SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended Commission file
JUNE 30, 1995 No. 0-13660
SEACOAST BANKING CORPORATION OF FLORIDA
(Exact name of registrant as specified in its charter)
Florida 59-2260678
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
815 Colorado Avenue, Stuart FL 34994
(Address of principal executive offices) (Zip code)
(407) 287-4000
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Class A Common Stock, Par Value $.10
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of June 30, 1995:
Class A Common Stock, $.10 Par Value - 3,729,826 shares
Class B Common Stock, $.10 Par Value - 554,421 shares
INDEX
SEACOAST BANKING CORPORATION OF FLORIDA
Part I FINANCIAL INFORMATION PAGE #
Item 1 Financial Statements (Unaudited)
Condensed consolidated balance sheets -
June 30, 1995, December 31, 1994 and
June 30, 1994 3 - 4
Condensed consolidated statements of income -
Three months ended June 30, 1995 and 1994; and
Six months ended June 30, 1995 and 1994 5 - 6
Condensed consolidated statements of cash flows -
Six months ended June 30, 1995 and 1994 7 - 9
Notes to condensed consolidated financial
statements 10 - 11
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 21
Part II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 22
Item 6 Reports on Form 8-K 22
SIGNATURES 23
Exhibit Article 9 - Financial Data Schedule 24 - 25
Part I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
June 30, December 31, June 30,
(Dollars in thousands) 1995 1994 1994
--------------------------------------------------------------------------------
ASSETS
Cash and due from banks 30417 25230 20083
Federal funds sold 26665 62350 2300
Securities:
At market 10468 131288 195776
At amortized cost (market values:
$134,501 at June 30, 1995,
$122,472 at Dec. 31, 1994 &
$ 71,889 at June 30, 1994) 131487 127373 72975
------- ------- -------
TOTAL SECURITIES 236167 258661 268751
Loans, net of unearned income 364147 292790 267912
Less: Allowance for loan losses (3947) (3373) (3726)
------- ------- -------
NET LOANS 360200 289417 264186
Bank premises and equipment 17357 15751 16117
Other real estate owned 111 165 3200
Other assets 16362 11137 10706
------- ------- -------
687279 662711 585343
======= ======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
Deposits 621884 559629 525815
Federal funds purchased and
securities sold under agreements to
repurchase, maturing within 30 days 2750 44639 1289
Other liabilities 3507 2859 3197
------- ------- -------
628141 607127 530301
CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
June 30, December 31, June 30,
(Dollars in thousands) 1995 1994 1994
--------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Preferred stock 0 0 0
Class A common stock 373 372 371
Class B common stock 55 56 57
Additional paid-in capital 18535 18498 18425
Retained earnings 43068 41049 38952
Treasury stock (546) 0 0
------- ------- -------
61485 59975 57805
Securities valuation equity (allowance) (2347) (4391) (2763)
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 59138 55584 55042
------- ------- -------
687279 662711 585343
======= ======= =======
<FN>
<F1> Note: The balance sheet at December 31, 1994 has been derived from
the audited financial statements at that date. See notes to condensed
consolidated financial statements.
</FN>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
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Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Six Months
Ended June 30, Ended June 30,
-----------------------------------
(Dollars in thousands, except per share data) 1995 1994 1995 1994
--------------------------------------------------------------------------------------
Interest and dividends on investment securities 3923 4206 7880 8556
Interest and fees on loans 7534 5207 13966 10300
Interest on federal funds sold 746 93 1399 206
------ ----- ------ ------
TOTAL INTEREST INCOME 12203 9506 23245 19062
Interest on deposits 1429 1376 2804 2743
Interest on time certificates 3904 1837 6871 3642
Interest on borrowed money 69 25 261 98
------ ----- ------ ------
TOTAL INTEREST EXPENSE 5402 3238 9936 6483
------ ----- ------ ------
NET INTEREST INCOME 6801 6268 13309 12579
Provision for loan losses 0 95 0 145
------ ----- ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 6801 6173 13309 12434
Noninterest income
Securities gains (losses) 46 809 (7) 794
Other income 1880 1596 3479 3360
------ ----- ------ ------
TOTAL NONINTEREST INCOME 1926 2405 3472 4154
TOTAL NONINTEREST EXPENSES 6107 6162 11972 12092
------ ----- ------ ------
INCOME BEFORE INCOME TAXES 2620 2416 4809 4496
Provision for income taxes 906 790 1632 1463
------ ----- ------ ------
NET INCOME 1714 1626 3177 3033
====== ===== ====== ======
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
----------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands, except per ------------------ ------------------
share data) 1995 1994 1995 1994
--------------------------------------------------------------------------------
PER SHARE COMMON STOCK:
NET INCOME 0.40 0.38 0.74 0.71
CASH DIVIDENDS DECLARED:
Class A 0.130 0.120 0.260 0.240
Class B 0.118 0.109 0.236 0.218
Average shares outstanding 4308402 4303395 4309079 4301201
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
----------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
Six Months Ended June 30 1995 1994
------------------------------------------------------------------------------------
Increase(Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Interest received 24018 19408
Fees and commissions received 3479 3316
Interest paid (9743) (6518)
Cash paid to suppliers and employees (11926) (10800)
Income taxes paid (1222) (1610)
------- -------
Net cash provided by operating activities 4606 3796
Cash flows from investing activities
Proceeds from maturity of securities classified at
market 14354 18235
Proceeds from maturity of securities classified at
amortized cost 10916 7504
Proceeds from sale of securities classified at market 56333 34722
Purchase of securities classified at market (38680) (54592)
Purchase of securities classified at amortized cost (4889) (2181)
Proceeds from sale of loans 0 24164
Net new loans and principal repayments (25262) (18878)
Proceeds from the sale of other real estate owned 219 761
Sale(purchase) of premises and equipment (80) (465)
Purchase of American Bank Capital Corporation, net
of cash acquired (4659) 0
Net change in other assets 239 82
------- -------
Net cash provided by (used in) investing activities 8491 9352
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
----------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
Six Months Ended June 30 1995 1994
------------------------------------------------------------------------------------
Cash flows from financing activities
Net increase in deposits (39) (7662)
Net decrease in federal funds purchased and
securities sold under agreements to repurchase (41889) (39244)
Sale of common stock -- Employee Stock Purchase Plan
and Employee Profit -- Sharing Plan 37 108
Exercise of stock options (58) 88
Purchase of common stock -- Treasury (546) 0
Dividends paid (1100) (1014)
------- -------
Net cash used in financing activities (43595) (47724)
------- -------
Net decrease in cash and cash equivalents (30498) (34576)
Cash and cash equivalents at beginning of year 87580 56959
------- -------
Cash and cash equivalents at end of period 57082 22383
======= =======
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
----------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
Six Months Ended June 30 1995 1994
------------------------------------------------------------------------------------
Reconciliation of Net Income to Cash Provided by
Operating Activities
Net Income 3177 3033
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1222 1439
Provision for loan losses 0 145
Loss on sale of securities 7 (794)
Gain on sale of loans 0 (44)
Loss(gain) on sale and writedown of foreclosed assets (52) 155
Loss on disposition of fixed assets 33 63
Change in interest receivable 523 (125)
Change in interest payable 193 (35)
Change in prepaid expenses (724) (270)
Change in accrued taxes 604 157
Change in other liabilities (377) 72
------ ------
Total adjustments 1429 763
------ ------
Net cash provided by operating activities 4606 3796
====== ======
Supplemental disclosure of noncash investing
activities:
Transfers from loans to other real estate owned 67 0
Market value adjustment to securities 2837 (11264)
Transfer from securities held for sale to held
for investment 10049 11216
See notes to condensed consolidated financial statement.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June
30, 1995, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1994.
NOTE B - CONTINGENT LIABILITIES
Various claims and lawsuits are pending against the Company and its
subsidiaries. Although the amount of any ultimate liability with
respect to such matters cannot be determined, in the opinion of
management, after consultation with legal counsel, those claims and
other lawsuits, when resolved, will not have a material adverse effect
on the consolidated financial condition of the Company and it's
subsidiaries.
NOTE C - ACQUISITION
On April 14, 1995, the Company acquired American Bank Capital
Corporation of Florida and its subsidiary, American Bank of Martin
County. The transaction was treated as a purchase with the Company
paying $9.3 million. The following represents the proforma impact as
of and for the year ended December 31, 1994, assuming the acquisition
occurred January 1, 1994:
December 31, 1994 (Dollars in thousands)
----------------------------------------------------------------
Total assets 726244
Total loans 340022
Total deposits 621524
Shareholders'equity 55584
Intangible assets 7662
Tangible Tier 1 capital to adjusted assets 7.46%
(Dollars in thousands,
For the year ended December 31, 1994 except per share amounts)
------------------------------------------------------------------
Net interest income 27328
Noninterest income 7771
Noninterest expense 24330
Net income 6910
Earnings per share 1.60
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
SECOND QUARTER 1995
The following discussion and analysis is designed to provide a better
understanding of the significant factors related to the company's
results of operations and financial condition. Such discussion and
analysis should be read in conjunction with the company's Condensed
Consolidated Financial Statements and the notes attached thereto.
EARNINGS SUMMARY
Earnings in the second quarter were enhanced through the acquisition
of $62 million in deposits and $46 million in loans of American Bank
Capital Corporation of Florida ("American") and its subsidiary,
American Bank of Martin County, on April 14, 1995. The company's
subsidiary, First National Bank and Trust Company of the Treasure
Coast, now has seventeen branches with the addition of one branch
resulting from the acquisition.
Net income for the second quarter of 1995 totalled $1,714,000 or $0.40
per share, compared with $1,626,000 or $0.38 per share in the second
quarter of 1994 and $1,463,000 or $0.34 per share in the first quarter
of 1995. Net income for the second quarter of 1994 included an after
tax securities gain of $518,000 or $0.12 per share.
Return on average assets was 0.99 percent and return on average
shareholders' equity was 11.18 percent for the second quarter of 1995,
compared to second quarter 1994's performance of 1.08 percent and
11.34 percent, respectively, and 1995's first quarter results of 0.92
percent and 9.82 percent, respectively.
NET INTEREST INCOME
Earnings in the second quarter of 1995 were affected by a net interest
margin (on a tax equivalent basis) that decreased from 4.49 percent in
the first quarter of 1995 to 4.29 percent in the second quarter of
this year. While competing institutions in our market held deposit
rates level for NOW, savings and money market deposits, the rate for
certificates of deposit increased markedly, by 53 basis points to 5.53
percent. The resulting rate paid for all interest bearing liabilities
for the second quarter of 1995 was 31 basis points higher than in the
first quarter of 1995. Enhancing the margin since the first quarter
of 1995 were increases in the yields on both investments and federal
funds sold of 11 basis points, with the yield on earning assets
increasing 8 basis points.
For the second quarter a year ago, the net interest margin recorded
was 4.61 percent. An increase in the general level of interest rates
over the last twelve months has resulted in a 70 basis point increase
in the yield on average earning assets to 7.65 percent. Similarly,
but to a higher degree, the rate paid for interest bearing liabilities
has increased 118 basis points to 3.89 percent.
Average earning assets for the second quarter of 1995 increased
$90,139,000 or 16.3 percent to $644,365,000, compared to prior year's
second quarter. The acquisition and loan demand, which picked up pace
in the latter half of 1994 and into 1995, provided a $86,199,000 or
32.8 percent increase in average loans to $349,378,000. Average
investment securities declined $36,232,000 or 12.9 percent, while
average federal funds sold grew $40,172,000 to $49,489,000. The
increase in average federal funds sold is related to securities sales
and maturities occurring in the fourth quarter and in the first and
second quarter of 1995. These funds will be utilized to fund loan
growth or will be reinvested.
In part, the mix of deposits had an unfavorable impact on the rate
paid for interest bearing liabilities. Average certificates of
deposit have increased $92,502,000 or 48.5 percent to $283,124,000,
while average balances for NOW, savings and money market accounts,
which are lower cost interest bearing deposits, have declined by
$18,123,000 to an aggregate balance of $267,335,000. Favorably
affecting deposit mix was an increase in average demand deposits of
$11,864,000 or 19.0 percent to $74,219,000.
If loan demand continues to improve as a result of the economy firming
up, and local competition allows rates paid for core deposits to
remain low, the net interest margin should remain level or possibly
improve over the remainder of 1995.
PROVISION FOR LOAN LOSSES
No provision was recorded in the second quarter of this year, compared
to a provision of $95,000 in the second quarter of 1994. Net
recoveries for the second quarter of $54,000 were realized, compared
to $36,000 in net charge-offs in the first three months of 1995 and
$28,000 in net recoveries last year in the second quarter. Net
recoveries annualized as a percent of average loans totalled 0.01
percent for the first half of 1995, compared to net charge-offs of
0.15 percent for all of 1994.
Management determines the provision for loan losses which is charged
to operations by constantly analyzing and monitoring delinquencies,
nonperforming loans and the level of outstanding balances for each
loan category, as well as the amount of net charge offs, and by
estimating losses inherent in its portfolio. While the company's
policies and procedures used to estimate the monthly provision for
loan losses charged to operations are considered adequate by
management and are reviewed from time to time by the Office of the
Comptroller of the Currency (OCC), there exist factors beyond the
control of the company, such as general economic conditions both
locally and nationally, which make management's judgment as to the
adequacy of the provision necessarily approximate and imprecise.
SECURITIES GAINS (LOSSES)
Securities losses in the first half of 1995 netted to only $7,000.
However, in May 1994, to reduce the company's exposure to higher
interest rates, U.S. agency securities totalling $24.7 million and
held in the company's available for sale portfolio were sold realizing
a gain of $846,000. These securities were to mature in the years 1999
and 2000. Of the proceeds from the sale, $8.1 million was reinvested
in shorter term U.S. Treasury and U.S. agency securities and the
remainder was utilized to fund seasonal deposit declines and lending
activities.
NONINTEREST INCOME
Noninterest income, excluding gains and losses from securities sales,
increased $284,000 or 17.8 percent to $1,880,000 in the second quarter
compared to one year earlier. The largest increase in noninterest
income occurred in service charges on deposits which increased
$151,000 or 31.3 percent compared to prior year. Service charges on
deposits grew during the second quarter as a result of the acquisition
and certain services being recently repriced.
The next largest increase in noninterest income was in brokerage
commissions and fees which increased $119,000 or 40.6 percent in the
second quarter year over year. The financial market turmoil during
1994 carried into 1995 culminating in first quarter's lower volumes of
business. However, second quarter's results indicate an improving
trend and renewed interest by consumers to invest in financial
markets. The company intends to continue to emphasize its brokerage
services to both existing and new customers, as expectations are that
financial markets will be more robust during the remainder of 1995.
Noninterest income, excluding gains and losses from securities sales,
for the first half of 1995 increased $119,000 or 3.5 percent, with
increases in service charges on deposits of $122,000 and brokerage
commissions and fees of $36,000. Other income declined $26,000 or 9.8
percent due to gains of $40,000 on the sale of $24.2 million in fixed
rate residential mortgage loans recognized during the first quarter of
1994. No such sales were recorded in 1995.
NONINTEREST EXPENSES
When compared to 1994, noninterest expenses for the second quarter
decreased by $55,000 or 0.9 percent to $6,107,000 and for the first
half declined $120,000 or 1.0 percent to $11,972,000. The results
reflect management's efforts to reduce overhead expenses, without
impacting marketing initiatives and service levels provided to bank
clients.
Salaries and wages increased $249,000 or 11.4 percent, compared to the
second quarter of 1994, and increased $396,000 or 9.1 percent for the
first half of 1995. A new branch opened in November 1994 in Port St.
Lucie, Florida and a new branch acquired from American on April 14,
1995 increased salaries and wages $47,000 for the quarter and $77,000
year to date. In addition, wages for lending personnel grew $152,000
for the second quarter and $198,000 year to date when compared to last
year, effected by increased loan demand. Employee benefits increased
$46,000 year to year for the quarter and grew $41,000 for the first
six months compared to prior year, due to higher payroll taxes and
profit sharing expense.
Occupancy expenses and furniture and equipment expenses, on an
aggregate basis, declined $6,000 versus second quarter results last
year and were $33,000 lower for the first six months of 1995 versus
prior year. The premium for Federal Deposit Insurance Corporation
("FDIC") insurance was $93,000 lower in both the first and second
quarters of 1995, reflecting action by the FDIC to lower premium rates
from $0.23 per $100 of deposits to $0.045 per $100 of deposits,
effective in the second half of 1995.
Costs associated with foreclosed and repossessed asset management
decreased $53,000 when compared to the second quarter of 1994 and
$167,000 when compared to the first half of 1994. Legal and
professional fees recorded for the second quarter of 1995 were
$146,000 lower and for the first six months of 1995 were $197,000
lower. Other real estate owned ("OREO") totalled only $165,000 at
June 30, 1995.
A decrease in other expense of $71,000 or 5.1 percent was recorded in
the second quarter compared to last year for the same period. Other
expenses were just $3,000 higher for the six month period ended June
30, 1995 versus prior year.
INCOME TAXES
Income taxes as a percentage of income before taxes were 33.9 percent
for the first half of this year, compared to 32.5 percent in 1994.
The increase in rate reflects a higher rate of provisioning for state
income taxes, a result of lower state intangible taxes paid to the
State of Florida that can be taken as a credit. In addition, tax-
exempt income as a percentage of the company's revenue stream is
lower, largely due to the accretive effect of the acquisition of
American.
FINANCIAL CONDITION
CAPITAL RESOURCES
Earnings retained by the company during the first half of 1995 and
over the prior twelve months has provided the company with continued
increases to its capital. At June 30, 1995, total capital was
$59,138,000, 7.4 percent higher than at June 30, 1994. The company's
ratio of average shareholders' equity to average total assets during
the first half of 1995 was 9.10 percent, compared to 9.35 percent
during the first half of 1994. The decline in this ratio was a result
of increased assets due to the acquisition of American.
Regulatory agencies have implemented a risk-based capital framework
with a minimum ratio of total capital to risk-weighted assets of 8
percent. At June 30, 1995, the company's ratio of total capital to
risk-weighted assets under these risk-based rules was 15.83 percent
and its ratio of Tier 1 capital to total adjusted assets was 7.66
percent. In comparison, these ratios were 19.51 percent and 9.25
percent, respectively, at June 30, 1994. Capital, as it is defined
for these ratios, excludes certain intangible assets, including
goodwill. At June 30, 1995, intangible assets excluded from capital
as a result of the acquisition of American totalled $5,964,000. In
comparison, no deduction to capital was calculated in 1994.
LOAN PORTFOLIO
All of the company's loan activity is with customers located within
its defined market area known as the Treasure Coast of Florida. This
area is located on the southeastern coast of Florida above Palm Beach
County and extends north to Brevard County.
Total loans (net of unearned income and excluding the allowance for
loan losses) were $364,147,000 at June 30, 1995, $96,235,000 or 35.9
percent more than at June 30, 1994, and $71,357,000 or 24.4 percent
more than at December 31, 1994. Approximately $46 million of the
increase is directly related to the purchase of American.
At June 30, 1995, the company's mortgage loan balances secured by
residential properties amounted to $188,459,000 or 51.8 percent of
total loans. The next largest concentration was loans secured by
commercial real estate which totalled $89,534,000 or 24.6 percent. The
company was also a creditor for consumer loans to individual customers
(primarily secured by motor vehicles) totalling $40,821,000,
commercial loans of $16,310,000, home equity lines of credit of
$10,080,000, and unsecured credit cards of $6,724,000.
All loans and commitments for one-to-four family residential
properties and commercial real estate are generally secured with first
mortgages on property with the amount loaned at inception to the fair
value of the property not to exceed 80 percent. Nearly all
residential real estate loans are made upon terms and conditions that
would make such loans eligible for resale under Federal National
Mortgage Association ("FNMA") or Federal Home Loan Mortgage
Corporation ("FHLMC") guidelines.
Real estate mortgage lending (particularly residential properties) is
expected to remain an important segment of the company's lending
activities. Exposure to market interest rate volatility with respect
to mortgage loans is managed by attempting to match maturities and
repricing opportunities for assets against liabilities, when possible.
At June 30, 1995, approximately $132 million or 70 percent of the
company's mortgage loan balances secured by residential properties
were adjustable, of which $127 million were adjustable rate 15- or 30-
year mortgage loans ("ARMs") that reprice based upon the one year
constant maturity United States Treasury Index plus a margin. These
15- and 30-year ARMs generally consist of two types: 1) those
repricing annually by up to one percent with a four percent cap over
the life of the loan, of which balances of approximately $37 million
were outstanding at June 30, 1995, and 2) those limited to a two
percent per annum increase and a six percent cap over the life of the
loan, of which approximately $90 million in balances existed at June
30, 1995.
The company's historical charge off rates for residential real estate
loans have been minimal, with annualized charge offs for the first six
months of 1995 of 0.03 percent and none for all of 1994.
At June 30, 1995, the company had commitments to make loans (excluding
unused home equity lines of credit and credit card lines) of
$21,083,000, compared to $14,101,000 at June 30, 1994.
The company attempts to reduce its exposure to the risk of the local
real estate market by limiting the aggregate size of its commercial
real estate portfolio, currently 24.6 percent of total loans, and by
making commercial real estate loans primarily on owner occupied
properties. The remainder of the real estate loan portfolio is
residential mortgages to individuals, and home equity loans, which the
company considers less susceptible to adverse effects from a downturn
in the real estate market, especially given the area's large
percentage of retired persons.
ALLOWANCE FOR LOAN LOSSES
Net losses on credit cards and residential real estate totalled
$88,000 and $29,000, respectively, for the first six months of 1995,
compared to net losses of $70,000 and recoveries of $4,000,
respectively, in 1994. Current and historical credit losses arising
from real estate lending transactions continue to compare favorably
with the company's peer group. Net recoveries recorded for commercial
real estate loans and installment loans of $99,000 and $26,000,
respectively, in the first half of 1995 compared favorably with the
prior year when $15,000 in commercial real estate loan recoveries and
$1,000 in installment loan charge offs were reported. Net recoveries
for commercial loans of $18,000 in the first half of 1995 compared to
$21,000 in recoveries in 1994.
As a result of the acquisition, American's allowance for loan losses
of $556,000 was incorporated with the company's reserves. The ratio
of the allowance for loan losses to net loans outstanding was 1.08
percent at June 30, 1995, compared to 1.10 percent at March 31, 1995,
prior to the acquisition. This ratio was 1.39 percent at June 30,
1994. The allowance for loan losses as a percentage of nonaccrual
loans and loans 90 days or more past due was 77.2 percent at June 30,
1995, compared to 139.6 percent at the same date in 1994.
NONPERFORMING ASSETS
At June 30, 1995, the company's ratio of nonperforming assets to loans
outstanding plus other real estate owned was 1.25 percent, compared to
2.16 percent one year earlier. A single accruing loan past due 90
days or more of $659,000 was outstanding, compared to $3,000 at June
30, 1994, and OREO of $111,000 was recorded at June 30, 1995, compared
to an outstanding balance of $3,200,000 at the end of the second
quarter in 1994. Repayment of the entire balance for the loan past
due 90 days or more outstanding at June 30, 1995 was made in July.
Nonaccrual loans totalled $4,457,000 at June 30, 1995, compared to a
balance of $2,667,000 at June 30, 1994. All of the nonaccrual loans
outstanding at June 30, 1995 were performing (current with respect to
payments), with the exception of ten loans aggregating to $860,000.
The performing loans were placed on nonaccrual status because the
company has determined that the collection of principal or interest in
accordance with the terms of such loans is uncertain. Of the amount
reported in nonaccrual loans at June 30, 1995, 95.0 percent is secured
with real estate, the remainder by the Small Business Administration
("SBA"). Management does not expect significant losses for which an
allowance for loan losses has not been provided associated with the
ultimate realization of these assets.
SECURITIES
Debt securities that the company has the intent and ability to hold to
maturity are carried at amortized cost. All other securities are
carried at market value and are available for sale. At June 30, 1995,
the company had $104,680,000 or 44.3 percent of total securities
available for sale and securities held to maturity were carried at an
amortized cost of $131,487,000, representing 55.7 percent of total
securities.
The company's securities portfolio decreased $32,584,000 from June 30,
1994. The securities portfolio as a percentage of earning assets was
37.7 percent at June 30, 1995, compared to 50.2 percent one year ago.
This decline is directly related to growth in the loan portfolio and
changes to the portfolio mix.
During 1994, management reduced the total portfolio's interest rate
risk by reducing the average life of the portfolio from four years to
less than three years and by increasing the percentage of adjustable
and floating rate securities. During the first half of 1995, proceeds
of $56.3 million from securities sales and maturing funds of $25.3
million were derived, of which $56.2 million was reinvested.
Remaining funds were invested in overnight federal funds sold, which
at June 30, 1995 totalled $26,665,000, or utilized to fund loan
growth. Management believes a significant portion of these remaining
funds will be used to fund further increases in the loan portfolio.
Company management considers the overall quality of the securities
portfolio to be high. The securities portfolio had an unrealized net
loss of $2,120,000 or 0.9 percent of amortized cost at June 30, 1995,
compared to a net loss of $8,721,000 or 3.4 percent of amortized cost
at December 31, 1994, and a net loss of $5,045,000 or 1.8 percent of
amortized cost at June 30, 1994. No securities are held which are not
traded in liquid markets or that meet Federal Financial Institution
Examination Council ("FFIEC") definition of a high risk investment.
The company does have any assets which would be defined as a
derivative security.
DEPOSITS
Total deposits increased $96,069,000 or 18.3 percent to $621,884,000
at June 30, 1995, compared to one year earlier. Approximately $62
million of the increase was attributable to the American acquisition.
The commercial bank deposits acquired are primarily core deposits
with interest rates paid and characteristics very similar to the
company's existing customer accounts.
Certificates of deposit increased $92,272,000 or 47.2 percent to
$287,790,000 over the past twelve months, while lower cost interest
bearing deposits (NOW, savings and money markets deposits) declined
$8,964,000 or 3.3 percent to $260,966,000. Noninterest bearing demand
deposits increased $12,761,000 or 21.1 percent to $73,128,000.
The increase in certificates of deposit and decline in NOW, savings
and money market deposits is directly related to higher interest rates
offered on certificates, reflecting the general rise in interest rates
during 1994 and 1995, and resulting renewed interest by customers in
investing in certificates of deposit.
INTEREST RATE SENSITIVITY
Interest rate movements and deregulation of interest rates have made
managing the company's interest rate sensitivity increasingly
important. The company's Asset/Liability Management Committee
("ALCO") is responsible for managing the company's exposure to changes
in market interest rates. The committee attempts to maintain stable
net interest margins by generally matching the volume of assets and
liabilities maturing, or subject to repricing, and by adjusting rates
to market conditions and changing interest rates.
Interest rate exposure is managed by monitoring the relationship
between earning assets and interest bearing liabilities, focusing
primarily on those that are rate sensitive. Rate sensitive assets and
liabilities are those that reprice at market interest rates within a
relatively short period, defined here as one year or less. The
difference between rate sensitive assets and rate sensitive
liabilities represents the company's interest sensitivity gap, which
may be either positive (assets exceed liabilities) or negative
(liabilities exceed assets).
On June 30, 1995, the company had a negative gap position based on
contractual maturities and prepayment assumptions for the next twelve
months, with a negative cumulative interest rate sensitivity gap as a
percentage of total earning assets of 22.5 percent. This means that
the company's assets reprice more slowly than its deposits. In a
declining interest rate environment, the cost of the company's
deposits and other liabilities may be expected to fall faster than the
interest received on its earning assets, thus increasing the net
interest spread. If interest rates generally increase, the negative
gap means that the interest received on earning assets may be expected
to increase more slowly than the interest paid on the company's
liabilities, therefore decreasing the net interest spread.
It has been the company's experience that deposit balances for NOW and
savings accounts are stable and subjected to limited repricing when
interest rates increase or decrease within a range of 200 basis
points. Therefore, the company's ALCO uses model simulation to manage
and measure its interest rate sensitivity.
The company has determined that an acceptable level of interest rate
risk would be for net interest income to fluctuate no more than 30
percent given an immediate change in interest rates (up or down) of
200 basis points. At March 31, 1995, net interest income would
decline 12 percent if interest rates would immediately rise 200 basis
points.
The company does not presently use interest rate protection products
in managing its interest rate sensitivity.
LIQUIDITY MANAGEMENT
Contractual maturities for assets and liabilities are reviewed to
adequately maintain current and expected future liquidity
requirements. Sources of liquidity, both anticipated and
unanticipated, are maintained through a portfolio of high quality
marketable assets, such as residential mortgage loans, securities
available for sale and federal funds sold. The company has access to
federal funds lines of credit and is able to provide short term
financing of its activities by selling, under an agreement to
repurchase, United States Treasury and Government agency securities
not pledged to secure public deposits or trust funds. At June 30,
1995, the company had federal funds lines of credit available and
unused of $32,500,000 and had $146,081,000 of United States Treasury
and Government agency securities and mortgage backed securities not
pledged and available for use under repurchase agreements.
Liquidity, as measured in the form of cash and cash equivalents
(including federal funds sold), totalled $57,082,000 at June 30, 1995
as compared to $22,383,000 at June 30,1994. Cash and cash equivalents
vary with seasonal deposit movements and are generally higher in the
winter than in the summer, and vary with the level of principal
repayments and investment activity occurring in the company's
securities portfolio and loan portfolio.
As is typical of financial institutions, cash flows from investing
activities (primarily in loans and securities) and from financial
activities (primarily through deposit generation and short term
borrowings) exceeded cash flows from operations. In 1995, the cash
flow from operations of $4,606,000 was $810,000 higher than during the
same period of 1994. Cash flows from investing and financing
activities reflect the increase in loan and deposit balances
experienced.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements presented herein have been prepared in
accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in the
relative purchasing power of money, over time, due to inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a
result, interest rates have a more significant impact on a financial
institution's performance than the general levels of inflation. Since
the beginning of 1994, the Federal Reserve Bank has increased interest
rates 275 basis points in an effort to curb inflation through monetary
policy. In addition, inflation increases financial institutions'
costs for goods and services purchased, the cost of salaries and
benefits, occupancy expense, and similar items. Inflation and related
increases in interest rates generally decrease the market value of
investments and loans held and may adversely affect liquidity,
earnings, and share-holders' equity. Mortgage originations and
refinancings tend to slow as interest rates increase, and likely will
reduce the company's earnings from such activities and the income from
the sale of residential mortgage loans in the secondary market.
Interest rates do not necessarily move in the same magnitude as the
prices of goods and services. In today's environment, with values of
real estate falling due to increased amounts of funds available for
real estate investment, and the anticipated effect of the RTC's
efforts to liquidate unprecedented volume of real properties from
failed thrifts, the values of real estate collateralizing the
company's loans and real estate held as other owned, could be
adversely affected.
Part II OTHER INFORMATION
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 1995 Annual Meeting of Shareholders was held
April 20, 1995.
(b) All directors reported to the Commission in the 1995
proxy statement were re-elected in entirety.
(c) The following matters voted upon at the meeting:
(i) The election of eight directors to serve until the
1996 Annual Meeting of Shareholders and until their
successors have been elected and qualified. The
number of votes cast for and against their re-
election were 8,400,812 (99.32%) and 57,351,
respectively.
(ii) The ratification of the appointment of Arthur Andersen
LLP as independent auditors for the fiscal year
ending December 31, 1995. The number of votes
cast for and against their ratification were
8,403,365 (99.35%) and 14,280, respectively.
Item 6 REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the
three month period ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SEACOAST BANKING CORPORATION OF FLORIDA
August 14, 1995 /s/ Dennis S. Hudson, III
DENNIS S. HUDSON, III
Executive Vice President &
Chief Operating Officer
August 14, 1995 /s/ William R. Hahl
WILLIAM R. HAHL
Senior Vice President &
Chief Financial Officer