,603
Average shares outstanding - Basic 4,832,118 4,891,188
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See notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Ended
March 31,
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(Dollars in thousands) 2000 1999
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Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Interest received $ 18,753 $ 18,056
Fees and commissions received 3,436 3,228
Interest paid (8,146) (7,437)
Cash paid to suppliers and employees (9,822) (9,512)
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Net cash provided by operating activities 4,221 4,335
Cash flows from investing activities
Proceeds from maturity of securities held for sale 3,776 30,642
Proceeds from maturity of securities held for investment 1,839 1,481
Proceeds from sale of securities held for sale 120 31,263
Purchase of securities held for sale (423) (78,409)
Purchase of securities held for investment (5,000) 0
Proceeds from sale of loans 7,119 0
Net new loans and principal repayments (38,032) (24,289)
Proceeds from the sale of other real estate owned 220 19
Additions to bank premises and equipment (710) (223)
Net change in other assets 150 66
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Net cash used in investing activities (30,941) (39,450)
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)(Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Ended
March 31,
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(Dollars in thousands) 2000 1999
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Cash flows from financing activities
Net increase in deposits 43,449 34,209
Net decrease in federal funds purchased and
repurchase agreements (39,550) (54,311)
Net increase in other borrowings 25,000 0
Exercise of stock options 86 182
Treasury stock acquired (577) (3,816)
Dividends paid (1,249) (1,145)
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Net cash used in financing activities 27,159 (24,881)
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Net increase (decrease) in cash and cash equivalents 439 (59,996)
Cash and cash equivalents at beginning of period 59,942 97,438
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Cash and cash equivalents at end of period $ 60,381 $ 37,442
====================
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)(Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Ended
March 31,
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(Dollars in thousands) 2000 1999
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Reconciliation of Net Income to Cash Provided by
Operating Activities
Net Income $ 3,107 $ 2,711
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 653 771
Provision for loan losses 150 360
Securities gains (1) (227)
Gain on sale of loans 65 0
Loss on sale and writedown of foreclosed assets 23 29
Loss on disposition of fixed assets 11 7
Change in interest receivable (244) 31
Change in interest payable 178 (64)
Change in prepaid expenses (80) (314)
Change in accrued taxes 2,037 1,804
Change in other liabilities (1,548) (773)
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Total adjustments 1,114 1,624
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Net cash provided by operating activities $ 4,221 $ 4,335
====================
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Supplemental disclosure of noncash investing activities:
Transfers from loans to other real estate owned $ 0 $ 162
Market value adjustment to securities (304) (855)
Transfers from loans to securities available for sale 0 14,960
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See notes to condensed consolidated financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEACOAST
BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepte in the
United States for interim financial information and with the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three-month
period ended March 31, 2000, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2000. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended December 31, 1999.
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NOTE B - COMPREHENSIVE INCOME
Under FASB Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," the Company is required to report a measure of all
changes in equity, not only reflecting net income but certain other changes as
well. At March 31, 2000 and 1999, comprehensive income was as follows:
Three Months Ended
March 31,
----------------------------
(Dollars in thousands) 2000 1999
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Net Income $3,107 $2,711
Unrealized losses on securities (58) (575)
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Comprehensive Income $3,049 $2,136
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NOTE C - OTHER BORROWINGS
On July 31, 1998, the Company acquired $24,970,000 in other borrowings,
$15,000,000 from the Federal Home Loan Bank (FHLB) payable on November 12, 2009,
with interest payable quarterly at 6.10%, and $9,970,000 from Donaldson, Lufkin
& Jenrette (DLJ), payable on July 31, 2003, with interest payable quarterly at
5.40%. Each debt is subject to early termination in accordance with the terms of
the agreement as follows: FHLB on November 12, 2004 and DLJ on July 31, 2000. On
March 9, 2000, an additional borrowing from the FHLB for $25,000,000 was
acquired, with a fixed term payable on March 9, 2002, and interest payable
monthly at 6.99%.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FIRST QUARTER 2000
The following discussion and analysis is designed to provide a better
understanding of the significant factors related to the Company's results of
operations and financial condition. Such discussion and analysis should be read
in conjunction with the Company's Condensed Consolidated Financial Statements
and the notes attached thereto.
EARNINGS SUMMARY
Net income for the first quarter of 2000 totaled $3,107,000 or $0.64 per share
diluted, higher than the $3,041,000 or $0.62 per share diluted recorded in the
fourth quarter of 1999 and higher than the $2,711,000 or $0.55 per share diluted
reported in the first quarter of 1999. In large part, the better performance is
due to initiatives taken over the past year to better align cost structures for
higher performance and to improve noninterest revenue. These efforts are
reflected in the favorable earnings improvement reported for the first quarter
of 2000.
Return on average assets was 1.15 percent and return on average shareholders'
equity was 14.75 percent for the first quarter of 2000, compared to fourth
quarter 1999's performance of 1.13 percent and 14.56 percent, respectively, and
the prior year's first quarter results of 1.04 percent and 13.92 percent,
respectively. The increase in return on equity reflects improved earnings and,
to a lesser extent, the impact of the Company's share repurchase program (See
"Capital Resources").
NET INTEREST INCOME
Net interest income (fully taxable equivalent) for 2000 totaled $10,805,000,
$109,000 or 1.0 percent greater than for the fourth quarter of 1999 and $58,000
or 0.5 percent higher than for the first quarter of 1999.
Net interest margin on a tax equivalent basis was stable for the first quarter
of 2000 compared to the fourth quarter of 1999. On a tax equivalent basis the
margin increased one basis point to 4.24 percent during the first quarter of
2000 from 4.23 percent in the fourth quarter of 1999. The cost of
interest-bearing liabilities increased 20 basis points to 3.96 percent from
fourth quarter, with rates for NOW, savings deposits, certificates of deposit,
short term borrowings (entirely composed of repurchase agreements and federal
funds purchased), and other borrowings increasing 14, 40, 25 21 and 41 basis
points, respectively. Rates for savings accounts increased primarily as a result
of the Company successfully marketing two relatively new savings products called
Grand Savings and Grand Savings Plus that earn a higher rate. The increase in
rate for other borrowings was due to the Company extending an existing $15
million borrowing from the Federal Home Loan Bank (FHLB) to a term of 10 years
at a slightly higher rate and the Company borrowing an additional $25 million
from the FHLB in early March 2000 for a term of two years at 6.99 percent.
Impacting the margin as well, the yield on earning assets increased 12 basis
points to 7.50 percent during the first quarter of 2000, compared to the fourth
quarter. Increases in the yield on loans of 11 basis points to 7.89 percent, the
yield on securities of 6 basis points to 6.18 percent, and the yield on federal
funds sold of 37 basis points to 5.71 percent was further enhanced by a changing
earning assets mix (with a $21.5 million growth in average loans during the
first quarter).
For the first quarter a year ago, the net interest margin was 4.38 percent. The
yield on average earning assets was 7.38 percent and rate on interest-bearing
liabilities was 3.56 percent.
Average earning assets for the first quarter of 2000 are $29,875,000 or 3.0
percent higher when compared to the prior year's first quarter. While average
loan balances grew $82,231,000 or 11.6 percent to $791,580,000, average
investment securities decreased $41,468,000 or 15.7 percent to $223,002,000, and
average federal funds sold declined $10,888,000 or 49.3 percent to $11,196,000.
The mix of earning assets and interest bearing liabilities impacts the margin.
Loans (the highest yielding component of earning assets) as a percentage of
average earning assets totaled 77.2 percent in the first quarter of 2000,
compared to 71.2 percent a year ago. Average certificates of deposit (a higher
cost component of interest-bearing liabilities) as a percentage of
interest-bearing liabilities decreased to 46.4 percent, compared to 47.3 percent
in the first quarter of 1999. Borrowings (including federal funds purchased,
sweep repurchase agreements with customers of the Company's subsidiary, and
borrowings from the FHLB and Donaldson, Lufkin and Jenrette) totaled 8.4 percent
of interest bearing liabilities in the first quarter, versus 6.8 percent a year
ago. While lower cost interest bearing core deposits (NOW, savings and money
market deposits) decreased $3,844,000 or 1.0 percent to $381,954,000, growth in
average noninterest-bearing demand deposits favorably affected the Company's
deposit mix, increasing $18,519,000 or 14.3 percent to $148,341,000.
<PAGE>
PROVISION FOR LOAN LOSSES
A provision of $150,000 recorded in the first quarter of this year supported the
11.6 percent increase in loans and was $210,000 lower than provisioning in the
first quarter of 1999, but equal to provisioning in the fourth quarter of 1999.
Net charge-offs for the first quarter decreased from $127,000 last year to
$17,000 in 2000. Net charge-offs annualized as a percent of average loans
totaled 0.01 percent for the first quarter of 2000, compared to 0.07 percent for
the same quarter in 1999 and 0.02 percent for the total year in 1999. These
ratios are much better than the banking industry as a whole.
Management determines the provision for loan losses charged to operations by
constantly analyzing and monitoring delinquencies, nonperforming loans and the
level of outstanding balances for each loan category, as well as the amount of
net charge-offs, and by estimating losses inherent in its portfolio. While the
Company's policies and procedures used to estimate the monthly provision for
loan losses charged to operations are considered adequate by management and are
reviewed from time to time by the Office of the Comptroller of the Currency
(OCC), there exist factors beyond the control of the Company, such as general
economic conditions both locally and nationally, which make management's
judgment as to the adequacy of the provision necessarily approximate and
imprecise.
NONINTEREST INCOME
Noninterest income, excluding gains and losses from securities sales, totaled
$3,443,000 for the first quarter of 2000, $316,000 or 10.1 percent higher than
for the same period last year.
The largest increase in noninterest income occurred in brokerage commissions and
fees combined with trust investment management services, an increase of $277,000
or 21.4 percent to $1,571,000. The increase is a direct result of personalized
service to a growing customer base brought about by the Company's expansion and
market penetration. The Company intends to continue to promote its brokerage and
trust services to both existing and new customers, as expectations are that
these financial products will remain in demand. Service charges on deposits and
other service charges and fees on an aggregate basis decreased $29,000 or 1.8
percent to $1,560,000. Other income increased $68,000 to $312,000, largely due
to $58,000 in gains on the sale of loans totaling $6.2 million recorded in the
Company's banking subsidiary's newly formed division known as Seacoast Marine
Finance, headquartered in Fort Lauderdale, Florida. Entry into the Fort
Lauderdale market began in early February with an experienced, seasoned team of
marine lending professionals. Seacoast Marine Finance's marketing emphasis is to
the southeast for transactions of $200,000 and greater, with the majority of
business volumes generated sold to larger regional financial institutions.
Higher rates for fixed rate residential 15- and 30-year loan products during
late 1999 and in 2000 have resulted in lower activity. In the first quarter of
1999 the Company securitized these loans as agency securities and sold $19.7
million, compared to $0.9 million in cash sales in the first quarter of 2000.
These sales generated additional income of $148,000, which is included in the
investment securities gains of $227,000 recorded in the first quarter of 1999,
and additional income of $7,000, which is included in other income for the first
quarter of 2000.
NONINTEREST EXPENSES
When compared to 1999, noninterest expenses for the first quarter decreased by
$219,000 or 2.4 percent to $9,006,000. The Company's overhead ratio has
decreased, from 69.6 percent in the first quarter of 1998 to 66.5 percent a year
ago to 63.2 percent in the first quarter of 2000. This is reflective of
initiatives to reduce overhead costs, particularly staffing, and streamlined
operational and procedural changes implemented throughout 1999.
Salaries and wages decreased $107,000 or 3.1 percent to $3,370,000. Employee
benefits declined $106,000 or 10.9 percent to $868,000 from the first quarter of
1999. All of the decrease in benefit costs is related to lower incentive
accruals for 2000.
Occupancy expenses and furniture and equipment expenses, on an aggregate basis,
increased $57,000 or 4.4 percent to $1,353,000, versus first quarter results
last year. A contractual increase in lease payments for premises of $52,000 was
the primary cause.
<PAGE>
Costs associated with foreclosed and repossessed asset management and
disposition totaled only $49,000, a reflection of low nonperforming asset
balances (see "Nonperforming Assets") in the first quarter 2000. Legal and
professional costs decreased $80,000 or 21.2 percent to $297,000 when compared
to March 31, 1999. Most of this decrease was related to expense in 1999 for
hiring an outside consulting service to partner with the Company in assessing a
number of internal processes for overhead improvement and revenue enhancement.
Marketing expenses, including sales promotion costs, ad agency production and
printing costs, newspaper and radio advertising, and other public relations
costs associated with the Company's efforts to market products and services,
decreased by $6,000 to $445,000 when compared to a year ago.
Outsourced data processing costs totaled $1,012,000 for the first quarter of
2000, an increase of $46,000 from a year ago. The Company's utilizes a third
party for its core data processing system. Outsourced data processing costs are
directly related to the number of transactions processed, which can be expected
to increase as the Company's business volumes grow and new products such as bill
pay, internet banking, etc. become more popular.
INCOME TAXES
Income taxes as a percentage of income before taxes were 38.1 percent for the
first quarter of this year, compared to 38.7 percent in 1999. The rate reflects
a higher rate of provisioning for state income taxes, a result of lower state
intangible tax credits, lower tax-exempt interest income and the Company's
effective federal tax rate increasing due to adjusted income before taxes
exceeding $10 million.
FINANCIAL CONDITION
CAPITAL RESOURCES
The Company's ratio of average shareholders' equity to average total assets
during the first quarter of 2000 was 7.82 percent, compared to 7.50 percent
during the first quarter of 1999. The Company has an approved share repurchase
plan which allows for up to 300,000 shares to be repurchased over the next
several years.
The risk-based capital minimum ratio for total capital to risk-weighted assets
for "well-capitalized" financial institutions is 10%. At March 31, 2000, the
Company's ratio was 12.13 percent.
LOAN PORTFOLIO
The Company's loan activity is principally with customers located within its
defined market area known as the Treasure Coast of Florida. This area is located
on the southeastern coast of Florida above Palm Beach County and extends north
to Brevard County.
Total loans (net of unearned income and excluding the allowance for loan losses)
were $809,105,000 at March 31, 2000, $84,506,000 or 11.7 percent more than at
March 31, 1999, and $30,941,000 or 4.0 percent more than at December 31, 1999.
At March 31, 2000, the Company's mortgage loan balances secured by residential
properties amounted to $456,204,000 or 56.4 percent of total loans (versus 54.7
percent a year ago). The next largest concentration was loans secured by
commercial real estate totaling $183,952,000 or 22.7 percent (versus 25.8
percent a year ago). The Company was also a creditor for consumer loans to
individual customers totaling $80,918,000, most secured with collateral and
including marine loans totaling approximately $2.0 million generated by the
Company's subsidiary bank's newly created lending division, Seacoast Marine
Finance, headquartered in Fort Lauderdale, Florida. Commercial loans of
$35,919,000, home equity lines of credit of $13,630,000, and construction loans
of $38,239,000 were outstanding as well at March 31, 2000.
During the first quarter of 2000, $0.9 million in fixed rate residential
mortgage loans and $6.2 million in marine loans (generated by Seacoast Marine
Finance) were sold. Over the past twelve months, $20 million in such loans were
sold.
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 re-pricing opportunities
for assets against liabilities, when possible. At March 31, 2000, approximately
$176 million or 39 percent of the Company's residential mortgage loan balances
were adjustable.
Of the approximate $28 million of new residential loans originated in 2000, $23
million were adjustable and $5 were fixed rate. Loans secured by residential
properties having fixed rates totaled approximately $280 million at March 31,
2000, of which 15- and 30-year mortgages totaled approximately $123 million and
$109 million, respectively. Remaining fixed rate balances were comprised of home
improvement loans with maturities less than 15 years.
<PAGE>
The majority of all loans and commitments for one-to-four family residential
properties and commercial real estate are generally secured with first mortgages
on property with the amount loaned at inception to the fair value of the
property not to exceed 80 percent. A majority of residential real estate loans
are made upon terms and conditions that would make such loans eligible for
resale under Federal National Mortgage Association ("FNMA") or Federal Home Loan
Mortgage Corporation ("FHLMC") guidelines. The Company's historical charge-off
rates for residential real estate loans have been minimal, with $6,000 in net
recoveries for the first quarter of 2000 compared to $104,000 in net charge-offs
for all of 1999. The Company considers residential mortgages less susceptible to
adverse effects from a downturn in the real estate market, especially given the
area's large percentage of retired persons.
Fixed rate and adjustable rate loans secured by commercial real estate totaled
approximately $116 million and $68 million, respectively, at March 31, 2000,
compared to $120 million and $67 million, respectively, a year ago. The Company
attempts to reduce its exposure to the risk of the local real estate market by
limiting the aggregate size of its commercial real estate portfolio and by
making commercial real estate loans primarily on owner occupied properties.
At March 31, 2000, the Company had commitments to make loans (excluding unused
home equity lines of credit) of $73,513,000, compared to $68,512,000 at March
31, 1999.
ALLOWANCE FOR LOAN LOSSES
Net recoveries on residential real estate loans and commercial estate loans
totaled $6,000 and $27,000, respectively, for the first three months of 2000,
compared to net losses of $42,000 and $18,000, respectively, in 1999. Current
and historical credit losses arising from real estate lending transactions
continue to compare favorably with the Company's peer group. Net charge-offs for
consumer loans of $104,000 compared to net charge-offs of $115,000 a year ago.
Net recoveries for commercial loans and credit card loans of $26,000 and
$28,000, respectively, in the first quarter of 2000 compared to recoveries of
$21,000 and $27,000, respectively, in 1999. As a result of the sale of the
credit card portfolio in 1998, the Company eliminated its exposure to future
credit card losses and continues to recover amounts on losses recorded prior to
the sale.
The ratio of the allowance for loan losses to net loans outstanding was 0.87
percent at March 31, 2000. This ratio was 0.91 percent at March 31, 1999 and
0.88 percent at December 31, 1999. The allowance for loan losses as a percentage
of nonaccrual loans and loans 90 days or more past due was 191.4 percent at
March 31, 2000, compared to 292.4 percent at the same date in 1999.
NONPERFORMING ASSETS
At March 31, 2000, the Company's ratio of nonperforming assets to loans
outstanding plus other real estate owned ("OREO") was 0.46 percent, compared to
0.35 percent one year earlier.
At March 31, 2000, there were no accruing loans past due 90 days or more and
OREO of $96,000 was outstanding. In 1999 on the same date, loans totaling
$83,000 were past due 90 days or more and OREO balances of $402,000 were
outstanding.
Nonaccrual loans totaled $3,659,000 at March 31, 2000, compared to a balance of
$2,166,000 at March 31, 1999. Most of the increase is due to a single
residential real estate credit totaling $897,000 with a loan to value of less
than 50 percent. All of the nonaccrual loans outstanding at March 31, 2000 were
performing with respect to payments, with the exception of 23 loans aggregating
to $2,535,000. The performing loans were placed on nonaccrual status because the
Company has determined that the collection of principal or interest in
accordance with the terms of such loans is uncertain. Of the amount reported in
nonaccrual loans at March 31, 2000, 91 percent is secured with real estate, 1
percent is 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.
<PAGE>
SECURITIES
Debt securities that the Company has the intent and ability to hold to maturity
are carried at amortized cost. All other securities are carried at market value
and are available for sale. At March 31, 2000, the Company had $201,812,000 or
90.8 percent of total securities available for sale and securities held to
maturity were carried at an amortized cost of $22,597,000, representing 10.2
percent of total securities.
The Company's securities portfolio has declined $54,735,000 or 19.7 percent from
March 31, 1999. The funds were utilized to fund loan growth.
Management controls the Company's interest rate risk by maintaining a low
average duration for the securities portfolio and with securities returning
principal monthly which can be reinvested. At March 31, 2000, the duration of
the portfolio was 3.2 years, compared to 2.5 years a year ago.
Unrealized net securities losses of $9,146,000 at March 31, 2000, compared to
net losses of $1,011,000 at March 31, 1999. The Fed increased rates 75 basis
points in 1999 and 50 basis points in 2000. As a result, a shifting U.S.
Treasury curve over the past twelve months resulted in increased 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 Council
("FFIEC") definition of a high risk investment.
DEPOSITS / BORROWINGS
Total deposits increased $9,977,000 or 1.1 percent to $949,382,000 at March 31,
2000, compared to one year earlier. While certificates of deposits decreased
$13,855,000 or 3.4 percent to $397,637,000 over the past twelve months, lower
cost interest bearing deposits (NOW, savings and money markets deposits)
increased $10,168,000 or 2.6 percent to $395,109,000. Noninterest bearing demand
deposits increased $13,664,000 or 9.6 percent to $156,636,000.
Repurchase agreement balances increased $3,967,000 or 16.9 percent to
$27,414,000 at March 31, 2000. Repurchase agreements are offered by the
Company's subsidiary bank to select customers who wish to sweep excess balances
on a daily basis for investment purposes. Other borrowings increased $25,000,000
to $49,970,000, reflecting funding obtained through the FHLB for a term of two
years at 6.99 percent in mid-March 2000.
INTEREST RATE SENSITIVITY
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 re-price 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).
Based on the Company's most recent ALCO modeling, 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 28.8 percent.
The Company's ALCO uses model simulation to manage and measure its interest rate
sensitivity. The Company has determined that an acceptable level of interest
rate risk would be for net interest income to fluctuate no more than 6 percent
given an immediate change in interest rates (up or down) of 200 basis points.
The Company's most recent ALCO model simulation indicated net interest income
would decline 3.3 percent if interest rates would immediately rise 200 basis
points. It has been the Company's experience that non-maturity core deposit
balances are stable and subjected to limited re-pricing when interest rates
increase or decrease within a range of 200 basis points.
The Company does not presently use interest rate protection products in managing
its interest rate sensitivity.
<PAGE>
LIQUIDITY MANAGEMENT
Contractual maturities for assets and liabilities are reviewed to adequately
maintain current and expected future liquidity requirements. Sources of
liquidity, both anticipated and unanticipated, are maintained through a
portfolio of high quality marketable assets, such as residential mortgage loans,
securities available for sale and federal funds sold. The Company has access to
federal funds lines of credit and is able to provide short term financing of its
activities by selling, under an agreement to repurchase, United States Treasury
and Government agency securities not pledged to secure public deposits or trust
funds. At March 31, 2000, the Company had available lines of credit of
$138,000,000. The Company also had $109,142,000 of United States Treasury and
Government agency securities and mortgage backed securities not pledged and
available for use under repurchase agreements. At March 31, 1999, the amount of
securities available and not pledged was $86,622,000.
Liquidity, as measured in the form of cash and cash equivalents (including
federal funds sold), totaled $60,381,000 at March 31, 2000 as compared to
$37,442,000 at March 31, 1999. Cash and cash equivalents vary with seasonal
deposit movements and are generally higher in the winter than in the summer, and
vary with the level of principal repayments and investment activity occurring in
the Company's securities portfolio and loan portfolio. As is typical of
financial institutions, cash flows from investing activities (primarily in loans
and securities) and from financial activities (primarily through deposit
generation and short term borrowings) exceeded cash flows from operations. In
2000, the cash flow from operations of $4,221,000 was $114,000 lower than during
the same period of 1999.
IMPACT OF 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 level of inflation. However, inflation affects financial institutions'
increased cost of goods and services purchased, the cost of salaries and
benefits, occupancy expense, and similar items. Inflation and related increases
in interest rates generally decrease the market value of investments and loans
held and may adversely affect liquidity, earnings, and shareholders' equity.
Mortgage originations and refinancings tend to slow as interest rates increase,
and likely will reduce the Company's earnings from such activities and the
income from the sale of residential mortgage loans in the secondary market.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
Certain of the matters discussed under the caption "Management's Discussion and
Analysis" and elsewhere in this Quarterly Report may constitute forward-looking
statements for purposes of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Seacoast Banking Corporation of Florida
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 effect of future economic conditions; governmental monetary and
fiscal policies, as well as legislative and regulatory changes; the risk 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 locally, regionally, nationally and internationally,
together with such competitors offering banking products and services by mail,
telephone and computer and the Internet; the effect 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.
<PAGE>
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed for the three-month period ended March
31, 2000.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEACOAST BANKING CORPORATION OF FLORIDA
May 12, 2000 /s/ Dennis S. Hudson, III
- ------------ -------------------------
DENNIS S. HUDSON, III
President & Chief Executive Officer
May 12, 2000 /s/ William R. Hahl
- ------------ -------------------
WILLIAM R. HAHL
Executive Vice President &
Chief Financial Officer
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