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Exhibit 13
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share data) | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||
FOR THE YEAR | ||||||||||||||||||||
Net interest income | $ | 52,774 | $ | 44,165 | $ | 45,960 | $ | 44,017 | $ | 40,795 | ||||||||||
Provision for loan losses | 1,000 | 0 | 0 | 0 | 600 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Securities gains (losses) | 44 | (1,172 | ) | 457 | 915 | (12 | ) | |||||||||||||
Other | 18,462 | 20,897 | 18,336 | 16,584 | 14,450 | |||||||||||||||
Noninterest expenses | 47,281 | 42,463 | 39,790 | 38,060 | 34,877 | |||||||||||||||
Income before income taxes | 22,999 | 21,427 | 24,963 | 23,456 | 19,756 | |||||||||||||||
Provision for income taxes | 8,077 | 7,411 | 9,677 | 9,326 | 7,668 | |||||||||||||||
Net income | 14,922 | 14,016 | 15,286 | 14,130 | 12,088 | |||||||||||||||
Core earnings1 | 23,941 | 22,781 | 24,461 | 22,624 | 20,459 | |||||||||||||||
Per Share Data | ||||||||||||||||||||
Net income: | ||||||||||||||||||||
Diluted | 0.95 | 0.89 | 0.97 | 0.90 | 0.76 | |||||||||||||||
Basic | 0.97 | 0.91 | 1.00 | 0.91 | 0.76 | |||||||||||||||
Cash dividends declared | 0.54 | 0.46 | 0.37 | 0.35 | 0.32 | |||||||||||||||
Book value | 7.00 | 6.71 | 6.59 | 6.09 | 5.42 | |||||||||||||||
Dividends to net income | 55.60 | % | 50.60 | % | 37.30 | % | 37.60 | % | 41.60 | % | ||||||||||
AT YEAR END | ||||||||||||||||||||
Assets | $ | 1,615,876 | $ | 1,353,823 | $ | 1,281,297 | $ | 1,225,964 | $ | 1,151,373 | ||||||||||
Securities | 593,758 | 565,089 | 498,459 | 306,352 | 204,664 | |||||||||||||||
Net loans | 892,949 | 702,632 | 681,335 | 777,993 | 837,328 | |||||||||||||||
Deposits | 1,372,466 | 1,129,642 | 1,030,540 | 1,015,154 | 957,089 | |||||||||||||||
Shareholders’ equity | 108,212 | 104,084 | 100,747 | 93,519 | 84,263 | |||||||||||||||
Performance ratios: | ||||||||||||||||||||
Return on average assets | 1.05 | % | 1.07 | % | 1.26 | % | 1.22 | % | 1.09 | % | ||||||||||
Return on average equity | 13.75 | 13.73 | 15.75 | 15.62 | 14.09 | |||||||||||||||
Net interest margin2 | 3.89 | 3.57 | 4.00 | 3.99 | 3.91 | |||||||||||||||
Average equity to average assets | 7.63 | 7.82 | 7.99 | 7.78 | 7.76 | |||||||||||||||
1. | Income before taxes excluding the provision for loan losses, securities gains (losses) and expenses associated with foreclosed and repossessed asset management and dispositions. | |||
2. | On a fully taxable equivalent basis |
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Overview and Outlook
Seacoast Banking Corporation of Florida is a one-bank holding company located on Florida’s southeast coast whose southern market is Palm Beach County and northern market is Brevard County. The Company has 29 full service branches, two of which were opened last year in Palm Beach County, as well as, a loan production office in Brevard County which opened during 2004. The Company plans to open three more branches in Palm Beach County and two branches in Brevard County over the next two years. The markets in which the Company operates have population growth rates over the past 10 years of approximately 23 percent and estimated growth rates of over 20 percent over the next 10 years.
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cial real estate production during 2003 and 2004, the loan portfolio increased by 3.0 percent in 2003 and 26.9 percent in 2004. Continued loan growth is expected given the Company’s continued consumer, commercial and commercial real estate production and its expansion in Palm Beach and Brevard Counties.
Restatement of Prior Period Financial Statements
Quarterly Financial Information
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(Dollars in thousands, | |||||||||||||||||||||
except per share amount) | First | Second | Third | Fourth | Full Year | ||||||||||||||||
2004 | |||||||||||||||||||||
Condensed Income Statement - as restated | |||||||||||||||||||||
Interest income | $ | 15,816 | $ | 16,086 | $ | 17,042 | $ | 18,108 | $ | 67,052 | |||||||||||
Interest expense | 3,383 | 3,334 | 3,580 | 3,981 | 14,278 | ||||||||||||||||
Net interest income | 12,433 | 12,752 | 13,462 | 14,127 | 52,774 | ||||||||||||||||
Provision for loan losses | 150 | 150 | 250 | 450 | 1,000 | ||||||||||||||||
Noninterest income | 5,439 | 3,846 | 5,160 | 4,017 | 18,462 | ||||||||||||||||
Net securities gains | 56 | (46 | ) | 16 | 18 | 44 | |||||||||||||||
Total noninterest income | 5,495 | 3,800 | 5,176 | 4,035 | 18,506 | ||||||||||||||||
Noninterest expense | 11,527 | 11,620 | 12,027 | 12,107 | 47,281 | ||||||||||||||||
Income before income tax expense | 6,251 | 4,782 | 6,361 | 5,605 | 22,999 | ||||||||||||||||
Net income | 4,037 | 3,090 | 4,095 | 3,700 | 14,922 | ||||||||||||||||
Financial Ratios | |||||||||||||||||||||
Return on average common equity | 15.13 | % | 11.50 | % | 14.98 | % | 13.38 | % | 13.75 | % | |||||||||||
Return on average assets | 1.20 | 0.89 | 1.16 | 0.97 | 1.05 | ||||||||||||||||
Net interest margin | 3.84 | 3.84 | 3.97 | 3.88 | 3.89 | ||||||||||||||||
Per Common Share | |||||||||||||||||||||
Basic net income | 0.26 | 0.20 | 0.27 | 0.24 | 0.97 | ||||||||||||||||
Diluted net income | 0.25 | 0.20 | 0.26 | 0.24 | 0.95 | ||||||||||||||||
Dividends Declared and Paid | 0.13 | 0.13 | 0.14 | 0.14 | 0.54 | ||||||||||||||||
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(Dollars in thousands, | Nine | |||||||||||||||||
except per share amount) | First | Second | Third | Months | ||||||||||||||
2004 | ||||||||||||||||||
Reconciliation to Previously Reported Results | ||||||||||||||||||
Noninterest income: | ||||||||||||||||||
As originally reported | $ | 4,861 | $ | 5,024 | $ | 4,846 | 14,731 | |||||||||||
Adjustment | 634 | (1,224 | ) | 330 | (260 | ) | ||||||||||||
Restated | 5,495 | 3,800 | 5,176 | 14,471 | ||||||||||||||
Income before income tax expense | ||||||||||||||||||
As originally reported | 5,617 | 6,006 | 6,031 | 17,654 | ||||||||||||||
Adjustment | 634 | (1,224 | ) | 330 | (260 | ) | ||||||||||||
Restated | 6,251 | 4,782 | 6,361 | 17,394 | ||||||||||||||
Net income: | ||||||||||||||||||
As originally reported | 3,625 | 3,886 | 3,880 | 11,391 | ||||||||||||||
Adjustment | 412 | (796 | ) | 215 | (169 | ) | ||||||||||||
Restated | 4,037 | 3,090 | 4,095 | 11,222 | ||||||||||||||
Basic net income per share: | ||||||||||||||||||
As originally reported | 0.23 | 0.25 | 0.25 | 0.74 | ||||||||||||||
Adjustment | 0.03 | (0.05 | ) | 0.02 | (0.01 | ) | ||||||||||||
Restated | 0.26 | 0.20 | 0.27 | 0.73 | ||||||||||||||
Diluted net income per share: | ||||||||||||||||||
As originally reported | 0.23 | 0.25 | 0.25 | 0.72 | ||||||||||||||
Adjustment | 0.02 | (0.05 | ) | 0.01 | (0.01 | ) | ||||||||||||
Restated | 0.25 | 0.20 | 0.26 | 0.71 | ||||||||||||||
The allowance and the provision for loan losses; fair value of securities held for sale; goodwill impairment and contingent liabilities. |
Disclosures intended to facilitate a reader’s understanding of the possible and likely events or uncertainties known to management that could have a material impact on the reported financial information of the Company related to the most critical accounting estimates are as follows:
The Allowance and Provision for Loan LossesA provision of $1,000,000 was recorded during 2004, partially as a result of loan growth of $191 million or 27 percent in 2004, while no provision was recorded during 2003 and 2002. The increased loss exposure as a result of the loan growth in 2004 was partially offset by the Company’s continued stable credit quality, and low nonperforming assets. Net charge-offs totaled $562,000 or 0.07 percent of average loans in 2004 compared to $666,000 or 0.10 percent of average loans for 2003. Nearly all of the net charge-offs in both years are principally attributed to the Company’s commercial and financial loan portfolio that represents less than 10 percent of the total loan portfolio. Net charge-offs have been nominal in the past few years as well with $208,000 or 0.03 percent of average loans for 2002 and $184,000 or 0.02 percent of average loans for 2001. The Company’s net charge-off ratios have been much better than the banking industry as a whole and this year’s results are consistent with the Company’s historical trends.
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larger additions to the allowance for loan losses. The last time the Company experienced significant net charge-offs and nonperforming loans was during the period 1988-1993 when the real estate markets in Florida experienced deflation and the national economy was in recession. Management believes that its current credit granting processes follows a comprehensive and disciplined approach that mitigates risk and lowers the likelihood of significant increases in charge-offs and nonperforming loans during all economic cycles.
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performance, are carefully analyzed and monitored in order to determine an adequate allowance level. Problem loan activity for this exposure needs to be evaluated over the long term to include all economic cycles when determining an adequate allowance level.
Nonperforming Assets Table 13 provides certain information concerning nonperforming assets for the years indicated.
Fair Value of Securities Held for Sale The fair value of the held for sale portfolio at December 31, 2004 was less than historical amortized cost, producing net unrealized losses of $3,171,000 that have been included in other comprehensive income as a component of shareholders’ equity. The fair value of each security was obtained from independent pricing sources utilized by many financial institutions. However, actual values can only be determined in an arms-length transaction between a willing buyer and seller that can, and often do, vary from these reported values. Furthermore, significant changes in recorded values due to changes in actual and perceived economic conditions can occur rapidly, producing greater unrealized losses in the held for sale portfolio. On November 1, 2004, in anticipation of a predicted rising interest rate environment and a potential decline in fair value of securities, the Company transferred $110.5 million in securities with net unrealized losses of $802,000 to its held to maturity portfolio from the held for sale portfolio.
Goodwill Impairment Beginning January 1, 2002, the Company’s goodwill was no longer amortized, but tested annually for impairment. The amount of goodwill at December 31, 2004 totaled approximately $2.6 million and was acquired in 1995 as a result of the purchase of a community bank within the Company’s market. The Company has a commercial bank deposit market share of approximately 35 percent in this market, which had a population increase of over 25 percent during the past ten years.
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services and favorable demographics, has resulted in increasing profitability over the long term in this market. There is data available indicating that both the products and customers serviced have grown since the acquisition, which is attributable to the increased profitability and supports the goodwill value at December 31, 2004.
Contingent LiabilitiesWe are subject to contingent liabilities, including judicial, regulatory and arbitration proceedings, tax and other claims arising from the conduct of our business activities. These proceedings include actions brought against us and/or our subsidiaries with respect to transactions in which we and/or our subsidiaries acted as a lender, a financial advisor, a broker or acted in a related activity. Accruals are established for legal and other claims when it becomes probable we will incur an expense and the amount can be reasonably estimated. We involve internal and external experts, such as attorneys, consultants and other professionals, in assessing probability and in estimating any amounts involved. Throughout the life of a contingency, we or our experts may learn of additional information that can affect our assessments about probability or about the estimates of amounts involved. Changes in these assessments can lead to changes in recorded reserves. In addition, the actual costs of resolving these claims may be substantially higher or lower than the amounts reserved for those claims.
Results of Operation
Net Interest Income Net interest income (on a fully taxable equivalent basis) for 2004 totaled $52,907,000, $8,597,000 or 19.4 percent higher than for 2003. Net interest margin on a tax equivalent basis increased 32 basis points to 3.89 percent from 3.57 percent for 2002. The following details net interest income and margin results (on a tax equivalent basis) for the past five quarters:
Net Interest | Net Interest | |||||||||
(Dollars in thousands) | Income | Margin | ||||||||
Fourth quarter 2003 | $ | 11,858 | 3.70 | % | ||||||
First quarter 2004 | 12,467 | 3.84 | ||||||||
Second quarter 2004 | 12,784 | 3.84 | ||||||||
Third quarter 2004 | 13,498 | 3.97 | ||||||||
Fourth quarter 2004 | 14,158 | 3.88 | ||||||||
4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | ||||||||||||||||
2004 | 2004 | 2004 | 2004 | 2003 | ||||||||||||||||
Yield | 4.97% | 5.02% | 4.85% | 4.89% | 4.85% | |||||||||||||||
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residential mortgages were originated during the twelve months ended December 31, 2004, compared to $261 million during the same period in 2003. Residential production was disrupted in September 2004 by two hurricanes that directly hit the Company’s markets and resulted in fewer applications processed. Lower production ($42.1 million) and fee income ($347,000) was recorded in the fourth quarter 2004.
4th Quarter | 3rd Quarter | 2nd Quarter | 1st Quarter | 4th Quarter | ||||||||||||||||
2004 | 2004 | 2004 | 2004 | 2003 | ||||||||||||||||
Rate | 1.44% | 1.37% | 1.30% | 1.34% | 1.46% | |||||||||||||||
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through a pay fixed receive floating rate swap through Citigroup. The swap matures on the same date as the $25.0 million borrowing (January 30, 2006). The Company swapped floating rate (three-month LIBOR) to a fixed rate payment (3.12 percent). Interest expense on other borrowings was higher by $21,000 during 2004 as a result of these last two swaps (aggregated).
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an increase in average balances maintained by customers utilizing sweep arrangements and the new FHLB borrowing.
Noninterest Income
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higher by $54.9 million or 41.9 percent year over year, and has also resulted in increased merchant income.
Noninterest Expenses
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2002 was in subcontractor fees paid to marine finance solicitors, which increased by $500,000 from 2002, principally due to the addition of sales staff in California. Higher insurance premiums (for directors and officers liability and blanket bond coverage) occurred as well in 2003, a direct result of financial scandals (Enron, WorldCom, etc.). Remaining unchanged for a number of years, retainers for directors and meeting fees were also increased in 2003.
Interest Rate Sensitivity Fluctuations in rates may result in changes in the fair market value of the Company’s financial instruments, cash flows and net interest income. This risk is managed using simulation modeling to calculate the most likely interest rate risk utilizing estimated loan and deposit growth. The objective is to optimize the Company’s financial position, liquidity, and net interest income while limiting their volatility.
Market RiskMarket risk refers to potential losses arising from changes in interest rates, and other relevant market rates or prices.
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While an instantaneous and severe shift in interest rates is used in this analysis to provide an estimate of exposure under an extremely adverse scenario, a gradual shift in interest rates would have a much more modest impact. Since EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon, i.e., the next fiscal year. Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changing product spreads that could mitigate the adverse impact of changes in interest rates.
Liquidity Risk ManagementLiquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liability, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure the ability to fund operations cost-effectively and to meet current and future potential obligations such as loan commitments and unexpected deposit outflows.
Contractual Commitments
December 31, 2004 | ||||||||||||||||
Over One Year | ||||||||||||||||
One Year | Through | Over | ||||||||||||||
(In thousands) | Total | or Less | Three Years | Three Years | ||||||||||||
Deposit maturities | $ | 1,372,466 | $ | 1,221,671 | $141,850 | $ 8,945 | ||||||||||
Short-term borrowings | 86,919 | 86,919 | ||||||||||||||
Long-term debt | 39,912 | 25,000 | 14,912 | |||||||||||||
Operating leases | 22,705 | 1,970 | 4,444 | 16,291 | ||||||||||||
$ | 1,522,002 | $ | 1,310,560 | $171,294 | $40,148 | |||||||||||
Funding sources primarily include customer-based core deposits, purchased funds, and collateralized borrowings, cash flows from operations, and asset securitizations and sales.
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The Company believes its liquidity to be strong and stable.
Off-Balance Sheet TransactionsIn the normal course of business, we engage in a variety of financial transactions that, under generally accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying elements of market, credit and liquidity risk.
Income TaxesIncome taxes as a percentage of income before taxes were 35.1 percent for 2004, compared to 34.6 percent in 2003 and 38.8 percent for 2002. Beginning in January 2003 the Company formed a subsidiary and transferred certain real estate assets to a real estate investment trust (REIT). As a result, the Company’s state income tax liability was reduced.
Financial ConditionTotal assets increased $262,053,000 or 19.4 percent to $1,615,876,000 in 2004, after increasing $72,526,000 or 5.7 percent to $1,353,823,000 in 2003.
Capital ResourcesTable 8 summarizes the Company’s capital position and selected ratios. The Company’s ratio of shareholders’ equity to period end total assets was 6.70 percent at December 31, 2004, compared with 7.69 percent one year earlier. The Company manages the size of its equity through a program of share repurchases of its outstanding Common stock. A total of 778,000 stock option shares are outstanding, of which 509,000 are exercisable; during 2004, 113,000 shares were exercised (see “Note H – Employee Benefits”). In treasury stock at December 31, 2004, there were 1,635,293 shares totaling $16,172,000, compared to 1,600,024 shares or $15,350,000 a year ago.
Loan Portfolio Table 9 shows total loans (net of unearned income) by category outstanding.
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loans increasing $13.0 million or 7.8 percent (annualized) and $44.7 million or 26.9 percent (annualized), respectively. Beginning in the third quarter 2003, the Company began selectively adding residential loans, primarily with adjustable rates, to its loan portfolio. As a result, sales of residential mortgage loans in 2004 were lower, with $78 million in loans sold from production totaling $224 million (compared to $188 million from production of $261 million in 2003). Loans continued to increase in each quarter during 2004, by $31.0 million or 17.5 percent (annualized) during the first quarter of 2004, $49.5 million or 26.8 percent (annualized) during the second quarter of 2004, $69.8 million or 35.4 percent (annualized) during the third quarter of 2004, and $40.4 million or 18.8 percent (annualized) during the fourth quarter of 2004. The response to the expansion in Palm Beach County continues to be very positive. At December 31, 2004, $134.7 million in loans are outstanding with a loan pipeline of approximately $122 million pending at year-end 2004. The Company anticipates loan balances to continue to increase prospectively and that the mix of consumer, commercial real estate and residential loans outstanding at December 31, 2004 will remain approximately unchanged going forward.
2004 | 2003 | |||||||||||||||||||||||
(In millions) | Funded | Unfunded | Total | Funded | Unfunded | Total | ||||||||||||||||||
Office buildings | $ 54.3 | $ 13.0 | $ 67.3 | $ 42.8 | $ 2.1 | $ 44.9 | ||||||||||||||||||
Retail trade | 43.5 | 6.0 | 49.5 | 39.5 | - | 39.5 | ||||||||||||||||||
Land development | 139.4 | 151.0 | 290.4 | 64.5 | 45.0 | 109.5 | ||||||||||||||||||
Industrial | 30.5 | 3.9 | 34.4 | 27.6 | 2.6 | 30.2 | ||||||||||||||||||
Healthcare | 25.8 | 0.4 | 26.2 | 26.5 | 2.7 | 29.2 | ||||||||||||||||||
Churches and educational facilities | 17.6 | 1.9 | 19.5 | 13.8 | 4.5 | 18.3 | ||||||||||||||||||
Recreation | 8.8 | - | 8.8 | 9.3 | - | 9.3 | ||||||||||||||||||
Multifamily | 16.8 | 4.7 | 21.5 | 7.5 | 8.3 | 15.8 | ||||||||||||||||||
Mobile home parks | 5.5 | - | 5.5 | 4.9 | - | 4.9 | ||||||||||||||||||
Land | 37.9 | 5.4 | 43.3 | 7.5 | 2.9 | 10.4 | ||||||||||||||||||
Lodging | 5.3 | - | 5.3 | 6.1 | - | 6.1 | ||||||||||||||||||
Restaurant | 3.4 | 0.1 | 3.5 | 1.8 | 0.1 | 1.9 | ||||||||||||||||||
Other | 57.5 | 2.7 | 60.2 | 52.0 | 2.3 | 54.3 | ||||||||||||||||||
Total | $446.3 | $189.1 | $635.4 | $303.8 | $70.5 | $374.3 | ||||||||||||||||||
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estate and $29,843,000 by residential real estate. All of the commercial real estate construction and land development loans are included in the table above. Some of the commercial real estate loans will convert to permanent financing as mortgages, while many of these loans will payoff, the source of repayment from the sale. Strong demand in the Company’s market area and the rate of absorption of new real estate product have provided the opportunity for growth in these type loans, with expectations in the near term that growth may continue, perhaps at a more moderate pace in 2005 as interest rates rise.
Deposits and Borrowings Total deposits increased $242,824,000 or 21.5 percent to $1,372,466,000 at December 31, 2004, compared to one year earlier. In comparison to 2002, deposits increased $99,102,000 or 9.6 percent in 2003 to $1,129,642,000. Certificates of deposits decreased $10,870,000 or 2.9 percent to $358,285,000 over the past twelve months, lower cost interest bearing deposits (NOW, savings and money markets deposits) increased $141,659,000 or 26.9 percent to $669,059,000, and noninterest bearing demand deposits increased $112,035,000 or 48.1 percent to $345,122,000. The Company’s success in marketing desirable products, in particular its new premium money market product during 2004, enhanced growth in lower cost interest bearing deposits. Growth in business demand deposits of $54,901,000 and personal demand deposits of $51,607,000 comprised most of the increase in noninterest bearing deposits.
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daily basis for investment purposes. The numbers of sweep repurchase accounts decreased from 111 a year ago to 104 at December 31, 2004. A fewer number of customers are maintaining larger balances.
Effects 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.
Securities Information related to yields, maturities, carrying values and unrealized gains (losses) of the Company’s securities is set forth in Tables 15-18.
Fourth Quarter Review Net income for the fourth quarter was $3.7 million or $0.24 diluted earnings per share, compared to $4.1 million or $0.26 diluted earnings
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per share in the third quarter of 2004 and $3.5 million or $0.22 diluted earnings per share in the fourth quarter of 2003. Earnings are on a restated basis (see “Restatement of Prior Period Financial Statements” and “Quarterly Financial Information”). Returns on average assets and equity were 0.97 percent and 13.38 percent for the fourth quarter of 2004, compared to 1.16 percent and 14.98 percent in the third quarter of 2004, and 1.03 percent and 13.07 percent in the fourth quarter of 2003.
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Table 1 – Condensed Income Statement*
(Tax equivalent basis) | 2004 | 2003 | 2002 | ||||||||||||
Net interest income | 3.72 | % | 3.39 | % | 3.80 | % | |||||||||
Provision for loan losses | 0.07 | 0.00 | 0.00 | ||||||||||||
Noninterest income | |||||||||||||||
Securities gains (losses) | 0.00 | (0.09 | ) | 0.04 | |||||||||||
Other | 1.30 | 1.60 | 1.51 | ||||||||||||
Noninterest expenses | 3.32 | 3.25 | 3.28 | ||||||||||||
Income before income taxes | 1.63 | 1.65 | 2.07 | ||||||||||||
Provision for income taxes including tax equivalent adjustment | 0.58 | 0.58 | 0.81 | ||||||||||||
Net Income | 1.05 | % | 1.07 | % | 1.26 | % | |||||||||
* As a Percent of Average Assets
Table 2 – Changes in Average Earning Assets
Increase/Decrease | Increase/Decrease | ||||||||||||||||||
(Dollars in thousands) | 2004 vs 2003 | 2003 vs 2002 | |||||||||||||||||
Securities: | |||||||||||||||||||
Taxable | $ | (17,016 | ) | (3.1 | )% | $ | 187,266 | 50.9 | % | ||||||||||
Nontaxable | (831 | ) | (29.5 | ) | (886 | ) | (23.9 | ) | |||||||||||
Federal funds sold and other short term investments | 12,413 | 195.5 | (25,794 | ) | (80.3 | ) | |||||||||||||
Loans, net | 121,310 | 17.9 | (70,597 | ) | (9.4 | ) | |||||||||||||
TOTAL | $ | 115,876 | 9.3 | % | $ | 89,989 | 7.8 | % | |||||||||||
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Table 3 – Rate/ Volume Analysis (on a Tax Equivalent Basis)
2004 vs 2003 | 2003 vs 2002 | ||||||||||||||||||||||||||||||||||
Due to Change in: | Due to Change in: | ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||
Amount of increase (decrease) | Volume | Rate | Mix | Total | Volume | Rate | Mix | Total | |||||||||||||||||||||||||||
EARNING ASSETS | |||||||||||||||||||||||||||||||||||
Securities | |||||||||||||||||||||||||||||||||||
Taxable | $ | (492 | ) | $ | 2,768 | $ | (85 | ) | $ | 2,191 | $ | 7,261 | $ | (3,633 | ) | $ | (1,848 | ) | $ | 1,780 | |||||||||||||||
NonTaxable | (66 | ) | (2 | ) | 1 | (67 | ) | (70 | ) | 1 | 0 | (69 | ) | ||||||||||||||||||||||
(558 | ) | 2,766 | (84 | ) | 2,124 | 7,191 | (3,632 | ) | (1,848 | ) | 1,711 | ||||||||||||||||||||||||
Federal funds sold and other short term investments | 137 | 29 | 57 | 223 | (422 | ) | (172 | ) | 138 | (456 | ) | ||||||||||||||||||||||||
Loans | 7,940 | (3,265 | ) | (584 | ) | 4,091 | (5,098 | ) | (5,063 | ) | 477 | (9,684 | ) | ||||||||||||||||||||||
TOTAL EARNING ASSETS | 7,519 | (470 | ) | (611 | ) | 6,438 | 1,671 | (8,867 | ) | (1,233 | ) | (8,429 | ) | ||||||||||||||||||||||
INTEREST BEARING LIABILITIES | |||||||||||||||||||||||||||||||||||
NOW (including Super NOW) | 55 | (45 | ) | (6 | ) | 4 | 50 | (241 | ) | (21 | ) | (212 | ) | ||||||||||||||||||||||
Savings deposits | 50 | (63 | ) | (3 | ) | (16 | ) | 48 | (615 | ) | (21 | ) | (588 | ) | |||||||||||||||||||||
Money market accounts | 424 | 241 | 49 | 714 | 357 | (1,079 | ) | (130 | ) | (852 | ) | ||||||||||||||||||||||||
Time deposits | (318 | ) | (1,462 | ) | 47 | (1,733 | ) | (526 | ) | (4,696 | ) | 165 | (5,057 | ) | |||||||||||||||||||||
211 | (1,329 | ) | 87 | (1,031 | ) | (71 | ) | (6,631 | ) | (7 | ) | (6,709 | ) | ||||||||||||||||||||||
Federal funds purchased and other short term borrowings | 59 | 187 | 20 | 266 | 104 | (130 | ) | (24 | ) | (50 | ) | ||||||||||||||||||||||||
Long Term Borrowings | (939 | ) | (694 | ) | 239 | (1,394 | ) | 1,340 | (775 | ) | (405 | ) | 161 | ||||||||||||||||||||||
TOTAL INTEREST BEARING LIABILITIES | (669 | ) | (1,836 | ) | 346 | (2,159 | ) | 1,373 | (7,536 | ) | (435 | ) | (6,598 | ) | |||||||||||||||||||||
NET INTEREST INCOME | $ | 8,188 | $ | 1,366 | $ | (957 | ) | $ | 8,597 | $ | 298 | $ | (1,331 | ) | $ | (798 | ) | $ | (1,831 | ) | |||||||||||||||
Table 4 – Changes in Average Interest Bearing Liabilities
Increase/Decrease | Increase/Decrease | |||||||||||||||||
(Dollars in thousands) | 2004 vs 2003 | 2003 vs 2002 | ||||||||||||||||
NOW | $ | 10,167 | 15.2 | % | $ | 5,362 | 8.7 | % | ||||||||||
Savings deposits | 9,205 | 6.0 | 5,019 | 3.4 | ||||||||||||||
Money market accounts | 57,225 | 20.2 | 30,553 | 12.1 | ||||||||||||||
Time deposits | (11,845 | ) | (3.2 | ) | (13,429 | ) | (3.5 | ) | ||||||||||
Federal funds purchased and other short term borrowings | 7,274 | 11.2 | 9,979 | 18.1 | ||||||||||||||
Other borrowings | (20,965 | ) | (34.4 | ) | 20,890 | 52.2 | ||||||||||||
TOTAL | $ | 51,061 | 5.1 | % | $ | 58,374 | 6.2 | % | ||||||||||
Table of Contents
36
Table 5 – Three Year Summary
2004 | 2003 | 2002 | |||||||||||||||||||||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | Average | Yield/ | ||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||||||||||||||||||
EARNING ASSETS | |||||||||||||||||||||||||||||||||||||||||||
Securities | |||||||||||||||||||||||||||||||||||||||||||
Taxable | $ | 538,391 | $ | 18,245 | 3.39 | % | $ | 555,407 | $ | 16,054 | 2.89 | % | $ | 368,141 | $ | 14,274 | 3.88 | % | |||||||||||||||||||||||||
Nontaxable | 1,987 | 156 | 7.85 | 2,818 | 223 | 7.91 | 3,704 | 292 | 7.88 | ||||||||||||||||||||||||||||||||||
540,378 | 18,401 | 3.41 | 558,225 | 16,277 | 2.92 | 371,845 | 14,566 | 3.92 | |||||||||||||||||||||||||||||||||||
Federal funds sold and other short term investments | 18,761 | 293 | 1.56 | 6,348 | 70 | 1.10 | 32,142 | 526 | 1.64 | ||||||||||||||||||||||||||||||||||
Loans2 | 799,649 | 48,491 | 6.06 | 678,339 | 44,400 | 6.55 | 748,936 | 54,084 | 7.22 | ||||||||||||||||||||||||||||||||||
TOTAL EARNING ASSETS | 1,358,788 | 67,185 | 4.94 | 1,242,912 | 60,747 | 4.89 | 1,152,923 | 69,176 | 6.00 | ||||||||||||||||||||||||||||||||||
Allowance for loan losses | (6,389 | ) | (6,407 | ) | (6,895 | ) | |||||||||||||||||||||||||||||||||||||
Cash and due from banks | 38,957 | 40,455 | 39,886 | ||||||||||||||||||||||||||||||||||||||||
Bank premises and equipment | 17,909 | 16,528 | 15,456 | ||||||||||||||||||||||||||||||||||||||||
Other assets | 13,727 | 12,333 | 13,096 | ||||||||||||||||||||||||||||||||||||||||
$ | 1,422,992 | $ | 1,305,821 | $ | 1,214,466 | ||||||||||||||||||||||||||||||||||||||
INTEREST BEARING LIABILITIES | |||||||||||||||||||||||||||||||||||||||||||
NOW | $ | 76,872 | 367 | 0.48 | % | $ | 66,705 | 363 | 0.54 | % | $ | 61,343 | 575 | 0.94 | % | ||||||||||||||||||||||||||||
Savings deposits | 162,113 | 819 | 0.51 | 152,908 | 835 | 0.55 | 147,889 | 1,423 | 0.96 | ||||||||||||||||||||||||||||||||||
Money market accounts | 340,295 | 2,811 | 0.83 | 283,070 | 2,097 | 0.74 | 252,517 | 2,949 | 1.17 | ||||||||||||||||||||||||||||||||||
Time deposits | 356,192 | 8,159 | 2.29 | 368,037 | 9,892 | 2.69 | 381,466 | 14,949 | 3.92 | ||||||||||||||||||||||||||||||||||
Federal funds purchased and other short term borrowings | 72,268 | 789 | 1.09 | 64,994 | 523 | 0.80 | 55,015 | 573 | 1.04 | ||||||||||||||||||||||||||||||||||
Other borrowings | 39,925 | 1,333 | 3.34 | 60,890 | 2,727 | 4.48 | 40,000 | 2,566 | 6.42 | ||||||||||||||||||||||||||||||||||
TOTAL INTEREST BEARING LIABILITIES | 1,047,665 | 14,278 | 1.36 | 996,604 | 16,437 | 1.65 | 938,230 | 23,035 | 2.46 | ||||||||||||||||||||||||||||||||||
Demand deposits | 260,229 | 201,921 | 174,154 | ||||||||||||||||||||||||||||||||||||||||
Other liabilities | 6,546 | 5,229 | 5,010 | ||||||||||||||||||||||||||||||||||||||||
1,314,440 | 1,203,754 | 1,117,394 | |||||||||||||||||||||||||||||||||||||||||
Shareholders’ equity | 108,552 | 102,067 | 97,072 | ||||||||||||||||||||||||||||||||||||||||
$ | 1,422,992 | $ | 1,305,821 | $ | 1,214,466 | ||||||||||||||||||||||||||||||||||||||
Interest expense as % of earning assets | 1.05 | % | 1.32 | % | 2.00 | % | |||||||||||||||||||||||||||||||||||||
Net interest income/yield on earning assets | $ | 52,907 | 3.89 | % | $ | 44,310 | 3.57 | % | $ | 46,141 | 4.00 | % | |||||||||||||||||||||||||||||||
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. |
Table of Contents
Table 6 – Noninterest Income
Year Ended | % Change | |||||||||||||||||||||
(Dollars in thousands) | 2004 | 2003 | 2002 | 04/03 | 03/02 | |||||||||||||||||
Service charges on deposit accounts | $ | 4,479 | $ | 4,907 | $ | 5,105 | (8.7 | )% | (3.9 | )% | ||||||||||||
Trust fees | 2,250 | 2,043 | 2,177 | 10.1 | (6.2 | ) | ||||||||||||||||
Mortgage banking fees | 1,824 | 4,423 | 3,364 | (58.8 | ) | 31.5 | ||||||||||||||||
Brokerage commissions and fees | 2,442 | 1,863 | 2,045 | 31.1 | (8.9 | ) | ||||||||||||||||
Marine finance fees | 2,997 | 3,161 | 1,408 | (5.2 | ) | 124.5 | ||||||||||||||||
Debit card income | 1,344 | 1,169 | 980 | 15.0 | 19.3 | |||||||||||||||||
Other deposit based EFT fees | 476 | 441 | 376 | 7.9 | 17.3 | |||||||||||||||||
Merchant income | 1,962 | 1,610 | 1,462 | 21.9 | 10.1 | |||||||||||||||||
Interest rate swap profits (losses) | (701 | ) | 0 | 0 | n/m | n/m | ||||||||||||||||
Other | 1,389 | 1,280 | 1,419 | 8.5 | (9.8 | ) | ||||||||||||||||
18,462 | 20,897 | 18,336 | (11.7 | ) | 14.0 | |||||||||||||||||
Securities gains (losses) | 44 | (1,172 | ) | 457 | n/m | n/m | ||||||||||||||||
TOTAL | $ | 18,506 | $ | 19,725 | $ | 18,793 | (6.2 | )% | 5.0 | % | ||||||||||||
n/m = not meaningful
Table 7 – Noninterest Expenses
Year Ended | % Change | |||||||||||||||||||||
(Dollars in thousands) | 2004 | 2003 | 2002 | 04/03 | 03/02 | |||||||||||||||||
Salaries and wages | $ | 19,119 | $ | 16,641 | $ | 15,761 | 14.9 | % | 5.6 | % | ||||||||||||
Employee benefits | 5,031 | 4,595 | 4,304 | 9.5 | 6.8 | |||||||||||||||||
Outsourced data processing costs | 5,716 | 5,265 | 4,795 | 8.6 | 9.8 | |||||||||||||||||
Telephone /data lines | 1,167 | 1,116 | 1,006 | 4.6 | 10.9 | |||||||||||||||||
Occupancy | 4,229 | 3,956 | 3,365 | 6.9 | 17.6 | |||||||||||||||||
Furniture and equipment | 1,919 | 1,739 | 1,989 | 10.4 | (12.6 | ) | ||||||||||||||||
Marketing | 2,465 | 2,119 | 2,036 | 16.3 | 4.1 | |||||||||||||||||
Legal and professional fees | 1,843 | 1,336 | 1,538 | 37.9 | (13.1 | ) | ||||||||||||||||
FDIC assessments | 171 | 163 | 173 | 4.9 | (5.8 | ) | ||||||||||||||||
Amortization of intangibles | 0 | 150 | 252 | n/m | (40.5 | ) | ||||||||||||||||
Other | 5,621 | 5,383 | 4,571 | 4.4 | 17.8 | |||||||||||||||||
TOTAL | $ | 47,281 | $ | 42,463 | $ | 39,790 | 11.4 | % | 6.7 | % | ||||||||||||
n/m = not meaningful
Table of Contents
38
Table 8 – Capital Resources
December 31 | |||||||||||||||
(Dollars in thousands) | 2004 | 2003 | 2002 | ||||||||||||
TIER 1 CAPITAL | |||||||||||||||
Common stock | $ | 1,710 | $ | 1,710 | $ | 1,555 | |||||||||
Additional paid in capital | 26,950 | 26,911 | 26,994 | ||||||||||||
Retained earnings | 101,501 | 95,336 | 89,960 | ||||||||||||
Restricted stock awards | (3,333 | ) | (1,947 | ) | 0 | ||||||||||
Treasury stock | (16,172 | ) | (15,350 | ) | (18,578 | ) | |||||||||
Valuation allowance | 0 | 0 | (15 | ) | |||||||||||
Intangibles | (2,650 | ) | (2,658 | ) | (2,840 | ) | |||||||||
TOTAL TIER 1 CAPITAL | 108,006 | 104,002 | 97,076 | ||||||||||||
TIER 2 CAPITAL | |||||||||||||||
Allowance for loan losses, as limited | 6,598 | 6,160 | 6,826 | ||||||||||||
TOTAL TIER 2 CAPITAL | 6,598 | 6,160 | 6,826 | ||||||||||||
TOTAL RISK-BASED CAPITAL | $ | 114,604 | $ | 110,162 | $ | 103,902 | |||||||||
Risk weighted assets | $ | 1,041,840 | $ | 797,352 | $ | 754,099 | |||||||||
Tier 1 risk based capital ratio | 10.36 | % | 13.04 | % | 12.87 | % | |||||||||
Total risk based capital ratio | 10.99 | 13.80 | 13.77 | ||||||||||||
Regulatory minimum | 8.00 | 8.00 | 8.00 | ||||||||||||
Tier 1 capital to adjusted total assets | 7.10 | 7.81 | 7.99 | ||||||||||||
Regulatory minimum | 4.00 | 4.00 | 4.00 | ||||||||||||
Shareholders’ equity to assets | 6.70 | 7.69 | 7.86 | ||||||||||||
Average shareholders’ equity to average total assets | 7.63 | 7.82 | 7.99 | ||||||||||||
Table of Contents
Table 9 – Loans Outstanding
December 31 | ||||||||||||||
(In thousands) | 2004 | 2003 | 2002 | |||||||||||
Construction and land development | $ | 252,329 | $ | 107,315 | $ | 77,909 | ||||||||
Real estate mortgage | ||||||||||||||
Residential real estate | ||||||||||||||
Adjustable | 110,934 | 108,863 | 106,070 | |||||||||||
Fixed rate | 61,574 | 75,226 | 119,013 | |||||||||||
Home equity mortgages | 60,090 | 48,986 | 41,436 | |||||||||||
Home equity lines | 14,337 | 10,950 | 12,219 | |||||||||||
246,935 | 244,025 | 278,738 | ||||||||||||
Commercial real estate | 251,757 | 226,366 | 199,385 | |||||||||||
498,692 | 470,391 | 478,123 | ||||||||||||
Commercial and financial | 66,240 | 46,310 | 40,491 | |||||||||||
Installment loans to individuals | ||||||||||||||
Automobiles and trucks | 29,789 | 36,189 | 45,268 | |||||||||||
Marine loans | 38,287 | 28,098 | 23,032 | |||||||||||
Other | 13,755 | 20,225 | 23,007 | |||||||||||
81,831 | 84,512 | 91,307 | ||||||||||||
Other loans | 455 | 264 | 331 | |||||||||||
TOTAL | $ | 899,547 | $ | 708,792 | $ | 688,161 | ||||||||
Table 10 – Loan Maturity Distribution
December 31, 2004 | |||||||||||||
Commercial, | Construction | ||||||||||||
Financial & | and Land | ||||||||||||
(In thousands) | Agricultural | Development | Total | ||||||||||
In one year or less | $ | 20,226 | $ | 158,277 | $ | 178,503 | |||||||
After one year but within five years: | |||||||||||||
Interest rates are floating or adjustable | 8,615 | 87,905 | 96,520 | ||||||||||
Interest rates are fixed | 15,833 | 5,985 | 21,818 | ||||||||||
In five years or more: | |||||||||||||
Interest rates are floating or adjustable | 9,554 | 0 | 9,554 | ||||||||||
Interest rates are fixed | 12,012 | 162 | 12,174 | ||||||||||
TOTAL | $ | 66,240 | $ | 252,329 | $ | 318,569 | |||||||
Table 11 – Maturity of Certificates of Deposit of $100,000 or More
December 31 | ||||||||||||||||||
% of | % of | |||||||||||||||||
(Dollars in thousands) | 2004 | Total | 2003 | Total | ||||||||||||||
Maturity Group: | ||||||||||||||||||
Under 3 Months | $ | 27,458 | 22.9 | % | $ | 27,376 | 25.8 | % | ||||||||||
3 to 6 Months | 16,936 | 14.1 | 13,450 | 12.6 | ||||||||||||||
6 to 12 Months | 29,931 | 24.9 | 23,768 | 22.4 | ||||||||||||||
Over 12 Months | 45,772 | 38.1 | 41,657 | 39.2 | ||||||||||||||
TOTAL | $ | 120,097 | 100.0 | % | $ | 106,251 | 100.0 | % | ||||||||||
Table of Contents
40
Table 12 – Summary of Loan Loss Experience
Year Ended December 31 | |||||||||||||||||||||||
(Dollars in thousands) | 2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||
Beginning balance | $ | 6,160 | $ | 6,826 | $ | 7,034 | $ | 7,218 | $ | 6,870 | |||||||||||||
Provision for loan losses | 1,000 | 0 | 0 | 0 | 600 | ||||||||||||||||||
Charge offs: | |||||||||||||||||||||||
Commercial and financial | 591 | 646 | 152 | 32 | 98 | ||||||||||||||||||
Consumer | 162 | 320 | 371 | 395 | 432 | ||||||||||||||||||
Commercial real estate | 0 | 78 | 6 | 27 | 35 | ||||||||||||||||||
Residential real estate | 0 | 9 | 2 | 2 | 78 | ||||||||||||||||||
TOTAL CHARGE OFFS | 753 | 1,053 | 531 | 456 | 643 | ||||||||||||||||||
Recoveries: | |||||||||||||||||||||||
Commercial and financial | 41 | 77 | 36 | 54 | 93 | ||||||||||||||||||
Consumer | 135 | 192 | 261 | 182 | 226 | ||||||||||||||||||
Commercial real estate | 15 | 108 | 2 | 22 | 39 | ||||||||||||||||||
Residential real estate | 0 | 10 | 24 | 14 | 33 | ||||||||||||||||||
TOTAL RECOVERIES | 191 | 387 | 323 | 272 | 391 | ||||||||||||||||||
Net loan charge offs | 562 | 666 | 208 | 184 | 252 | ||||||||||||||||||
ENDING BALANCE | $ | 6,598 | $ | 6,160 | $ | 6,826 | $ | 7,034 | $ | 7,218 | |||||||||||||
Loans outstanding at end of year* | $ | 899,547 | $ | 708,792 | $ | 688,161 | $ | 785,027 | $ | 844,546 | |||||||||||||
Ratio of allowance for loan losses to loans outstanding at end of year | 0.73 | % | 0.87 | % | 0.99 | % | 0.90 | % | 0.85 | % | |||||||||||||
Daily average loans outstanding* | $ | 799,649 | $ | 678,339 | $ | 748,936 | $ | 831,093 | $ | 820,429 | |||||||||||||
Ratio of net charge offs to average loans outstanding | 0.07 | % | 0.10 | % | 0.03 | % | 0.02 | % | 0.03 | % | |||||||||||||
* | Net of unearned income. |
Table 13 – Allowance for Loan Losses
December 31 | ||||||||||||||||||||||
(Dollars in thousands) | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||
ALLOCATION BY LOAN TYPE | ||||||||||||||||||||||
Commercial and financial loans | $ | 1,339 | $ | 786 | $ | 850 | $ | 738 | $ | 844 | ||||||||||||
Real estate loans | 4,395 | 4,353 | 4,745 | 4,924 | 4,970 | |||||||||||||||||
Installment loans | 864 | 1,021 | 1,231 | 1,372 | 1,404 | |||||||||||||||||
TOTAL | $ | 6,598 | $ | 6,160 | $ | 6,826 | $ | 7,034 | $ | 7,218 | ||||||||||||
YEAR END LOAN TYPES AS A PERCENT OF TOTAL LOANS | ||||||||||||||||||||||
Commercial and financial loans | 7.4 | % | 6.6 | % | 5.9 | % | 4.7 | % | 4.7 | % | ||||||||||||
Real estate loans | 83.5 | 81.5 | 80.8 | 82.1 | 84.6 | |||||||||||||||||
Installment loans | 9.1 | 11.9 | 13.3 | 13.2 | 10.7 | |||||||||||||||||
TOTAL | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||
Table of Contents
Table 14 – Nonperforming Assets
December 31 | ||||||||||||||||||||||
(Dollars in thousands) | 2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||||||||
Nonaccrual loans1 | $ | 1,447 | $ | 1,091 | $ | 2,241 | $ | 2,423 | $ | 2,099 | ||||||||||||
Renegotiated loans | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||
Other real estate owned | 0 | 1,954 | 8 | 119 | 346 | |||||||||||||||||
TOTAL NONPERFORMING ASSETS | $ | 1,447 | $ | 3,045 | $ | 2,249 | $ | 2,542 | $ | 2,445 | ||||||||||||
Amount of loans outstanding at end of year2 | $ | 899,547 | $ | 708,792 | $ | 688,161 | $ | 785,027 | $ | 844,546 | ||||||||||||
Ratio of total nonperforming assets to loans outstanding and other real estate owned at end of period | 0.16 | % | 0.43 | % | 0.33 | % | 0.32 | % | 0.29 | % | ||||||||||||
Accruing loans past due 90 days or more | $ | 32 | $ | 8 | $ | 0 | $ | 134 | $ | 108 | ||||||||||||
1. | Interest income that could have been recorded during 2004 and 2003 related to nonaccrual loans was $39,000 and $106,000, respectively, none of which was included in interest income or net income. All nonaccrual loans are secured. |
2. | Net of unearned income. |
Table 15 – Securities Held For Sale
December 31 | |||||||||||||||||||
Amortized | Fair | Unrealized | Unrealized | ||||||||||||||||
(In thousands) | Cost | Value | Gains | Losses | |||||||||||||||
U.S. Treasury and other U.S. government agencies and corporations | |||||||||||||||||||
2004 | $ | 20,934 | $ | 20,656 | $ | 0 | $ | (278 | ) | ||||||||||
2003 | 1,002 | 1,002 | 0 | 0 | |||||||||||||||
Mortgage-backed securities | |||||||||||||||||||
2004 | 369,699 | 366,806 | 275 | (3,168 | ) | ||||||||||||||
2003 | 480,775 | 477,018 | 663 | (4,420 | ) | ||||||||||||||
Other | |||||||||||||||||||
2004 | 7,745 | 7,745 | 0 | 0 | |||||||||||||||
2003 | 6,203 | 6,203 | 0 | 0 | |||||||||||||||
Total Securities Held For Sale | |||||||||||||||||||
2004 | $ | 398,378 | $ | 395,207 | $ | 275 | $ | (3,446 | ) | ||||||||||
2003 | 487,980 | 484,223 | 663 | (4,420 | ) | ||||||||||||||
Table of Contents
42
Table 16 – Securities Held For Investment
December 31 | |||||||||||||||||||
Amortized | Fair | Unrealized | Unrealized | ||||||||||||||||
(In thousands) | Cost | Value | Gains | Losses | |||||||||||||||
U.S. Treasury and other U.S. government agencies and corporations | |||||||||||||||||||
2004 | $ | 4,999 | $ | 4,906 | $ | 0 | $ | (93 | ) | ||||||||||
2003 | 4,998 | 4,933 | 0 | (65 | ) | ||||||||||||||
Mortgage-backed securities | |||||||||||||||||||
2004 | 192,128 | 192,018 | 464 | (574 | ) | ||||||||||||||
2003 | 73,585 | 72,392 | 140 | (1,333 | ) | ||||||||||||||
Obligations of states and political subdivisions | |||||||||||||||||||
2004 | 1,424 | 1,518 | 94 | 0 | |||||||||||||||
2003 | 2,283 | 2,416 | 133 | 0 | |||||||||||||||
Total Securities Held For Investment | |||||||||||||||||||
2004 | $ | 198,551 | $ | 198,442 | $ | 558 | $ | (667 | ) | ||||||||||
2003 | 80,866 | 79,741 | 273 | (1,398 | ) | ||||||||||||||
Table 17 – Maturity Distribution of Securities Held For Investment
December 31, 2004 | ||||||||||||||||||||||||||||||||
No | Average | |||||||||||||||||||||||||||||||
1 Year | 1-5 | 5-10 | After 10 | Contractual | Maturity | |||||||||||||||||||||||||||
(Dollars in thousands) | Or Less | Years | Years | Years | Maturity | Total | In Years | |||||||||||||||||||||||||
AMORTIZED COST | ||||||||||||||||||||||||||||||||
U.S. Treasury and other U.S. government agencies and corporations | $ | 4,999 | $ | 4,999 | 1.48 | |||||||||||||||||||||||||||
Mortgage-backed securities | $ | 10,197 | 168,522 | $ | 13,409 | 192,128 | 3.18 | |||||||||||||||||||||||||
Obligations of states and political subdivisions | 225 | 207 | 992 | 1,424 | 7.17 | |||||||||||||||||||||||||||
Total Securities Held For Investment | $ | 10,422 | $ | 173,728 | $ | 14,401 | $ | 0 | $ | 0 | $ | 198,551 | 3.17 | |||||||||||||||||||
FAIR VALUE | ||||||||||||||||||||||||||||||||
U.S. Treasury and other U.S. government agencies and corporations | $ | 4,906 | $ | 4,906 | ||||||||||||||||||||||||||||
Mortgage-backed securities | $ | 10,225 | 168,467 | $ | 13,326 | 192,018 | ||||||||||||||||||||||||||
Obligations of states and political subdivisions | 228 | 222 | 1,068 | 1,518 | ||||||||||||||||||||||||||||
Total Securities Held For Investment | $ | 10,453 | $ | 173,595 | $ | 14,394 | $ | 0 | $ | 0 | $ | 198,442 | ||||||||||||||||||||
WEIGHTED AVERAGE YIELD (FTE) | ||||||||||||||||||||||||||||||||
U.S. Treasury and other U.S. government agencies and corporations | 1.87 | % | 1.87 | % | ||||||||||||||||||||||||||||
Mortgage-backed securities | 3.85 | % | 4.40 | % | 3.97 | % | 4.34 | % | ||||||||||||||||||||||||
Obligations of states and political subdivisions | 7.53 | % | 8.46 | % | 7.69 | % | 7.78 | % | ||||||||||||||||||||||||
Total Securities Held For Investment | 3.93 | % | 4.33 | % | 4.23 | % | 4.30 | % | ||||||||||||||||||||||||
Table of Contents
Table 18 – Maturity Distribution of Securities Held For Sale
December 31, 2004 | |||||||||||||||||||||||||||||||
After | No | Average | |||||||||||||||||||||||||||||
1 Year | 1-5 | 5-10 | 10 | Contractual | Maturity | ||||||||||||||||||||||||||
(Dollars in thousands) | Or Less | Years | Years | Years | Maturity | Total | In Years | ||||||||||||||||||||||||
AMORTIZED COST | |||||||||||||||||||||||||||||||
U.S. Treasury and other U.S. government agencies and corporations | $ | 1,990 | $ | 18,944 | $ | 20,934 | 0.23 | ||||||||||||||||||||||||
Mortgage-backed securities | 59,004 | 310,630 | $ | 65 | 369,699 | 1.93 | |||||||||||||||||||||||||
Other | 0 | 0 | 0 | $ | 7,745 | 7,745 | * | ||||||||||||||||||||||||
Total Securities Held For Sale | $ | 60,994 | $ | 329,574 | $ | 65 | $ | 0 | $ | 7,745 | $ | 398,378 | 1.84 | ||||||||||||||||||
FAIR VALUE | |||||||||||||||||||||||||||||||
U.S. Treasury and other U.S. government agencies and corporations | $ | 1,989 | $ | 18,667 | $ | 20,656 | |||||||||||||||||||||||||
Mortgage-backed securities | 58,477 | 308,264 | $ | 65 | 366,806 | ||||||||||||||||||||||||||
Other | 0 | 0 | 0 | $ | 7,745 | 7,745 | |||||||||||||||||||||||||
Total Securities Held For Sale | $ | 60,466 | $ | 326,931 | $ | 65 | $ | 0 | $ | 7,745 | $ | 395,207 | |||||||||||||||||||
WEIGHTED AVERAGE YIELD (FTE) | |||||||||||||||||||||||||||||||
U.S. Treasury and other U.S. government agencies and corporations | 2.01 | % | 2.89 | % | 2.81 | % | |||||||||||||||||||||||||
Mortgage-backed securities | 2.97 | % | 3.11 | % | 5.88 | % | 3.09 | % | |||||||||||||||||||||||
Other | 3.32 | % | 3.32 | % | |||||||||||||||||||||||||||
Total Securities Held For Sale | 2.94 | % | 3.10 | % | 5.88 | % | 3.32 | % | 3.08 | % | |||||||||||||||||||||
* | Other Securities excluded from calculated average for total securities |
Table 19 – Interest Rate Sensitivity Analysis1
December 31, 2004 | ||||||||||||||||||||||
(Dollars in thousands) | 0-3 Months | 4-12 Months | 1-5 Years | Over 5 Years | Total | |||||||||||||||||
Federal funds sold and interest bearing deposits | $ | 44,758 | $ | - | $ | - | $ | - | $ | 44,758 | ||||||||||||
Securities2 | 174,525 | 132,883 | 252,860 | 36,661 | 596,929 | |||||||||||||||||
Loans3 | 311,274 | 148,221 | 378,566 | 60,039 | 898,100 | |||||||||||||||||
Earning assets | 530,557 | 281,104 | 631,426 | 96,700 | 1,539,787 | |||||||||||||||||
Savings deposits4 | 669,059 | - | - | - | 669,059 | |||||||||||||||||
Certificates of deposit | 75,653 | 131,837 | 147,834 | 2,961 | 358,285 | |||||||||||||||||
Borrowings | 111,919 | - | 14,912 | - | 126,831 | |||||||||||||||||
Interest bearing liabilities | 856,631 | 131,837 | 162,746 | 2,961 | 1,154,175 | |||||||||||||||||
Interest rate swaps | (44,000 | ) | 5,500 | 38,500 | - | - | ||||||||||||||||
Interest sensitivity gap | $ | (370,074 | ) | $ | 154,767 | $ | 507,180 | $ | 93,739 | $ | 385,612 | |||||||||||
Cumulative gap | $ | (370,074 | ) | $ | (215,307 | ) | $ | 291,873 | $ | 385,612 | ||||||||||||
Cumulative gap to total earning assets (%) | (24.0 | ) | (14.0 | ) | 19.0 | 25.0 | ||||||||||||||||
Earning assets to interest bearing liabilities (%) | 61.9 | 213.2 | 388.0 | 3,265.8 | ||||||||||||||||||
1. | The repricing dates may differ from maturity dates for certain assets due to prepayment assumptions. |
2. | Securities are stated at amortized cost. |
3. | Excludes nonaccrual loans. |
4. | This category is comprised of NOW, savings and money market deposits. If NOW and savings deposits (totaling $205,439) were deemed repriceable in “4-12 months”, the interest sensitivity gap and cumulative gap would be $164,635 indicating 10.7% of earning assets and 81.5% of earning assets to interest bearing liabilities for the “0-3 months” category. |
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44
Table 20 – Risk Management Derivative Financial Instruments
December 31, 2004 | ||||||||||||||||||||||||||
Average | ||||||||||||||||||||||||||
Notional | Unrealized | Unrealized | Ineffective- | Maturity | ||||||||||||||||||||||
(Dollars in thousands) | Amount | Gains | Losses | Equity | ness | in Years | ||||||||||||||||||||
LIABILITY HEDGES | ||||||||||||||||||||||||||
Cash flow hedges | ||||||||||||||||||||||||||
Interest rate swaps – pay fixed | $ | 25,000 | $ | - | $ | 13 | $ | 8 | $ | - | 1.08 | |||||||||||||||
Fair value hedges | ||||||||||||||||||||||||||
Interest rate swaps – receive fixed | 15,000 | - | 88 | - | - | 4.87 | ||||||||||||||||||||
Interest rate swaps Interest rate swaps – receive fixed | 54,000 | - | 701 | - | - | 2.14 | ||||||||||||||||||||
Total | $ | 94,000 | $ | - | $ | 802 | $ | 8 | - | 2.29 | ||||||||||||||||
Table 21 – Risk Management Derivative Financial Instruments – Expected Maturities
December 31, 2004 | ||||||||||||||||||||||
1 Year | 1 - 2 | 2 - 5 | Over 5 | |||||||||||||||||||
(Dollars in thousands) | or Less | Years | Years | Years | Total | |||||||||||||||||
CASH FLOW LIABILITY HEDGES | ||||||||||||||||||||||
Notional Amount – Swaps Pay Fixed | - | $ | 25,000 | - | - | $ | 25,000 | |||||||||||||||
Weighted average receive rate | - | 2.13 | % | - | - | 2.13 | % | |||||||||||||||
Weighted average pay rate | - | 3.12 | % | - | - | 3.12 | % | |||||||||||||||
Unrealized gain (loss) | - | $ | (13 | ) | - | - | $ | (13 | ) | |||||||||||||
FAIR VALUE LIABILITY ECONOMIC HEDGES | ||||||||||||||||||||||
Notional Amount – Swaps Receive Fixed | - | - | - | $ | 15,000 | $ | 15,000 | |||||||||||||||
Weighted average receive rate | - | - | - | 6.10 | % | 6.10 | % | |||||||||||||||
Weighted average pay rate | - | - | - | 4.58 | % | 4.58 | % | |||||||||||||||
Unrealized gain (loss) | - | - | - | $ | (88 | ) | $ | (88 | ) | |||||||||||||
INTEREST RATE SWAP | ||||||||||||||||||||||
Notional Amount – Swaps Receive Fixed | $5,500 | $ | 6,000 | $ | 42,500 | - | $ | 54,000 | ||||||||||||||
Weighted average receive rate | 2.86 | % | 2.86 | % | 2.86 | % | - | 2.86 | % | |||||||||||||
Table of Contents
50
Selected Quarterly Information
Consolidated Quarterly Average Balances, Yields and Rates1
2004 Quarters | |||||||||||||||||||||||||||
Fourth | Third | Second | |||||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | Average | Yield/ | ||||||||||||||||||||||
(Dollars in thousands) | Balance | Rate | Balance | Rate | Balance | Rate | |||||||||||||||||||||
EARNING ASSETS | |||||||||||||||||||||||||||
Securities | |||||||||||||||||||||||||||
Taxable | $ | 526,604 | 3.39 | % | $ | 518,637 | 3.49 | % | $ | 562,030 | 3.37 | % | |||||||||||||||
Nontaxable | 1,409 | 7.38 | 2,180 | 8.07 | 2,181 | 7.89 | |||||||||||||||||||||
TOTAL SECURITIES | 528,013 | 3.40 | 520,817 | 3.51 | 564,211 | 3.39 | |||||||||||||||||||||
Federal funds sold and other short term investments | 47,389 | 1.91 | 1,166 | 1.02 | 11,219 | 0.97 | |||||||||||||||||||||
Loans2 | 877,153 | 6.09 | 827,880 | 5.99 | 762,092 | 5.97 | |||||||||||||||||||||
TOTAL EARNING ASSETS | 1,452,552 | 4.97 | 1,349,863 | 5.02 | 1,337,522 | 4.85 | |||||||||||||||||||||
Allowance for loan losses | (6,594 | ) | (6,420 | ) | (6,339 | ) | |||||||||||||||||||||
Cash and due from banks | 45,680 | 34,787 | 38,348 | ||||||||||||||||||||||||
Bank premises and equipment | 18,879 | 18,408 | 17,365 | ||||||||||||||||||||||||
Other assets | 12,767 | 13,473 | 14,360 | ||||||||||||||||||||||||
$ | 1,523,284 | $ | 1,410,111 | $ | 1,401,256 | ||||||||||||||||||||||
INTEREST BEARING LIABILITIES | |||||||||||||||||||||||||||
NOW | $ | 84,639 | 0.52 | % | $ | 70,026 | 0.47 | % | $ | 78,409 | 0.46 | % | |||||||||||||||
Savings deposits | 166,779 | 0.50 | 159,258 | 0.51 | 162,803 | 0.51 | |||||||||||||||||||||
Money market accounts | 381,957 | 0.95 | 358,530 | 0.90 | 326,922 | 0.75 | |||||||||||||||||||||
Time deposits | 351,838 | 2.39 | 347,337 | 2.23 | 375,155 | 2.20 | |||||||||||||||||||||
Federal funds purchased and other short term borrowings | 73,931 | 1.53 | 68,020 | 1.15 | 69,184 | 0.84 | |||||||||||||||||||||
Other borrowings | 40,028 | 3.59 | 39,784 | 3.45 | 39,926 | 3.27 | |||||||||||||||||||||
TOTAL INTEREST BEARING LIABILITIES | 1,097,172 | 1.44 | 1,042,955 | 1.37 | 1,034,399 | 1.30 | |||||||||||||||||||||
Demand deposits | 308,654 | 250,871 | 252,435 | ||||||||||||||||||||||||
Other liabilities | 7,444 | 7,536 | 6,346 | ||||||||||||||||||||||||
TOTAL | 1,413,270 | 1,301,362 | 1,293,180 | ||||||||||||||||||||||||
Shareholders’ equity | 110,014 | 108,749 | 108,076 | ||||||||||||||||||||||||
$ | 1,523,284 | $ | 1,410,111 | $ | 1,401,256 | ||||||||||||||||||||||
Interest expense as % of earning assets | 1.09 | % | 1.06 | % | 1.00 | % | |||||||||||||||||||||
Net interest income as % of earning assets | 3.88 | 3.97 | 3.84 | ||||||||||||||||||||||||
1. | The tax equivalent adjustment is based on a 35% 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. |
Table of Contents
2003 Quarters | ||||||||||||||||||||||||||||||||||||||||
First | Fourth | Third | Second | First | ||||||||||||||||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | Average | Yield/ | |||||||||||||||||||||||||||||||
Balance | Rate | Balance | Rate | Balance | Rate | Balance | Rate | Balance | Rate | |||||||||||||||||||||||||||||||
$ | 546,639 | 3.30 | % | $ | 576,859 | 3.21 | % | $ | 575,915 | 2.56 | % | $ | 555,142 | 2.68 | % | $ | 512,781 | 3.15 | % | |||||||||||||||||||||
2,182 | 7.88 | 2,183 | 7.88 | 2,924 | 7.93 | 2,980 | 8.05 | 3,193 | 7.77 | |||||||||||||||||||||||||||||||
548,821 | 3.32 | 579,042 | 3.22 | 578,839 | 2.58 | 555,122 | 2.71 | 515,974 | 3.17 | |||||||||||||||||||||||||||||||
15,150 | 0.96 | 4,649 | 0.94 | 7,265 | 0.98 | 6,769 | 1.19 | 6,723 | 1.27 | |||||||||||||||||||||||||||||||
730,308 | 6.14 | 689,353 | 6.26 | 662,425 | 6.35 | 671,740 | 6.76 | 690,022 | 6.81 | |||||||||||||||||||||||||||||||
1,294,279 | 4.89 | 1,273,044 | 4.85 | 1,248,529 | 4.56 | 1,236,631 | 4.90 | 1,212,719 | 5.25 | |||||||||||||||||||||||||||||||
(6,200 | ) | (6,177 | ) | (6,123 | ) | (6,542 | ) | (6,795 | ) | |||||||||||||||||||||||||||||||
36,985 | 36,116 | 31,240 | 47,638 | 47,048 | ||||||||||||||||||||||||||||||||||||
16,969 | 16,781 | 16,858 | 16,339 | 16,122 | ||||||||||||||||||||||||||||||||||||
14,324 | 14,056 | 11,472 | 11,687 | 12,105 | ||||||||||||||||||||||||||||||||||||
$ | 1,356,357 | 1,333,820 | $ | 1,301,976 | $ | 1,305,753 | $ | 1,281,199 | ||||||||||||||||||||||||||||||||
$ | 74,402 | 0.46 | % | $ | 70,682 | 0.47 | % | $ | 61,928 | 0.47 | % | $ | 66,854 | 0.58 | % | $ | 67,373 | 0.66 | % | |||||||||||||||||||||
159,594 | 0.51 | 157,089 | 0.51 | 154,759 | 0.51 | 150,818 | 0.55 | 148,857 | 0.62 | |||||||||||||||||||||||||||||||
293,111 | 0.66 | 292,293 | 0.66 | 290,248 | 0.67 | 283,526 | 0.79 | 265,843 | 0.86 | |||||||||||||||||||||||||||||||
368,584 | 2.34 | 359,342 | 2.45 | 365,558 | 2.58 | 375,143 | 2.78 | 372,273 | 2.94 | |||||||||||||||||||||||||||||||
79,989 | 0.85 | 68,718 | 0.77 | 50,596 | 0.60 | 62,430 | 0.83 | 78,495 | 0.96 | |||||||||||||||||||||||||||||||
39,962 | 3.04 | 56,576 | 4.11 | 65,000 | 4.43 | 65,000 | 4.49 | 56,944 | 4.90 | |||||||||||||||||||||||||||||||
1,015,642 | 1.34 | 1,004,700 | 1.46 | 988,089 | 1.58 | 1,003,771 | 1.73 | 989,785 | 1.83 | |||||||||||||||||||||||||||||||
228,526 | 218,489 | 205,740 | 196,451 | 186,613 | ||||||||||||||||||||||||||||||||||||
4,839 | 5,633 | 6,069 | 4,406 | 4,787 | ||||||||||||||||||||||||||||||||||||
1,249,007 | 1,228,822 | 1,199,898 | 1,204,628 | 1,181,185 | ||||||||||||||||||||||||||||||||||||
107,350 | 104,998 | 102,078 | 101,125 | 100,014 | ||||||||||||||||||||||||||||||||||||
$ | 1,356,357 | $ | 1,333,820 | $ | 1,301,976 | $ | 1,305,753 | $ | 1,281,199 | |||||||||||||||||||||||||||||||
1.05 | % | 1.15 | % | 1.25 | % | 1.40 | % | 1.50 | % | |||||||||||||||||||||||||||||||
3.84 | 3.70 | 3.31 | 3.50 | 3.76 | ||||||||||||||||||||||||||||||||||||
Table of Contents
52
Selected Quarterly Information
Quarterly Consolidated Income Statement (Unaudited)
2004 Quarters “As restated” | 2003 Quarters | ||||||||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | Fourth | Third | Second | First | Fourth | Third | Second | First | |||||||||||||||||||||||||||
Net interest income: | |||||||||||||||||||||||||||||||||||
Interest income | $ | 18,108 | $ | 17,042 | $ | 16,086 | $ | 15,816 | $ | 15,528 | $ | 14,329 | $ | 15,073 | $ | 15,672 | |||||||||||||||||||
Interest expense | 3,981 | 3,580 | 3,334 | 3,383 | 3,703 | 3,940 | 4,317 | 4,477 | |||||||||||||||||||||||||||
Net interest income | 14,127 | 13,462 | 12,752 | 12,433 | 11,825 | 10,389 | 10,756 | 11,195 | |||||||||||||||||||||||||||
Provision for loan losses | 450 | 250 | 150 | 150 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||
Net interest income after provision for loan losses | 13,677 | 13,212 | 12,602 | 12,283 | 11,825 | 10,389 | 10,756 | 11,195 | |||||||||||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||||||||||||||
Service charges on deposit accounts | 1,077 | 1,201 | 1,094 | 1,107 | 1,209 | 1,279 | 1,202 | 1,217 | |||||||||||||||||||||||||||
Trust fees | 639 | 556 | 517 | 538 | 498 | 494 | 527 | 524 | |||||||||||||||||||||||||||
Mortgage banking fees | 347 | 523 | 472 | 482 | 464 | 1,098 | 1,223 | 1,638 | |||||||||||||||||||||||||||
Brokerage commissions and fees | 533 | 523 | 671 | 715 | 493 | 364 | 586 | 420 | |||||||||||||||||||||||||||
Marine finance fees | 600 | 640 | 994 | 763 | 592 | 903 | 859 | 807 | |||||||||||||||||||||||||||
Debit Card income | 347 | 348 | 351 | 298 | 259 | 301 | 320 | 289 | |||||||||||||||||||||||||||
Other deposit based EFT fees | 123 | 108 | 117 | 128 | 114 | 106 | 105 | 116 | |||||||||||||||||||||||||||
Merchant income | 454 | 503 | 540 | 465 | 395 | 405 | 405 | 405 | |||||||||||||||||||||||||||
Other income | 338 | 428 | 314 | 309 | 205 | 347 | 368 | 360 | |||||||||||||||||||||||||||
Interest rate swap profit (losses) | (441 | ) | 330 | (1,224 | ) | 634 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||
Securities gains (losses) | 18 | 16 | (46 | ) | 56 | 0 | (4 | ) | (11 | ) | (1,157 | ) | |||||||||||||||||||||||
Total noninterest income | 4,035 | 5,176 | 3,800 | 5,495 | 4,229 | 5,293 | 5,584 | 4,619 | |||||||||||||||||||||||||||
Noninterest expenses: | |||||||||||||||||||||||||||||||||||
Salaries and wages | 5,007 | 5004 | 4,609 | 4,499 | 3,995 | 4,214 | 4,273 | 4,159 | |||||||||||||||||||||||||||
Employee benefits | 1,080 | 1,288 | 1,216 | 1,447 | 1,044 | 1,123 | 1,212 | 1,216 | |||||||||||||||||||||||||||
Outsourced data processing costs | 1,380 | 1,451 | 1,484 | 1,401 | 1,297 | 1,367 | 1,315 | 1,286 | |||||||||||||||||||||||||||
Occupancy | 1,014 | 1,093 | 1,046 | 1,076 | 1,009 | 977 | 976 | 994 | |||||||||||||||||||||||||||
Furniture and equipment | 439 | 500 | 497 | 483 | 362 | 451 | 427 | 499 | |||||||||||||||||||||||||||
Marketing | 630 | 582 | 603 | 650 | 559 | 492 | 518 | 550 | |||||||||||||||||||||||||||
Legal and professional fees | 806 | 375 | 372 | 290 | 219 | 339 | 370 | 408 | |||||||||||||||||||||||||||
FDIC assessments | 45 | 42 | 43 | 41 | 37 | 44 | 41 | 41 | |||||||||||||||||||||||||||
Amortization of intangibles | 0 | 0 | 0 | 0 | 0 | 24 | 63 | 63 | |||||||||||||||||||||||||||
Other | 1,706 | 1,692 | 1,750 | 1,640 | 1,593 | 1,637 | 1,610 | 1,659 | |||||||||||||||||||||||||||
Total noninterest expenses | 12,107 | 12,027 | 11,620 | 11,527 | 10,115 | 10,668 | 10,805 | 10,875 | |||||||||||||||||||||||||||
Income before income taxes | 5,605 | 6,361 | 4,782 | 6,251 | 5,939 | 5,014 | 5,535 | 4,939 | |||||||||||||||||||||||||||
Provision for income taxes | 1,905 | 2,266 | 1,692 | 2,214 | 2,111 | 1,599 | 1,985 | 1,716 | |||||||||||||||||||||||||||
Net income | $ | 3,700 | $ | 4,095 | $ | 3,090 | $ | 4,037 | $ | 3,828 | $ | 3,415 | $ | 3,550 | $ | 3,233 | |||||||||||||||||||
PER COMMON SHARE DATA | |||||||||||||||||||||||||||||||||||
Net income diluted | $ | 0.24 | $ | 0.26 | $ | 0.20 | $ | 0.25 | $ | 0.24 | $ | 0.22 | $ | 0.23 | $ | 0.21 | |||||||||||||||||||
Net income basic | 0.24 | 0.27 | 0.20 | 0.26 | 0.25 | 0.22 | 0.23 | 0.21 | |||||||||||||||||||||||||||
Cash dividends declared: | |||||||||||||||||||||||||||||||||||
Common stock | 0.14 | 0.14 | 0.13 | 0.13 | 0.13 | 0.13 | 0.10 | 0.10 | |||||||||||||||||||||||||||
Market price common stock: | |||||||||||||||||||||||||||||||||||
Low close | 20.000 | 18.850 | 18.510 | 17.740 | 16.670 | 13.851 | 14.864 | 16.145 | |||||||||||||||||||||||||||
High close | 23.900 | 22.020 | 21.350 | 21.199 | 18.100 | 18.600 | 17.817 | 18.091 | |||||||||||||||||||||||||||
Bid price at end of period | 22.250 | 21.360 | 20.930 | 20.700 | 17.350 | 17.400 | 15.664 | 17.627 | |||||||||||||||||||||||||||
Table of Contents
Report of Management’s Assessment of Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal controls over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Table of Contents
46
The Board of Directors and Shareholders
We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, that Seacoast Banking Corporation of Florida and subsidiaries (the Company) did not maintain effective internal control over financial reporting as of December 31, 2004, resulting from the absence of controls designed to ensure that the documentation required by generally accepted accounting principles at the inception of a derivative transaction is properly maintained for the term of the respective derivative financial instrument, based on criteria established inInternal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management’s assessment: As of December 31, 2004, in relation to accounting for derivative instruments under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Financial Instruments and Hedging Activities,” the Company did not have controls designed to ensure that the documentation required by generally accepted accounting principles at the inception of a derivative transaction is properly maintained for the term of the respective derivative financial instrument. As a result of this deficiency and the resulting errors in accounting for derivative financial instruments, previously reported 2004 interim financial information was restated. These restatements were required to properly reflect changes in the estimated fair value of certain derivative financial instruments as a component of earnings in the period of change in estimated fair value.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2004, and the related consolidated statements of income, shareholders’ equity and cash flows for the year then ended. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2004 consolidated financial statements, and this report does not affect
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our report dated March 9, 2005, which expressed an unqualified opinion on those consolidated financial statements.
In our opinion, management’s assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established inInternal Control – Integrated Frameworkissued by the COSO. Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established inInternal Control – Integrated Frameworkissued by the COSO.
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48
The Board of Directors and Shareholders
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated 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, 2004, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on criteria established inInternal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 9, 2005 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.
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Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors and Shareholders
In our opinion, the accompanying consolidated balance sheet as of December 31, 2003 and the related consolidated statements of income, shareholders equity and of cash flows for each of the two years in the period ended December 31, 2003 present fairly, in all material respects, the financial position, results of operations and cash flows of Seacoast Banking Corporation of Florida and its subsidiaries at December 31, 2003 and for each of the two years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
West Palm Beach, Florida
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Consolidated Statements of Income
For the Year Ended December 31 | |||||||||||||
(Dollars in thousands, except per share data) | 2004 | 2003 | 2002 | ||||||||||
INTEREST INCOME | |||||||||||||
Interest on securities | |||||||||||||
Taxable | $18,245 | $16,054 | $14,274 | ||||||||||
Nontaxable | 103 | 147 | 195 | ||||||||||
Interest and fees on loans | 48,411 | 44,331 | 54,000 | ||||||||||
Interest on federal funds sold and interest bearing deposits | 293 | 70 | 526 | ||||||||||
Total interest income | 67,052 | 60,602 | 68,995 | ||||||||||
INTEREST EXPENSE | |||||||||||||
Interest on savings deposits | 3,997 | 3,295 | 4,947 | ||||||||||
Interest on time certificates | 8,159 | 9,892 | 14,949 | ||||||||||
Interest on borrowed money | 2,122 | 3,250 | 3,139 | ||||||||||
Total interest expense | 14,278 | 16,437 | 23,035 | ||||||||||
NET INTEREST INCOME | 52,774 | 44,165 | 45,960 | ||||||||||
Provision for loan losses | 1,000 | 0 | 0 | ||||||||||
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 51,774 | 44,165 | 45,960 | ||||||||||
NONINTEREST INCOME | |||||||||||||
Securities gains (losses) | 44 | (1,172 | ) | 457 | |||||||||
Other | 18,462 | 20,897 | 18,336 | ||||||||||
Total noninterest income | 18,506 | 19,725 | 18,793 | ||||||||||
NONINTEREST EXPENSES | 47,281 | 42,463 | 39,790 | ||||||||||
INCOME BEFORE INCOME TAXES | 22,999 | 21,427 | 24,963 | ||||||||||
Provision for income taxes | 8,077 | 7,411 | 9,677 | ||||||||||
NET INCOME | $14,922 | $14,016 | $15,286 | ||||||||||
SHARE DATA | |||||||||||||
Net income per share of common stock | |||||||||||||
Diluted | $ 0.95 | $ 0.89 | $ 0.97 | ||||||||||
Basic | 0.97 | 0.91 | 1.00 | ||||||||||
Average shares outstanding | |||||||||||||
Diluted | 15,745,445 | 15,667,015 | 15,717,893 | ||||||||||
Basic | 15,335,731 | 15,334,765 | 15,350,353 | ||||||||||
See notes to consolidated financial statements.
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54
Consolidated Balance Sheets
December 31 | |||||||||||
(Dollars in thousands, except share data) | 2004 | 2003 | |||||||||
ASSETS | |||||||||||
Cash and due from banks | $ | 44,920 | $ | 44,928 | |||||||
Federal funds sold and interest bearing deposits | 44,758 | 255 | |||||||||
Total cash and cash equivalents | 89,678 | 45,183 | |||||||||
Securities held for sale (at fair value) | 395,207 | 484,223 | |||||||||
Securities held for investment (fair values: 2004 – 198,442 and 2003 – $79,741) | 198,551 | 80,866 | |||||||||
Total securities | 593,758 | 565,089 | |||||||||
Loans available for sale | 2,346 | 5,403 | |||||||||
Loans | 899,547 | 708,792 | |||||||||
Less: Allowance for loan losses | (6,598 | ) | (6,160 | ) | |||||||
Net loans | 892,949 | 702,632 | |||||||||
Bank premises and equipment, net | 18,965 | 16,847 | |||||||||
Other real estate owned | 0 | 1,954 | |||||||||
Other assets | 18,180 | 16,715 | |||||||||
TOTAL ASSETS | $ | 1,615,876 | $ | 1,353,823 | |||||||
LIABILITIES | |||||||||||
Deposits | |||||||||||
Demand deposits (noninterest bearing) | $ | 345,122 | $ | 233,087 | |||||||
Savings deposits | 669,059 | 527,400 | |||||||||
Other time deposits | 238,188 | 262,904 | |||||||||
Time certificates of $100,000 or more | 120,097 | 106,251 | |||||||||
Total deposits | 1,372,466 | 1,129,642 | |||||||||
Federal funds purchased and securities sold under agreement to repurchase, maturing within 30 days | 86,919 | 74,158 | |||||||||
Other borrowings | 39,912 | 40,000 | |||||||||
Other liabilities | 8,367 | 5,939 | |||||||||
1,507,664 | 1,249,739 | ||||||||||
Commitments and Contingencies (Notes I and N) | |||||||||||
SHAREHOLDERS’ EQUITY | |||||||||||
Preferred stock, par value $1.00 per share – authorized 4,000,000 shares, none issued or outstanding | 0 | 0 | |||||||||
Common stock, par value $.10 per share authorized 22,000,000 shares, issued 17,103,650 and outstanding 15,289,417 shares in 2004 and authorized 22,000,000 shares, issued 17,103,650 and outstanding 15,358,526 shares in 2003 | 1,710 | 1,710 | |||||||||
Additional paid-in capital | 26,950 | 26,911 | |||||||||
Retained earnings | 101,501 | 95,336 | |||||||||
Less: Restricted stock awards (178,940 shares issued and outstanding in 2004, and 145,100 shares issued and outstanding in 2003) | (3,333 | ) | (1,947 | ) | |||||||
Less: Treasury stock (1,635,293 shares in 2004 and 1,600,024 shares in 2003), at cost | (16,172 | ) | (15,350 | ) | |||||||
110,656 | 106,660 | ||||||||||
Accumulated other comprehensive (loss), net | (2,444 | ) | (2,576 | ) | |||||||
TOTAL SHAREHOLDERS’ EQUITY | 108,212 | 104,084 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 1,615,876 | $ | 1,353,823 | |||||||
See notes to consolidated financial statements.
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Consolidated Statements of Cash Flows
For The Year Ended December 31 | |||||||||||||||
(Dollars in thousands) | 2004 | 2003 | 2002 | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||||||
Interest received | $ | 69,793 | $ | 71,733 | $ | 76,660 | |||||||||
Fees and commissions received | 19,180 | 19,562 | 17,382 | ||||||||||||
Interest paid | (14,201 | ) | (16,616 | ) | (23,383 | ) | |||||||||
Cash paid to suppliers and employees | (43,269 | ) | (41,305 | ) | (36,094 | ) | |||||||||
Income taxes paid | (8,794 | ) | (7,476 | ) | (9,408 | ) | |||||||||
Trading securities activity | 7,365 | 74,648 | 0 | ||||||||||||
Origination of loans designated available for sale | (230,879 | ) | (348,984 | ) | (213,212 | ) | |||||||||
Sale of loans designated available for sale | 233,936 | 357,395 | 218,533 | ||||||||||||
Net change in other assets | (644 | ) | 5,138 | (7,349 | ) | ||||||||||
Net cash provided by operating activities | 32,487 | 114,095 | 23,129 | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||||||
Maturities of securities held for sale | 85,093 | 258,672 | 306,103 | ||||||||||||
Maturities of securities held for investment | 47,170 | 110,485 | 3,301 | ||||||||||||
Proceeds from sale of securities held for sale | 136,698 | 141,771 | 38,131 | ||||||||||||
Purchase of securities held for sale | (253,265 | ) | (507,348 | ) | (535,733 | ) | |||||||||
Purchase of securities held for investment | (54,933 | ) | (158,884 | ) | (9,997 | ) | |||||||||
Net new loans and principal repayments | (191,625 | ) | (23,650 | ) | 95,934 | ||||||||||
Proceeds from the sale of other real estate owned | 2,012 | 78 | 216 | ||||||||||||
Additions to bank premises and equipment | (4,004 | ) | (2,610 | ) | (2,583 | ) | |||||||||
Net cash used in investing activities | (232,854 | ) | (181,486 | ) | (104,628 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||||||
Net increase in deposits | 243,026 | 98,920 | 15,388 | ||||||||||||
Net increase (decrease) in federal funds purchased and repurchase agreements | 12,761 | (28,809 | ) | 31,263 | |||||||||||
Exercise of stock options and vesting of stock awards | 1,247 | 899 | 653 | ||||||||||||
Net treasury stock acquired | (3,872 | ) | (1,172 | ) | (2,391 | ) | |||||||||
Dividends paid | (8,300 | ) | (7,086 | ) | (5,706 | ) | |||||||||
Net cash provided by financing activities | 244,862 | 62,752 | 39,207 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 44,495 | (4,639 | ) | (42,292 | ) | ||||||||||
Cash and cash equivalents at beginning of year | 45,183 | 49,822 | 92,114 | ||||||||||||
Cash and cash equivalents at end of year | $ | 89,678 | $ | 45,183 | $ | 49,822 | |||||||||
See Note O for supplemental disclosures.
See notes to consolidated financial statements.
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Common Stock | |||||||||||||||||||||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Restricted | Other | ||||||||||||||||||||||||||||||||||||||
(Dollars in thousands, | Paid-in | Retained | Stock | Treasury | Comprehensive | ||||||||||||||||||||||||||||||||||||
except share amounts) | Class A | Class B | Class A | Class B | Capital | Earnings | Awards | Stock | Income, Net | Total | |||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2001 | 4,303 | 350 | $ | 483 | $ | 35 | $ | 27,924 | $ | 80,886 | $ | 0 | $ | (17,239 | ) | $ | 1,430 | $ | 93,519 | ||||||||||||||||||||||
Effect of capital simplification | 350 | (350 | ) | 35 | (35 | ) | |||||||||||||||||||||||||||||||||||
Effect of three for one stock split | 9,308 | 1,037 | (1,037 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive Income: | |||||||||||||||||||||||||||||||||||||||||
Net income | 15,286 | 15,286 | |||||||||||||||||||||||||||||||||||||||
Net unrealized loss on securities | (844 | ) | (844 | ) | |||||||||||||||||||||||||||||||||||||
Net reclassification adjustment | 230 | 230 | |||||||||||||||||||||||||||||||||||||||
Comprehensive income | 14,672 | ||||||||||||||||||||||||||||||||||||||||
Cash dividends at $0.37 per share | (5,706 | ) | (5,706 | ) | |||||||||||||||||||||||||||||||||||||
Treasury stock acquired | (147 | ) | (2,482 | ) | (2,482 | ) | |||||||||||||||||||||||||||||||||||
Common stock issued from Treasury: | |||||||||||||||||||||||||||||||||||||||||
For employee benefit plans | 6 | 91 | 91 | ||||||||||||||||||||||||||||||||||||||
For stock options and awards | 70 | 107 | (506 | ) | 1,052 | 653 | |||||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2002 | 13,890 | 0 | 1,555 | 0 | 26,994 | 89,960 | 0 | (18,578 | ) | 816 | 100,747 | ||||||||||||||||||||||||||||||
Effect of 10% stock dividend paid as a stock split | 1,389 | 155 | (155 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive Income: | |||||||||||||||||||||||||||||||||||||||||
Net income | 14,016 | 14,016 | |||||||||||||||||||||||||||||||||||||||
Net unrealized loss on securities | (2,790 | ) | (2,790 | ) | |||||||||||||||||||||||||||||||||||||
Net reclassification adjustment | (332 | ) | (332 | ) | |||||||||||||||||||||||||||||||||||||
Net unrealized loss on cash flow interest rate swap | (270 | ) | (270 | ) | |||||||||||||||||||||||||||||||||||||
Comprehensive income | 10,624 | ||||||||||||||||||||||||||||||||||||||||
Cash dividends at $0.46 per share | (7,086 | ) | (7,086 | ) | |||||||||||||||||||||||||||||||||||||
Treasury stock acquired | (76 | ) | (1,313 | ) | (1,313 | ) | |||||||||||||||||||||||||||||||||||
Common stock issued from Treasury: | |||||||||||||||||||||||||||||||||||||||||
For employee benefit plans | 9 | (4 | ) | 145 | 141 | ||||||||||||||||||||||||||||||||||||
For stock options and awards | 292 | 72 | (1,550 | ) | (1,947 | ) | 4,396 | 971 | |||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2003 | 15,504 | 0 | 1,710 | 0 | 26,911 | 95,336 | (1,947 | ) | (15,350 | ) | (2,576 | ) | 104,084 | ||||||||||||||||||||||||||||
Comprehensive Income: | |||||||||||||||||||||||||||||||||||||||||
Net income | 14,922 | 14,922 | |||||||||||||||||||||||||||||||||||||||
Net unrealized gain on securities | 16 | 16 | |||||||||||||||||||||||||||||||||||||||
Net reclassification adjustment | (145 | ) | (145 | ) | |||||||||||||||||||||||||||||||||||||
Net unrealized gain on cash flow interest rate swap | 261 | 261 | |||||||||||||||||||||||||||||||||||||||
Comprehensive income | 15,054 | ||||||||||||||||||||||||||||||||||||||||
Cash dividends at $0.54 per share | (8,300 | ) | (8,300 | ) | |||||||||||||||||||||||||||||||||||||
Treasury stock acquired | (210 | ) | (4,057 | ) | (4,057 | ) | |||||||||||||||||||||||||||||||||||
Common stock issued from Treasury: | |||||||||||||||||||||||||||||||||||||||||
For employee benefit plans | 9 | 2 | 182 | 184 | |||||||||||||||||||||||||||||||||||||
For stock options and awards | 165 | 39 | (459 | ) | (1,386 | ) | 3,053 | 1,247 | |||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2004 | 15,468 | $ | 0 | $ | 1,710 | $ | 0 | $ | 26,950 | $ | 101,501 | $ | (3,333 | ) | $ | (16,172 | ) | $ | (2,444 | ) | $ | 108,212 | |||||||||||||||||||
See notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
Note A
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impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance.
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and Other Intangible Assets” (“SFAS No. 142”). Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized, but are subject to impairment tests at least annually. Intangible assets with finite lives continue to be amortized over the period the Company expects to benefit from such assets and are periodically reviewed for other than temporary impairment. Goodwill totaled $2,639,000 at December 31, 2004. The Company’s goodwill evaluation for the year ended December 31, 2004 indicated that none of the goodwill is impaired.
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and earnings per share would have been reduced to the following pro forma amounts:
(In thousands, except per share data) | 2004 | 2003 | 2002 | ||||||||||||
Net income | |||||||||||||||
As Reported | $ | 14,922 | $ | 14,016 | $ | 15,286 | |||||||||
Stock Based Employee Compensation Cost, Net of Tax | (49 | ) | (17 | ) | (7 | ) | |||||||||
Pro Forma | 14,873 | 13,999 | 15,279 | ||||||||||||
Per Share (Diluted): | |||||||||||||||
As Reported | 0.95 | 0.89 | 0.97 | ||||||||||||
Pro Forma | 0.94 | 0.89 | 0.97 | ||||||||||||
Per Share (Basic): | |||||||||||||||
As Reported | 0.97 | 0.91 | 1.00 | ||||||||||||
Pro Forma | 0.97 | 0.91 | 1.00 | ||||||||||||
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initial investment and prohibits carrying over valuation allowances from the seller for those individually-evaluated loans that have evidence of deterioration in credit quality since origination, and it is probable all contractual cash flows on the loan will be unable to be collected. SOP 03-3 also requires the excess of all undiscounted cash flows expected to be collected at acquisition over the purchaser’s initial investment to be recognized as interest income on a level-yield basis over the life of the loan. Subsequent increases in cash flows expected to be collected are recognized prospectively through an adjustment of the loan’s yield over its remaining life, while subsequent decreases are recognized as impairment. Loans carried at fair value, mortgage loans held for sale, and loans to borrowers in good standing under revolving credit agreements are excluded from the scope of SOP 03-3. The guidance is effective for loans acquired in fiscal years beginning after December 15, 2004.
Note B
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Note C
Held for Investment | Held for Sale | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
(In thousands) | Cost | Value | Cost | Value | ||||||||||||
Due in less than one year | $ | 225 | $ | 228 | $ | 1,990 | $ | 1,989 | ||||||||
Due after one year through five years | 5,206 | 5,128 | 18,944 | 18,667 | ||||||||||||
Due after ten years | 992 | 1,068 | 0 | 0 | ||||||||||||
6,423 | 6,424 | 20,934 | 20,656 | |||||||||||||
Mortgage backed securities, AAA rated or equivalent | 192,128 | 192,018 | 369,699 | 366,806 | ||||||||||||
No contractual maturity | 0 | 0 | 7,745 | 7,745 | ||||||||||||
$ | 198,551 | $ | 198,442 | $ | 398,378 | $ | 395,207 | |||||||||
December 31, 2004 | |||||||||||||||||
Gross | Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | ||||||||||||||
(In thousands) | Cost | Gains | Losses | Value | |||||||||||||
SECURITIES HELD FOR SALE | |||||||||||||||||
U.S. Treasury and U.S. Government agencies | $ | 20,934 | $ | 0 | $ | (278 | ) | $ | 20,656 | ||||||||
Mortgage backed securities, AAA rated or equivalent | 369,699 | 275 | (3,168 | ) | 366,806 | ||||||||||||
Other securities | 7,745 | 0 | 0 | 7,745 | |||||||||||||
$ | 398,378 | $ | 275 | $ | (3,446 | ) | $ | 395,207 | |||||||||
SECURITIES HELD FOR INVESTMENT | |||||||||||||||||
U.S. Treasury and U.S. Government agencies | $ | 4,999 | $ | 0 | $ | (93 | ) | $ | 4,906 | ||||||||
Mortgage backed securities, AAA rated or equivalent | 192,128 | 464 | (574 | ) | 192,018 | ||||||||||||
Obligations of states and political subdivisions | 1,424 | 94 | 0 | 1,518 | |||||||||||||
$ | 198,551 | $ | 558 | $ | (667 | ) | $ | 198,442 | |||||||||
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December 31, 2003 | |||||||||||||||||
Gross | Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | ||||||||||||||
(In thousands) | Cost | Gains | Losses | Value | |||||||||||||
SECURITIES HELD FOR SALE | |||||||||||||||||
U.S. Treasury and U.S. Government agencies | $ | 1,002 | $ | 0 | $ | 0 | $ | 1,002 | |||||||||
Mortgage backed securities, AAA rated or equivalent | 480,775 | 663 | (4,420 | ) | 477,018 | ||||||||||||
Other securities | 6,203 | 0 | 0 | 6,203 | |||||||||||||
$ | 487,980 | $ | 663 | $ | (4,420 | ) | $ | 484,223 | |||||||||
SECURITIES HELD FOR INVESTMENT | |||||||||||||||||
U.S. Treasury and U.S. Government agencies | $ | 4,998 | $ | 0 | $ | (65 | ) | $ | 4,933 | ||||||||
Mortgage backed securities, AAA rated or equivalent | 73,585 | 140 | (1,333 | ) | 72,392 | ||||||||||||
Obligations of states and political subdivisions | 2,283 | 133 | 0 | 2,416 | |||||||||||||
$ | 80,866 | $ | 273 | $ | (1,398 | ) | $ | 79,741 | |||||||||
Temporarily Impaired Securities
December 31, 2004 | ||||||||||||||||||||||||||
Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||
(In thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||||
U.S. Treasury and U.S. Government agencies | $ | 20,656 | $ | (279) | $ | 4,906 | $ | (92) | $ | 25,562 | $ | (371) | ||||||||||||||
Mortgage backed securities, AAA Rated | 174,670 | (1,738) | 213,170 | (2,006) | 387,840 | (3,744) | ||||||||||||||||||||
Total temporarily impaired securities | $ | 195,326 | $ | (2,017) | $ | 218,076 | $ | (2,098) | $ | 413,402 | $ | (4,115) | ||||||||||||||
Note D
An analysis of loans at December 31 is summarized as follows:
(In thousands) | 2004 | 2003 | ||||||
Real estate mortgage | $ | 498,692 | $ | 470,391 | ||||
Construction and land development | 252,329 | 107,315 | ||||||
Commercial and financial | 66,240 | 46,310 | ||||||
Installment loans to individuals | 81,831 | 84,512 | ||||||
Other | 455 | 264 | ||||||
TOTAL | $ | 899,547 | $ | 708,792 | ||||
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and during 2004, $510,000 of new loans were made and repayments totaled $806,000.
Note E
2004 | 2003 | ||||||||||||||||
Recorded | Valuation | Recorded | Valuation | ||||||||||||||
(In thousands) | Investment | Allowance | Investment | Allowance | |||||||||||||
Impaired loans: | |||||||||||||||||
Valuation allowance required | $ | 517 | $ | 258 | $ | 0 | $ | 0 | |||||||||
No valuation allowance required | 0 | 0 | 0 | 0 | |||||||||||||
$ | 517 | $ | 258 | $ | 0 | $ | 0 | ||||||||||
(In thousands) | 2004 | 2003 | 2002 | |||||||||||
Balance, beginning of year | $ | 6,160 | $ | 6,826 | $ | 7,034 | ||||||||
Provision charged to operating expense | 1,000 | 0 | 0 | |||||||||||
Charge offs | (753 | ) | (1,053 | ) | (530 | ) | ||||||||
Recoveries | 191 | 387 | 322 | |||||||||||
Balance, end of year | $ | 6,598 | $ | 6,160 | $ | 6,826 | ||||||||
Table of Contents
Note F
Bank premises and equipment are summarized as follows:
Accumulated | Net | |||||||||||||
Depreciation & | Carrying | |||||||||||||
(In thousands) | Cost | Amortization | Value | |||||||||||
December 31, 2004 | ||||||||||||||
Premises (including land of $3,867) | $ | 26,751 | $ | 10,948 | $ | 15,803 | ||||||||
Furniture and equipment | 12,211 | 9,049 | 3,162 | |||||||||||
$ | 38,962 | $ | 19,997 | $ | 18,965 | |||||||||
December 31, 2003 | ||||||||||||||
Premises (including land of $3,867) | $ | 23,997 | $ | 10,150 | $ | 13,847 | ||||||||
Furniture and equipment | 12,221 | 9,221 | 3,000 | |||||||||||
$ | 36,218 | $ | 19,371 | $ | 16,847 | |||||||||
Note G
(In thousands) | 2004 | 2003 | 2002 | |||||||||||
Maximum amount outstanding at any month end | $ | 98,464 | $ | 99,462 | $ | 102,967 | ||||||||
Weighted average interest rate at end of year | 1.89 | % | 0.90 | % | 1.17 | % | ||||||||
Average amount outstanding | $ | 72,268 | $ | 64,994 | $ | 55,015 | ||||||||
Weighted average interest rate | 1.09 | % | 0.80 | % | 1.04 | % | ||||||||
On July 31, 1998, the Company acquired $15,000,000 in other borrowings from the Federal Home Loan Bank (FHLB), principal payable on November 12, 2009 with interest payable quarterly at a fixed rate of 6.10%. On January 30, 2003, the Company acquired $25,000,000 from the FHLB, principal payable on January 30, 2006 with interest payable quarterly; the borrowing is a floating rate agreement that resets quarterly based on the London Interbank Offered Rate (LIBOR).
Note H
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66
plan the Company granted options on 99,000 shares and issued 52,000 shares of restricted stock awards during 2004 and granted options on 216,000 shares and issued 145,100 shares of restricted stock awards during 2003. Under the plans, the option exercise price equals the common stock’s market price on the date of grant. All options issued prior to December 31, 2002 have a vesting period of four years and a contractual life of ten years. All options issued in 2003 and 2004 have a vesting period of five years and a contractual life of ten years. Stock option fair value is measured on the date of grant using the Black-Scholes option pricing model with market assumptions. Option pricing models require the use of highly subjective assumptions, including expected stock price volatility, which when changed can materially affect fair value estimates. Accordingly, the model does not necessarily provide a reliable single measure of the fair value of the Company’s stock options.
Number | Weighted Average | Option Price | Weighted Average | ||||||||||||||
of Shares | Fair Value | Per Share | Exercise Price | ||||||||||||||
Options outstanding, January 1, 2002 | 801,900 | $ | 3.56– 8.79 | $ 7.65 | |||||||||||||
Exercised | (75,900 | ) | 3.56– 8.79 | 7.08 | |||||||||||||
Options outstanding, December 31, 2002 | 726,000 | 5.30– 8.79 | 7.73 | ||||||||||||||
Exercised | (146,000 | ) | 5.38– 8.79 | 6.10 | |||||||||||||
Granted | 216,000 | $2.16 | 17.08 | 17.08 | |||||||||||||
Options outstanding, December 31, 2003 | 796,000 | 5.30–17.08 | 10.56 | ||||||||||||||
Exercised | (113,000 | ) | 5.30– 8.79 | 7.93 | |||||||||||||
Granted | 99,000 | 3.08 | 19.87–22.40 | 22.34 | |||||||||||||
Cancelled | (4,000 | ) | 17.08 | 17.08 | |||||||||||||
Options outstanding, December 31, 2004 | 778,000 | $ | 5.30–22.40 | $12.41 | |||||||||||||
Options exercisable, December 31, 2004 | 509,000 | $ | 5.30–17.08 | $ 8.92 | |||||||||||||
Table of Contents
The following table summarizes information about stock options outstanding at December 31, 2004:
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Weighted | ||||||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||||
Number | Remaining | Average | Number | Average | ||||||||||||||||||
Exercise | of Shares | Contractual | Exercise | of Shares | Exercise | |||||||||||||||||
Prices | Outstanding | Life in Years | Price | Exercisable | Price | |||||||||||||||||
$ | 5.30 | 20,000 | 0.17 | $ | 5.30 | 20,000 | $ | 5.30 | ||||||||||||||
6.59 | 55,000 | 1.50 | 6.59 | 55,000 | 6.59 | |||||||||||||||||
7.46 | 13,000 | 5.22 | 7.46 | 13,000 | 7.46 | |||||||||||||||||
7.73 | 66,000 | 2.58 | 7.73 | 66,000 | 7.73 | |||||||||||||||||
8.22 | 10,000 | 5.62 | 8.22 | 10,000 | 8.22 | |||||||||||||||||
8.79 | 303,000 | 3.54 | 8.79 | 303,000 | 8.79 | |||||||||||||||||
17.08 | 212,000 | 8.88 | 17.08 | 42,000 | 17.08 | |||||||||||||||||
19.87 | 3,000 | 9.55 | 19.87 | - | ||||||||||||||||||
22.40 | 96,000 | 9.97 | 22.40 | - | ||||||||||||||||||
778,000 | 5.56 | $ | 12.41 | 509,000 | $ | 8.92 | ||||||||||||||||
Note I
(in thousands) | ||||
2005 | $ | 1,970 | ||
2006 | 2,297 | |||
2007 | 2,147 | |||
2008 | 1,718 | |||
2009 | 1,484 | |||
Thereafter | 13,089 | |||
$ | 22,705 | |||
Note J
Year Ended December 31 | |||||||||||||
(In thousands) | 2004 | 2003 | 2002 | ||||||||||
Current | |||||||||||||
Federal | $ | 8,524 | $ | 7,512 | $ | 8,746 | |||||||
State | 281 | 9 | 1,380 | ||||||||||
Deferred | |||||||||||||
Federal | (619 | ) | (95 | ) | (379 | ) | |||||||
State | (109 | ) | (15 | ) | (70 | ) | |||||||
TOTAL | $ | 8,077 | $ | 7,411 | $ | 9,677 | |||||||
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68
Temporary differences in the recognition of revenue and expense for tax and financial reporting purposes resulted in deferred income taxes as follows:
Year Ended December 31 | ||||||||||||
(Dollars in thousands) | 2004 | 2003 | 2002 | |||||||||
Depreciation | $ | 25 | $ | 60 | $ | (100 | ) | |||||
Allowance for loan losses | (169 | ) | 257 | 80 | ||||||||
Interest and fee income | (319 | ) | (229 | ) | (420 | ) | ||||||
Other real estate owned | 32 | (32 | ) | 0 | ||||||||
Fair value of derivative instruments | (271 | ) | 0 | 0 | ||||||||
Other | (26 | ) | (166 | ) | (9 | ) | ||||||
TOTAL | $ | (728 | ) | $ | (110 | ) | $ | (449 | ) | |||
The difference between the total expected tax expense (computed by applying the U.S. Federal tax rate of 35% to pretax income in 2004, 2003 and 2002) and the reported income tax expense relating to income before income taxes is as follows:
Year Ended December 31 | |||||||||||||
(In thousands) | 2004 | 2003 | 2002 | ||||||||||
Tax rate applied to income before income taxes | $ | 8,050 | $ | 7,499 | $ | 8,737 | |||||||
Increase (decrease) resulting from the effects of: | |||||||||||||
Tax-exempt interest on obligations of states and political subdivisions | (86 | ) | (93 | ) | (117 | ) | |||||||
State income taxes | (60 | ) | 2 | (459 | ) | ||||||||
Amortization of intangibles | 0 | 53 | 88 | ||||||||||
Other | 1 | (44 | ) | 118 | |||||||||
Federal tax provision | 7,905 | 7,417 | 8,367 | ||||||||||
State tax provision | 172 | (6 | ) | 1,310 | |||||||||
Applicable income taxes | $ | 8,077 | $ | 7,411 | $ | 9,677 | |||||||
The net deferred tax assets (liabilities) are comprised of the following:
December 31 | |||||||||
(In thousands) | 2004 | 2003 | |||||||
Allowance for loan losses | $ | 2,213 | $ | 2,044 | |||||
Interest and fee income | 500 | 181 | |||||||
Net unrealized securities losses | 1,489 | 1,450 | |||||||
Cash flow interest rate swaps | 5 | 168 | |||||||
Fair value interest rate swaps | 271 | 0 | |||||||
Deferred compensation | 276 | 210 | |||||||
Other real estate owned | 0 | 32 | |||||||
Gross deferred tax assets | 4,754 | 4,085 | |||||||
Depreciation | (355 | ) | (330 | ) | |||||
Other | (130 | ) | (90 | ) | |||||
Gross deferred tax liabilities | (485 | ) | (420 | ) | |||||
Deferred tax asset valuation allowance | 0 | 0 | |||||||
Net deferred tax assets | $ | 4,269 | $ | 3,665 | |||||
Table of Contents
The tax effects of unrealized gains (losses) for securities and cash flow interest rate swaps included in the calculation of comprehensive income as presented in the Statements of Shareholders’ Equity for the three years ended December 31, are as follows:
(In thousands) | ||||
2004 | $ | 124 | ||
2003 | (2,131 | ) | ||
2002 | (358 | ) | ||
Note K
Details of noninterest income and expenses follow:
Year Ended December 31 | |||||||||||||
(In thousands) | 2004 | 2003 | 2002 | ||||||||||
Noninterest income | |||||||||||||
Service charges on deposit accounts | $ | 4,479 | $ | 4,907 | $ | 5,105 | |||||||
Trust fees | 2,250 | 2,043 | 2,177 | ||||||||||
Mortgage banking fees | 1,824 | 4,423 | 3,364 | ||||||||||
Brokerage commissions and fees | 2,442 | 1,863 | 2,045 | ||||||||||
Marine finance fees | 2,997 | 3,161 | 1,408 | ||||||||||
Debit card income | 1,344 | 1,169 | 980 | ||||||||||
Other deposit based EFT fees | 476 | 441 | 376 | ||||||||||
Merchant income | 1,962 | 1,610 | 1,462 | ||||||||||
Interest rate swap losses | (701 | ) | 0 | 0 | |||||||||
Other | 1,389 | 1,280 | 1,419 | ||||||||||
18,462 | 20,897 | 18,336 | |||||||||||
Securities gains (losses), net | 44 | (1,172 | ) | 457 | |||||||||
TOTAL | $ | 18,506 | $ | 19,725 | $ | 18,793 | |||||||
Noninterest expenses | |||||||||||||
Salaries and wages | $ | 19,119 | $ | 16,641 | $ | 15,761 | |||||||
Employee benefits | 5,031 | 4,595 | 4,304 | ||||||||||
Outsourced data processing costs | 5,716 | 5,265 | 4,795 | ||||||||||
Telephone/ data lines | 1,167 | 1,116 | 1,006 | ||||||||||
Occupancy | 4,229 | 3,956 | 3,365 | ||||||||||
Furniture and equipment | 1,919 | 1,739 | 1,989 | ||||||||||
Marketing | 2,465 | 2,119 | 2,036 | ||||||||||
Legal and professional fees | 1,843 | 1,336 | 1,538 | ||||||||||
FDIC assessments | 171 | 163 | 173 | ||||||||||
Amortization of intangibles | 0 | 150 | 252 | ||||||||||
Other | 5,621 | 5,383 | 4,571 | ||||||||||
TOTAL | $ | 47,281 | $ | 42,463 | $ | 39,790 | |||||||
Note L
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70
Holders of common stock are entitled to one vote per share on all matters presented to shareholders as provided in the Company’s Articles of Incorporation.
Required Regulatory Capital
Minimum To Be Well | |||||||||||||||||||||||||||
Minimum for | Capitalized Under | ||||||||||||||||||||||||||
Capital Adequacy | Prompt Corrective | ||||||||||||||||||||||||||
Purposes | Action Provisions | ||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||
SEACOAST BANKING CORP (CONSOLIDATED) | |||||||||||||||||||||||||||
At December 31, 2004: | |||||||||||||||||||||||||||
Total Capital (to risk-weighted assets) | $ | 114,604 | 10.99 | % | $ | 83,347 | > or = 8.00 | % | $ | 104,184 | > or = N/A | ||||||||||||||||
Tier 1 Capital (to risk-weighted assets) | 108,006 | 10.36 | 41,674 | > or = 4.00 | % | 62,510 | > or = N/A | ||||||||||||||||||||
Tier 1 Capital (to adjusted average assets) | 108,006 | 7.10 | 60,825 | > or = 4.00 | % | 76,032 | > or = N/A | ||||||||||||||||||||
At December 31, 2003: | |||||||||||||||||||||||||||
Total Capital (to risk-weighted assets) | $ | 110,162 | 13.80 | % | $ | 63,788 | > or = 8.00 | % | $ | 79,735 | > or = N/A | ||||||||||||||||
Tier 1 Capital (to risk-weighted assets) | 104,002 | 13.04 | 31,894 | > or = 4.00 | % | 47,841 | > or = N/A | ||||||||||||||||||||
Tier 1 Capital (to adjusted average assets) | 104,002 | 7.81 | 53,246 | > or = 4.00 | % | 66,558 | > or = N/A | ||||||||||||||||||||
FIRST NATIONAL BANK AND TRUST COMPANY OF TREASURE COAST (A WHOLLY OWNED BANK SUBSIDIARY) | |||||||||||||||||||||||||||
At December 31, 2004: | |||||||||||||||||||||||||||
Total Capital (to risk-weighted assets) | $ | 108,597 | 10.42 | % | $ | 83,335 | > or = 8.00 | % | $ | 104,169 | > or =10.00 | % | |||||||||||||||
Tier 1 Capital (to risk-weighted assets) | 101,999 | 9.79 | 41,668 | > or = 4.00 | % | 62,501 | > or = 6.00 | % | |||||||||||||||||||
Tier 1 Capital (to adjusted average assets) | 101,999 | 6.71 | 60,824 | > or = 4.00 | % | 76,030 | > or = 5.00 | % | |||||||||||||||||||
At December 31, 2003: | |||||||||||||||||||||||||||
Total Capital (to risk-weighted assets) | $ | 104,894 | 13.14 | % | $ | 63,785 | > or = 8.00 | % | $ | 79,732 | > or = 10.00 | % | |||||||||||||||
Tier 1 Capital (to risk-weighted assets) | 98,734 | 12.38 | 31,893 | > or = 4.00 | % | 47,839 | > or = 6.00 | % | |||||||||||||||||||
Tier 1 Capital (to adjusted average assets) | 98,734 | 7.41 | 53,245 | > or = 4.00 | % | 66,556 | > or = 5.00 | % | |||||||||||||||||||
Table of Contents
Note M
Balance Sheets
December 31 | |||||||||
(In thousands) | 2004 | 2003 | |||||||
Assets | |||||||||
Cash | $ | 10 | $ | 10 | |||||
Securities purchased under agreement to resell with subsidiary bank, maturing within 30 days | 5,681 | 5,029 | |||||||
Investment in subsidiaries | 102,205 | 98,816 | |||||||
Other assets | 328 | 283 | |||||||
$ | 108,224 | $ | 104,138 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
Liabilities | $ | 12 | $ | 54 | |||||
Shareholders’ equity | 108,212 | 104,084 | |||||||
$ | 108,224 | $ | 104,138 | ||||||
Statements of Income
Year Ended December 31 | ||||||||||||||
(In thousands) | 2004 | 2003 | 2002 | |||||||||||
Income | ||||||||||||||
Dividends | ||||||||||||||
Subsidiary | $ | 11,920 | $ | 10,520 | $ | 9,150 | ||||||||
Interest/ other | 64 | 29 | 25 | |||||||||||
11,984 | 10,549 | 9,175 | ||||||||||||
Expenses | 463 | 529 | 919 | |||||||||||
Income before income tax credit and equity in undistributed income of subsidiaries | 11,521 | 10,020 | 8,256 | |||||||||||
Income tax credit | 140 | 175 | 313 | |||||||||||
Income before equity in undistributed income of subsidiaries | 11,661 | 10,195 | 8,569 | |||||||||||
Equity in undistributed income of subsidiaries | 3,261 | 3,821 | 6,717 | |||||||||||
Net income | $ | 14,922 | $ | 14,016 | $ | 15,286 | ||||||||
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72
Statements of Cash Flows
Year Ended December 31 | ||||||||||||||
(In thousands) | 2004 | 2003 | 2002 | |||||||||||
Cash flows from operating activities | ||||||||||||||
Interest received | $ | 64 | $ | 29 | $ | 25 | ||||||||
Dividends received | 11,920 | 10,520 | 9,150 | |||||||||||
Income taxes received | 248 | 420 | 335 | |||||||||||
Cash paid to suppliers | (655 | ) | (686 | ) | (1,000 | ) | ||||||||
Net cash provided by operating activities | 11,577 | 10,283 | 8,510 | |||||||||||
Cash flows from investing activities | ||||||||||||||
Increase in securities purchased under agreement to resell, maturing in 30 days, net | (652 | ) | (2,924 | ) | (1,066 | ) | ||||||||
Net cash provided by (used in) investing activities | (652 | ) | (2,924 | ) | (1,066 | ) | ||||||||
Cash flows from financing activities | ||||||||||||||
Exercise of stock options/ Stock award vesting | 1,247 | 899 | 653 | |||||||||||
Treasury stock purchased | (3,872 | ) | (1,172 | ) | (2,391 | ) | ||||||||
Dividends paid | (8,300 | ) | (7,086 | ) | (5,706 | ) | ||||||||
Net cash used in financing activities | (10,925 | ) | (7,359 | ) | (7,444 | ) | ||||||||
Net change in cash | 0 | 0 | 0 | |||||||||||
Cash at beginning of year | 10 | 10 | 10 | |||||||||||
Cash at end of year | $ | 10 | $ | 10 | $ | 10 | ||||||||
RECONCILIATION OF NET INCOME TO CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||||||||
Net income | $ | 14,922 | $ | 14,016 | $ | 15,286 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
Equity in undistributed income of subsidiaries | (3,261 | ) | (3,821 | ) | (6,717 | ) | ||||||||
Other, net | (84 | ) | 88 | (59 | ) | |||||||||
Net cash provided by operating activities | $ | 11,577 | $ | 10,283 | $ | 8,510 | ||||||||
Note N
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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 $307,021,000 commitments to extend credit outstanding at December 31, 2004, $109,387,000 is secured by 1-4 family residential properties with approximately $32,000,000 at fixed interest rates ranging from 5.00% to 7.00%.
December 31 | |||||||||
(In thousands) | 2004 | 2003 | |||||||
Contract or Notional Amount | |||||||||
Financial instruments whose contract amounts represent credit risk: | |||||||||
Commitments to extend credit | $ | 307,021 | $ | 168,448 | |||||
Standby letters of credit and financial guarantees written: | |||||||||
Secured | 7,900 | 4,960 | |||||||
Unsecured | 86 | 303 | |||||||
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74
Note O
Year Ended December 31 | |||||||||||||||
(In thousands) | 2004 | 2003 | 2002 | ||||||||||||
Net income | $ | 14,922 | $ | 14,016 | $ | 15,286 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||||||
Depreciation | 1,863 | 1,783 | 1,887 | ||||||||||||
Amortization of premiums and discounts on securities | 2,923 | 8,431 | 5,540 | ||||||||||||
Other amortization | 418 | 770 | 1,402 | ||||||||||||
Trading securities activity | 7,365 | 74,648 | 0 | ||||||||||||
Change in loans available for sale, net | 3,057 | 8,411 | 5,321 | ||||||||||||
Provision for loan losses | 1,000 | 0 | 0 | ||||||||||||
Deferred tax benefit | (728 | ) | (110 | ) | (449 | ) | |||||||||
Loss (gain) on sale of securities | (44 | ) | 1,172 | (457 | ) | ||||||||||
Loss on fair value interest rate swap | 701 | 0 | 0 | ||||||||||||
Gain on sale of loans | (35 | ) | (79 | ) | 0 | ||||||||||
Loss (gain) on sale and write down of foreclosed assets | (58 | ) | 63 | (23 | ) | ||||||||||
Loss on disposition of equipment | 23 | 25 | 8 | ||||||||||||
Change in interest receivable | (489 | ) | 824 | 21 | |||||||||||
Change in interest payable | 77 | (179 | ) | (348 | ) | ||||||||||
Change in prepaid expenses | 320 | 421 | 257 | ||||||||||||
Change in accrued taxes | 2 | 57 | 723 | ||||||||||||
Change in other assets | (644 | ) | 5,138 | (7,349 | ) | ||||||||||
Change in other liabilities | 1,814 | (1,296 | ) | 1,310 | |||||||||||
TOTAL ADJUSTMENTS | 17,565 | 100,079 | 7,843 | ||||||||||||
Net cash provided by operating activities | $ | 32,487 | $ | 114,095 | $ | 23,129 | |||||||||
Supplemental disclosure of non cash investing activities: | |||||||||||||||
Fair value adjustment to securities | $ | (213 | ) | $ | (5,110 | ) | $ | (1,008 | ) | ||||||
Transfers from loans to other real estate owned | 0 | 2,087 | 82 | ||||||||||||
Transfers from securities held for sale to held for investment | 110,474 | 0 | 0 | ||||||||||||
Transfers from securities held for sale to trading securities | 7,412 | 74,905 | 0 | ||||||||||||
Table of Contents
Note P
December 31 | |||||||||||||||||||
2004 | 2003 | ||||||||||||||||||
Carrying | Fair | Carrying | Fair | ||||||||||||||||
(In thousands) | Amount | Value | Amount | Value | |||||||||||||||
Financial Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 89,678 | $ | 89,678 | $ | 45,183 | $ | 45,183 | |||||||||||
Securities | 593,758 | 593,649 | 565,089 | 563,964 | |||||||||||||||
Loans, net | 892,949 | 897,054 | 702,632 | 710,373 | |||||||||||||||
Loans available for sale | 2,346 | 2,388 | 5,403 | 5,514 | |||||||||||||||
Derivative product assets | 18 | 18 | 21 | 21 | |||||||||||||||
Financial Liabilities | |||||||||||||||||||
Deposits | 1,372,466 | 1,371,629 | 1,129,642 | 1,134,370 | |||||||||||||||
Borrowings | 126,831 | 126,831 | 114,158 | 116,034 | |||||||||||||||
Derivative product liabilities | 802 | 802 | 439 | 439 | |||||||||||||||
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76
data inputs are used to estimate the fair value of derivative product assets and liabilities.
Note Q
Year Ended December 31 | |||||||||||||
(Dollars in thousands, | Net | Per Share | |||||||||||
except per share data) | Income | Shares | Amount | ||||||||||
2004 | |||||||||||||
Basic Earnings Per Share | |||||||||||||
Income available to common shareholders | $ | 14,922 | 15,335,731 | $ | 0.97 | ||||||||
Dilutive effect of options issued to executives (see Note H) | 409,714 | ||||||||||||
Diluted Earnings Per Share | |||||||||||||
Income available to common shareholders plus assumed conversions | $ | 14,922 | 15,745,445 | $ | 0.95 | ||||||||
2003 | |||||||||||||
Basic Earnings Per Share | |||||||||||||
Income available to common shareholders | $ | 14,016 | 15,334,765 | $ | 0.91 | ||||||||
Dilutive effect of options issued to executives (see Note H) | 332,250 | ||||||||||||
Diluted Earnings Per Share | |||||||||||||
Income available to common shareholders plus assumed conversions | $ | 14,016 | 15,667,015 | $ | 0.89 | ||||||||
2002 | |||||||||||||
Basic Earnings Per Share | |||||||||||||
Income available to common shareholders | $ | 15,286 | 15,350,353 | $ | 1.00 | ||||||||
Dilutive effect of options issued to executives (see Note H) | 367,540 | ||||||||||||
Diluted Earnings Per Share | |||||||||||||
Income available to common shareholders plus assumed conversions | $ | 15,286 | 15,717,893 | $ | 0.97 | ||||||||
Note R
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used in the hedging transaction has been highly effective in offsetting changes in fair value or cash flows of the hedged item, and whether the derivative is expected to continue to be highly effective.
Carrying | |||||||||||||||||||||||||
Notional Amount | Amount | Fair Value | |||||||||||||||||||||||
(In thousands) | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||
Derivative Product Assets | |||||||||||||||||||||||||
Interest rate swaps which do not qualify for hedge accounting | $ | 1,446 | $ | 1,470 | $ | 18 | $ | 21 | $ | 18 | $ | 21 | |||||||||||||
Derivative Product Liabilities | |||||||||||||||||||||||||
Cash flow interest rate swap under hedge accounting | 25,000 | 25,000 | 13 | 439 | 13 | 439 | |||||||||||||||||||
Interest rate swaps not accounted for as hedges | 54,000 | 54,000 | 701 | 0 | 701 | 0 | |||||||||||||||||||
Interest rate swaps which qualify for hedge accounting | 15,000 | 88 | 88 | ||||||||||||||||||||||
Note S
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78
Income Tax | ||||||||||||||
Pre-tax | (Expense) | After-tax | ||||||||||||
(In thousands) | Amount | Benefit | Amount | |||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET | ||||||||||||||
Accumulated other comprehensive income, net, December 31, 2001 | $ | 2,329 | $ | (899 | ) | $ | 1,430 | |||||||
Unrealized net holding loss on securities | (1,383 | ) | 539 | (844 | ) | |||||||||
Reclassification adjustment for realized gains and losses on securities | 375 | (145 | ) | 230 | ||||||||||
Accumulated other comprehensive income, net, December 31, 2002 | 1,321 | (505 | ) | 816 | ||||||||||
Unrealized net holding loss on securities | (4,550 | ) | 1,760 | (2,790 | ) | |||||||||
Net loss on cash flow hedge derivatives | (439 | ) | 169 | (270 | ) | |||||||||
Reclassification adjustment for realized gains and losses on securities | (540 | ) | 208 | (332 | ) | |||||||||
Accumulated other comprehensive income, net, December 31, 2003 | (4,208 | ) | 1,632 | (2,576 | ) | |||||||||
Unrealized net holding gain on securities | 25 | (9 | ) | 16 | ||||||||||
Net gain on cash flow hedge derivatives | 426 | (165 | ) | 261 | ||||||||||
Reclassification adjustment for realized gains and losses on securities | (225 | ) | 80 | (145 | ) | |||||||||
Accumulated other comprehensive income, net, December 31, 2004 | $ | (3,982 | ) | $ | 1,538 | $ | (2,444 | ) | ||||||