1
EXHIBIT 13
Financial Highlights
(Dollars in thousands except per share data) 1995 1994 1993 1992 1991
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FOR THE YEAR
Net interest income $ 27,090 $ 25,200 $ 26,059 $ 27,477 $ 21,916
Provision for loan losses 250 145 150 1,103 2,775
Noninterest income:
Securities gains 480 752 1,204 1,759 476
Other 7,517 6,475 7,588 7,693 6,974
Noninterest expenses 24,246 23,005 24,345 26,655 22,008
Income before income taxes 10,591 9,277 10,356 9,171 4,583
Provision for income taxes 3,765 3,091 3,488 3,022 1,317
Income before cumulative effect
of a change in accounting principle 6,826 6,186 6,868 6,149 3,266
Cumulative effect on prior years of a
change in accounting for income taxes 0 0 264 0 0
Net income 6,826 6,186 7,132 6,149 3,266
Core earnings (1) 10,425 8,690 10,421 10,234 7,570
Per share data:
Income before cumulative effect of
a change in accounting principle 1.58 1.44 1.60 1.45 0.92
Cumulative effect on prior years of
a change in accounting for income taxes 0.00 0.00 0.06 0.00 0.00
Net income 1.58 1.44 1.66 1.45 0.92
Cash dividends paid: Class A common 0.54 0.49 0.45 0.41 0.40
Book Value 14.75 12.98 14.13 11.71 10.65
Dividends to net income 33.4% 33.5% 26.5% 27.9% 44.7%
AT YEAR END
Assets $771,348 $662,711 $639,404 $ 613,558 $ 610,171
Securities 213,638 258,661 283,732 292,935 266,775
Net loans 410,898 289,417 255,995 247,754 276,845
Deposits 660,967 559,629 533,486 551,368 560,740
Shareholders' equity (2) 62,200 55,584 60,257 49,707 45,045
Performance ratios:
Return on average assets 1.00% 1.02% 1.19% 1.02% 0.60%
Return on average equity 11.05 10.69 13.47 12.92 8.38
Net interest margin (3) 4.32 4.57 4.80 5.07 4.52
Average equity to average assets 9.01 9.51 8.81 7.89 7.19
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(1) Income before taxes excluding the provision for loan losses, securities
gains and expenses associated with foreclosed and repossessed asset
management and dispositions.
(2) Includes securities valuation equity (allowance) of $(705,000) in 1995,
$(4,391,000) in 1994 and $4,667,000 in 1993 related to adoption of
Financial Accounting Standard Board Statement No. 115 "Accounting for
Certain Investments in Debt and Equity Securities."
(3) On a fully taxable equivalent basis.
2
FINANCIAL REVIEW
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1995 MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis is designed to provide a better
understanding of the significant factors related to the Company's results of
operations and financial condition. Such discussion and analysis should be
read in conjunction with the Consolidated Financial Statements of the Company
and the notes thereto, and the Financial Highlights provided on page 3 of this
report.
Earnings during 1995 were impacted by 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. Earnings were also favorably
impacted by loan growth and improved trust and brokerage fees and commissions.
Net income for 1995 totalled $6,826,000 or $1.58 per share, compared with
$6,186,000 or $1.44 per share in 1994 and $7,132,000 or $1.66 per share in
1993. Return on average assets was 1.00 percent and return on average
shareholders' equity was 11.05 percent for 1995, compared to the prior year's
results of 1.02 percent and 10.69 percent, respectively, and 1993's results
which included securities gains of $1,204,000 and the positive impact of
$264,000 from the adoption of FASB statement No. 109, "Accounting for Income
Taxes", of 1.19 percent and 13.47 percent, respectively.
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CONDENSED INCOME STATEMENT AS A PERCENT OF AVERAGE ASSETS Table 1
(Tax equivalent basis)
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1995 1994 1993
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Net interest income 4.00% 4.21% 4.40%
Provision for loan losses 0.04 0.02 0.02
Noninterest income
Securities gains 0.07 0.12 0.20
Other 1.10 1.06 1.26
Noninterest expenses 3.53 3.78 4.05
------------------------------------------
Income before income taxes 1.60 1.59 1.79
Provision for income taxes including
tax equivalent adjustment
and cumulative effect of a change
in accounting principle 0.60 0.57 0.60
-------------------------------------------
NET INCOME 1.00% 1.02% 1.19%
===========================================
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RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income (fully taxable equivalent) for 1995 increased $1,859,000
or 7.3 percent, with increased business volumes more than offsetting the
effect of a decline in the net interest margin from 4.57 percent a year ago to
4.32 percent. While competing institutions in our market lowered deposit rates
for savings and NOW deposits, rates paid for other types of deposits increased
and resulted in a 32 basis points rise to 2.85 percent for money market
deposits and a 142 basis points rise to 5.48 percent for time deposits. In
addition, the rate paid for short term borrowings, primarily sweep repurchase
agreements with customers of the Company's subsidiary bank, increased 121
basis points to 4.59 percent. The resulting rate paid for all interest bearing
liabilities in 1995 was 3.85 percent, 99 basis points higher than in 1994.
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CHANGES IN AVERAGE EARNING ASSETS Table 2
(Dollars in thousands)
Increase/(Decrease) Increase/(Decrease)
------------------------------------------------------
1995 vs 1994 1994 vs 1993
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Securities:
Taxable $(35,028) (13.4)% $(12,698) (4.6)%
Nontaxable (435) (3.1) 598 4.5
Federal funds sold and other
short term investments 25,119 177.8 6,299 80.5
Loans, net 85,713 31.7 14,883 5.8
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TOTAL $ 75,369 13.5% $ 9,082 1.6%
===================================================
In part, a renewed interest by consumers in certificates of deposit offered at
higher rates during the second half of 1994 and during 1995 effected an
increase in the Company's cost of interest bearing liabilities. Average time
deposits increased $78,325,000 or 39.4 percent, while average balances for
NOW, savings and money market accounts, which are lower cost interest bearing
deposits, declined $14,540,000 or 5.2 percent on an aggregate basis. Favorably
affecting deposit mix was an increase in average noninterest bearing demand
deposits of $9,084,000 or 14.4 percent.
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RATE/VOLUME ANALYSIS (ON A TAX EQUIVALENT BASIS) Table 3
Amount of Increase (Decrease) (Dollars in thousands)
1995 vs 1994 1994 vs 1993
--------------------------------------------------------------------------------
Due to Change in: Due to Change in:
Volume Rate Mix Total Volume Rate Mix Total
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INTEREST INCOME
Securities:
Taxable $(2,116) $ 733 $ (98) $(1,481) $ (818) $(1,110) $ 51 $(1,877)
Nontaxable (37) (22) 1 (58) 52 (31) (1) 20
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(2,153) 711 (97) (1,539) (766) (1,141) 50 (1,857)
Federal funds sold and other short
term investments 1,118 209 371 1,698 188 115 92 395
Loans 6,915 1,522 483 8,920 1,223 (387) (22) 814
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TOTAL INTEREST INCOME 5,880 2,442 757 9,079 645 (1,413) 120 (648)
INTEREST EXPENSE
NOW (including Super NOW) (166) (52) 5 (213) 97 26 1 124
Savings deposits (245) (31) 5 (271) (169) (108) 10 (267)
Money market accounts 205 260 26 491 32 35 0 67
Time deposits 3,178 2,830 1,115 7,123 (144) 302 (6) 152
--------------------------------------------------------------------------------
2,972 3,007 1,151 7,130 (184) 255 5 76
Federal funds purchased and other short
term borrowings (5) 96 (1) 90 55 56 23 134
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TOTAL INTEREST EXPENSE 2,967 3,103 1,150 7,220 (129) 311 28 210
--------------------------------------------------------------------------------
NET INTEREST INCOME $ 2,913 $ (661) $ (393) $ 1,859 $ 774 $(1,724) $ 92 $ (858)
================================================================================
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The yield on earning assets increased 59 basis points during 1995 to 7.63
percent. Yield increases in 1995 for investment securities, federal funds sold
and the loan portfolio of 27 basis points, 148 basis points and 56 basis
points, respectively, resulted from an improved mix of earning assets. Average
earning assets for 1995 increased $75,369,000 or 13.5 percent, compared to the
prior year. The acquisition of American and loan demand, which picked up pace
during 1995, provided an $85,713,000 or 31.7 percent increase in average
loans. While $68 million in residential mortgage loans were originated in
1995, no sales of residential mortgage loans were transacted. Average
securities declined $35,463,000 or 12.9 percent to $240,408,000, while average
federal funds sold grew $25,119,000 or 177.8 percent. In part, the increase in
average federal funds sold is related to securities sales of $115,107,000 and
maturities of $62,586,000 occurring over the past twelve months, offset by
purchases of securities of $114,244,000. These funds will be utilized to fund
1996 loan growth or will be reinvested.
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CHANGES IN AVERAGE INTEREST BEARING LIABILITIES Table 4
(Dollars in thousands)
Increase/(Decrease) Increase/(Decrease)
------------------- -------------------
1995 vs 1994 1994 vs 1993
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NOW (including Super NOW) $(10,223) (8.6)% $ 6,057 5.3 %
Savings deposits (12,431) (16.4) (8,041) (9.6)
Money market accounts 8,114 9.9 1,273 1.6
Time deposits 78,325 39.4 (3,686) (1.8)
Federal funds purchased and
other short term borrowings (133) (1.7) 2,306 40.9
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Total $ 63,652 13.2 % $(2,091) (0.4)%
=============================================================
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During 1994 and early 1995, the Federal Reserve Bank increased short term
interest rates steadily and the prime rate reached 9.00 percent in February of
this
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THREE YEAR SUMMARY Table 5
AVERAGE BALANCES, INTEREST INCOME AND EXPENSES, YIELDS AND RATES (1)
(Dollars in thousands) 1995 1994 1993
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Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
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ASSETS
Earning assets:
Securities
Taxable $226,854 $14,337 6.32% $261,882 $15,818 6.04% $274,580 $17,695 6.44%
Nontaxable 13,554 1,135 8.37 13,989 1,193 8.53 13,391 1,173 8.76
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TOTAL SECURITIES 240,408 15,472 6.44 275,871 17,011 6.17 287,971 18,868 6.55
Federal funds sold and other
short term investments 39,246 2,327 5.93 14,127 629 4.45 7,828 234 2.99
Loans (2) 355,885 30,716 8.63 270,172 21,796 8.07 255,289 20,982 8.22
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TOTAL EARNING ASSETS 635,539 48,515 7.63 560,170 39,436 7.04 551,088 40,084 7.27
Allowance for loan losses (3,845) (3,545) (3,953)
Cash and due from banks 24,152 23,737 23,009
Bank premises and equipment 16,769 16,182 17,105
Other assets 13,228 11,951 14,144
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$685,843 $608,495 $601,393
=========================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
NOW (Including Super NOW) $109,115 $ 1,721 1.58% $119,338 $ 1,934 1.62% $113,281 $ 1,810 1.60%
Savings deposits 63,485 1,228 1.93 75,916 1,499 1.97% 83,957 1,766 2.10
Money market accounts 89,836 2,558 2.85 81,722 2,067 2.53% 80,449 2,000 2.49
Time deposits 277,261 15,195 5.48 198,936 8,072 4.06% 202,622 7,920 3.91
Federal funds purchased and other
short term borrowings 7,816 359 4.59 7,949 269 3.38% 5,643 135 2.39
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TOTAL INTEREST BEARING LIABILITIES 547,513 21,061 3.85 483,861 13,841 2.86% 485,952 13,631 2.81
Demand deposits 72,310 63,226 58,807
Other liabilities 4,258 3,518 3,679
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624,081 550,605 548,438
Shareholders' Equity 61,762 57,890 52,955
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$685,843 $608,495 $601,393
=========================================================================================
Interest expense as % of earning assets 3.31% 2.47% 2.47%
Net interest income/yield on earnings
assets $27,454 4.32% $25,595 4.57% $26,453 4.80%
=========================================================================================
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(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.
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year. Since July, the Federal Reserve Bank has lowered short term rates 50
basis points, with an identical decline in the prime rate. Consensus opinion
among economists indicates lower inflation and a weaker economy are expected,
particularly if the United States Congress and the President concur on lower
federal government expenditures. This may result in further short term rate
cuts by the Federal Reserve Bank and a lower prime rate. Expectations within
the markets the Company serves are for loan demand to remain strong during
1996, with loans exceeding anticipated deposit growth on a percentage basis.
While the Company's average earning assets increased slightly during 1994 and
the mix of average earning assets improved, the yield on earning assets
declined 23 basis points in 1994 to 7.04 percent while the rate paid for
interest bearing liabilities increased 5 basis points to 2.86 percent. As
such, the Company's net interest income (fully taxable equivalent) in 1994
declined $858,000 or 3.2 percent compared to 1993's results. The decline in
yield on earning assets in 1994 resulted from the restructuring of earning
assets which began in late 1993 and continued in 1994. The restructuring
consisted of moving more earning assets into adjustable rate products from
higher yielding fixed rate instruments which had substantially more interest
rate volatility in a rising interest rate environment.
Average loan balances increased $14,883,000 or 5.8% during 1994. The Company
originated $59 million of residential mortgage loans during 1994 and sold
fixed rate residential mortgage loans totalling $24.7 million as part of the
Company's asset liability management restructuring. The yield on loans of 8.07
percent for 1994 was 15 basis points lower than in 1993.
Average securities balances declined $12,100,000 or 4.2 percent and the yield
on securities declined 38 basis points during 1994, from 6.55 percent to 6.17
percent. Proceeds from the sale of securities of $72,521,000 and maturities of
$32,997,000 were offset by purchases of $94,650,000. Securities with longer
durations were sold and replaced with securities having shorter durations.
While average time and savings deposits declined $3,686,000 or 1.8 percent and
$8,041,000 or 9.6 percent, respectively, during 1994, NOW accounts and money
market accounts increased $6,057,000 or 5.3 percent and $1,273,000 or 1.6
percent, respectively. Average demand deposits grew $4,419,000 or 7.5 percent.
Excess liquidity in the Treasure Coast market held deposit rate increases to a
minimum during the first half of 1994. During the second half of 1994, a
renewed interest by consumers in certificates of deposit effected an increase
in the Company's cost of interest bearing liabilities.
For the years ended December 31, 1995 and 1994, Table 3 discloses the
increases and decreases in net interest income attributable to changes in the
volume and rates of individual earning assets and interest bearing
liabilities. The balances of nonaccruing loans are included in average loans
outstanding.
PROVISION FOR LOAN LOSSES
The factors of our improved loan demand, and growth in loans outstanding,
offset by continued improvement in net charge offs (decline from $394,000 in
1994 to $113,000 in 1995) resulted in minimal provisioning for loan losses in
1995 of $250,000. The provision for loan losses in 1994 was $145,000, a
decline of $5,000 when compared to 1993. See "Nonperforming Assets" and
"Allowance for Loan Losses."
The Company's internal loan monitoring systems provide detailed monthly
analysis of delinquencies, nonperforming assets, and potential problem loans,
which are reviewed regularly by the Board of Directors.
Management determines the provision for loan losses which is charged to
operations by constantly analyzing and monitoring delinquencies, nonperforming
loans and the level of outstanding balances for each loan category, as well as
the amount of net charge offs, and by estimating losses inherent in its
portfolio. While the Company's policies and procedures used to estimate the
monthly provision for loan losses charged to operations are considered
adequate by management and are reviewed from time to time by the Office of the
Comptroller of the Currency, there exist factors beyond the control of the
Company, such as general economic conditions both locally and nationally,
which make management's judgment as to the adequacy of the provision
necessarily approximate and imprecise. Due to increased loan balances,
management forecasts a likelihood of higher provisioning for loan losses in
1996 than in 1995 and 1994.
NONINTEREST INCOME
Table 6 shows noninterest income for the years indicated.
Noninterest income, excluding gains from sales of securities, increased
$1,042,000 or 16.1 percent in 1995 compared to prior year. The largest
increase in noninterest income occurred in service charges on deposits which
increased $421,000 or 20.7 percent. Service charges on deposits grew during
the year as a result of the acquisition and certain services being repriced.
The next two largest increases in noninterest income during 1995 were in
brokerage commissions and fees and trust fees which increased $365,000 or 30.7
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percent and $186,000 or 10.8 percent, respectively, year over year. The
financial market turmoil during 1994 carried into 1995 culminating in first
quarter 1995's lower volumes of business. However, results during the
remainder of 1995 indicate an improving trend and renewed interest by
consumers to invest in financial markets. Additional sales staff in trust and
the repricing of trust services favorably impacted results for the year. The
Company intends to continue to emphasize its brokerage and trust services to
both existing and new customers, as expectations are that financial markets
will remain robust in 1996.
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NONINTEREST INCOME Table 6
(Dollars in thousands)
Year Ended % Change
---------------------------------------------------------
1995 1994 1993 95/94 94/93
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Service charges on deposit accounts $2,454 $2,033 $2,208 20.7% (7.9)%
Trust fees 1,908 1,722 1,785 10.8 (3.5)
Other service charges and fees 1,098 1,028 1,105 6.8 (7.0)
Brokerage commissions and fees 1,555 1,190 1,753 30.7 (32.1)
Other 502 502 737 0.0 (31.9)
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7,517 6,475 7,588 16.1 (14.7)
Securities gains 480 752 1,204 (36.2) (37.5)
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TOTAL $7,997 $7,227 $8,792 10.7% (17.8)%
=========================================================
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Noninterest income, excluding gains from sales of securities, declined
$1,113,000 or 14.7 percent in 1994 compared to 1993. As noted above, the
environment for financial products in 1994 was in turmoil due to an uncertain
rate of economic growth and inflation. As a result, brokerage commissions and
fees earned by the Company declined by $563,000 or 32.1 percent in 1994 when
compared to 1993.
A decrease in service charges on deposits of $175,000 or 7.9 percent also
occurred when 1994's results are compared to 1993. Higher average balances
maintained by customers in their demand, NOW, savings and money market account
deposits reduced the opportunity for such charges to be incurred.
Residential real estate lending is an important segment of the
Company's lending activities, and exposure to market interest rate
volatility is managed at times by the sale of fixed rate loans in the
secondary market. Many fixed rate mortgages were generated during the
low interest rates in 1993, while the rising rates of 1994 had
consumers switching to lower initial rate periodic adjustable rate
mortgages. While no sales were recorded in 1995, during 1994 gains of
$45,000 on the sale of $24.7 million in fixed rate residential
mortgages were recognized and included in other income. In
comparison, a gain of $277,000 on the sale of $25.5 million in such
loans was recorded in 1993 in other income.
A decline in other service charges and fees of $77,000 or 7.0 percent which
occurred in 1994 versus 1993 was due to late charges on loans declining, as a
result of reduced loan delinquencies, and lower loan servicing income
as a result of loan sales in 1993 and 1994.
During 1995, as interest rates declined and the market value of the securities
portfolio increased, sales of securities generated a net gain of $480,000. The
proceeds from sales and funds received from maturation have been utilized to
fund seasonal deposit declines and to fund lending activities. The amount of
gains on sales of securities realized for the years ended December 31, 1994
and 1993 resulted from uncertain economic environments. During 1994,
securities sales were executed to reduce the Company's exposure to predicted
increasing interest rates in the future. As a result, a net gain of $752,000
was recognized in 1994.
In 1993, in anticipation of the adoption of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", at December 31, 1993, management's intent to hold certain
securities as investments changed in September, 1993. Therefore, some
securities were sold, creating gains, while others were identified as held for
sale. As a result, a net gain of $1,204,000 was recorded in 1993.
NONINTEREST EXPENSES
Table 7 shows the Company's noninterest expenses for the years indicated.
When compared to 1994, noninterest expenses increased $1,241,000 or 5.4
percent. The largest component of this increase was salaries and wages which
increased $968,000 or 11.1 percent. A new branch opened in November 1994 in
Port St. Lucie, Florida and a new branch acquired from American on April 14,
1995 increased salaries and wages $158,000. In addition, wages for lending
personnel grew $126,000 when compared to prior year, effected by increased
loan demand. Also, salaries related to trust and brokerage activities
increased $229,000 and $147,000, respectively. Employee benefits increased
$136,000 or 7.5 percent, due to a $97,000 increase in group health insurance
benefits, higher payroll taxes and increased costs associated with the
Company's 401K salary deferral plan and profit sharing expense.
Occupancy expenses and furniture and equipment expenses, on an aggregate
basis, declined $26,000. Marketing expenses increased $105,000 or 8.3 percent,
primarily as a result of increases in sales promotion and public relations
costs, reflecting heightened efforts to market products and services within
the Company's market.
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Legal and professional fees decreased $126,000 or 16.4 percent and costs
associated with foreclosed and repossessed asset management totalled only
$64,000. These results reflect lower activity levels with respect to problem
assets in 1995.
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NONINTEREST EXPENSES Table 7
(Dollars in thousands)
Year Ended % Change
---------------------------------------------------------
1995 1994 1993 95/94 94/93
- ------------------------------------------------------------------------------------------------------------
Salaries and wages $ 9,650 $ 8,682 $ 9,188 11.1% (5.5)%
Pension and other employee benefits 1,951 1,815 1,850 7.5 (1.9)
Occupancy 2,331 2,230 2,251 4.5 (0.9)
Furniture and equipment 1,900 2,027 2,231 (6.3) (9.1)
Marketing 1,367 1,262 996 8.3 26.7
Legal and professional fees 742 888 860 (16.4) 3.3
FDIC assessments 728 1,191 1,297 (38.9) (8.2)
Foreclosed and repossessed asset
management and dispositions, 64 20 1,119 220.0 (98.2)
Amortization of intangibles 418 88 84 375.0 4.8
Other 5,095 4,802 4,469 6.1 7.5
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TOTAL $24,246 $23,005 $24,345 5.4% (5.5)%
=========================================================
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The premium for Federal Deposit Insurance Corporation (FDIC) insurance was
$463,000 or 38.9 percent lower in 1995, compared to prior year. Since 1989,
the annual premium rate had increased from 0.09 percent of total deposits to
0.23 percent of total deposits for both commercial banks and savings and
loans. The rate assessed on deposits was reduced in mid-1995 for commercial
banks to a range of 0.04 percent to 0.10 percent, depending on the capital
adequacy and examination ratings imposed by governing bank regulatory
authorities on individual financial institutions. This action by the FDIC
effected the reduction in expense for 1995. The rate charged to savings and
loans remained unchanged, ranging from 0.23 percent to 0.29 percent. The rate
the Company's subsidiary bank is being assessed is the lowest rate indicated,
based on the guidelines.
Amortization of intangible assets increased $330,000 or 375.0 percent as a
result of the acquisition of American, for which the Company recorded
amortizable assets for goodwill and core deposit intangible. The other expense
category increased $293,000 or 6.1 percent in 1995 year over year. The
increase was primarily caused by higher postage and special delivery
expenditures and telephone costs, up $154,000 and $101,000, respectively.
When compared to 1993, noninterest expenses for 1994 decreased $1,340,000 or
5.5 percent. These results reflect the Company's efforts to reduce overhead
expenses, without impacting marketing initiatives and service levels provided
to bank clients.
The level of noninterest expenses was favorably impacted as a result of
efforts to improve productivity, reflected by salaries and wages decreasing
$506,000 or 5.5 percent in 1994 compared to 1993. A corresponding decrease for
pension and other employee benefits of $35,000 or 1.9 percent was recorded as
well. A decline of $183,000 was recorded for the Company's 401K salary
deferral plan and profit sharing plan expense. This decrease was offset by a
decrease of $142,000 in pension income recognized in 1994 compared to 1993
(See "Footnote H" to the Consolidated Financial Statements).
Costs associated with foreclosed and repossessed asset management in 1994
decreased $1,099,000 or 98.2 percent to $20,000 when compared to 1993,
entirely due to the sale of other real estate owned during the year.
Offsetting this decline was an increase in marketing expenses of $266,000 or
26.7 percent in 1994. Increased use of direct mail, print and television media
directly focused to key market segments the Company serves was utilized in
1994 but was not used in 1993.
The other expense category increased $337,000 or 7.4 percent in 1994 compared
to 1993. In part, the increase in 1994 was due to the settlement of a legal
dispute by the Company's insurance carrier to avoid future legal costs of a
trial. The Company's share of the settlement (the insurance deductible) of
$190,000 was charged to other expense. Remaining growth in other expense was
related to increased business volumes.
Federal Deposit Insurance Corporation (FDIC) assessments the Company paid
declined 8.2 percent in 1994.
INCOME TAXES
Income taxes for the year 1995 were $3,765,000, 21.8 percent above the
$3,091,000 for 1994, which was 11.4 percent below the $3,488,000 for 1993.
The Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes" was adopted in the first quarter of 1993, as required. Due
to the cumulative effect on prior years of its adoption, net income in the
first quarter and for the year 1993 was $264,000 or $0.06 per share higher.
Income taxes as a percentage of income before taxes, excluding the effect of
SFAS No. 109, were 35.5 percent for 1995, compared to 33.0 percent in 1994 and
33.7 percent in 1993. The increase in rate in 1995 reflects a higher rate of
provisioning for state income taxes, a result of lower intangible taxes paid
that can be taken as a credit. Conversely, the lower rate in 1994 compared to
1993 reflects a lower rate of provisioning for state income taxes, a result of
the State of Florida permitting an increase in the amount of intangible tax
that can be taken as a credit.
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8
Although the Company has $1,627,000 of deferred tax assets, no valuation
allowance has been recorded because $402,000 of this balance is related to
unrealized losses which, as a result of SFAS No. 115, are deemed to be
temporary, as well as, sufficient taxable income to carryback to recover these
differences.
FINANCIAL CONDITION
The Company increased its assets 16.4 percent between December 31, 1994 and
December 31, 1995. In comparison, the Company increased its assets 3.6 percent
between December 31, 1993 and December 31, 1994.
CAPITAL RESOURCES
Table 8 summarizes the Company's capital position and selected ratios.
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CAPITAL RESOURCES Table 8
(Dollars in thousands)
December 31 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
TIER 1 CAPITAL
Common stock $ 429 $ 428 $ 426
Additional paid in capital 18,612 18,498 18,231
Retained earnings 45,540 41,049 36,933
Treasury Stock (1,676) 0 0
Valuation allowance (1,016) (1,942) (330)
Goodwill (4,409) (0) (0)
--------------------------------------------------
Total Tier 1 capital 57,480 58,033 55,260
TIER 2 CAPITAL
Allowance for loan losses, as limited 4,066 3,373 3,622
--------------------------------------------------
Total Tier 2 capital 4,066 3,373 3,622
--------------------------------------------------
Total risk based capital $ 61,546 $ 61,406 $ 58,882
==================================================
Risk weighted assets $409,677 $314,489 $ 298,871
==================================================
Tier 1 risk based capital ratio 14.03% 18.45% 18.49%
Regulatory minimum 8.00 8.00 8.00
Total risk based capital ratio 15.02 19.53 19.70
Tier 1 capital to adjusted total assets (1) 7.78 9.19 8.97
Regulatory minimum 4.00 4.00 4.00
Shareholders' equity to assets 8.06 8.39 9.42
Average shareholders' equity to average total assets 9.01 9.51 8.81
- -------------------------------------------------------------------------------------------------------------
(1) Intangible assets have been deducted from tier 1 capital and adjusted total assets for this calculation.
- -------------------------------------------------------------------------------------------------------------
The Company's ratio of shareholders' equity to period end assets was 8.06
percent at December 31, 1995, compared with 8.39 percent one year earlier. The
decrease in 1995 reflects additional assets of $69 million resulting from the
acquisition of American. In addition, this ratio is impacted by SFAS No. 115,
"Accounting for Certain Debt and Equity Securities," by which a securities
valuation allowance of $705,000 was recognized at December 31, 1995, compared
to a securities valuation allowance of $4,391,000 at December 31, 1994.
Excluding the effect of this standard, the Company's ratio of shareholders'
equity to period end assets was 8.16 percent and 9.05 percent, respectively,
at year end 1995 and 1994.
Book value per common share outstanding totalled $14.75 at December 31, 1995,
compared to $12.98 at December 31, 1994. Without the effect of SFAS No. 115,
book value was $14.92 at December 31, 1995, compared to $14.01 at December 31,
1994, an increase of 7.0 percent.
Tangible book value per common share, reflecting a deduction from
shareholders' equity for intangible assets of $6,884,000 and $480,000 at
December 31, 1995 and 1994, respectively, was 13.12 percent at December 31,
1995, compared to 12.87 percent at December 31, 1994, an increase of 1.9
percent.
The Company is considered well capitalized, based on all measures of
regulatory capital.
LOAN PORTFOLIO
Table 9 shows total loans (net of unearned income) by category outstanding at
the indicated dates.
The Company makes substantially all its loans to customers located within the
three counties of the Treasure Coast. It has no foreign loans or highly
leveraged transaction (HLT) loans.
- ----------------------------------------------------------------------------------------------------------
LOANS OUTSTANDING Table 9
(Dollars in thousands)
December 31 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
Real estate mortgage $335,031 $229,713 $205,002 $197,696 $213,443
Real estate construction 10,540 8,728 2,710 3,680 3,240
Commercial and financial 17,205 11,296 9,692 8,626 12,150
Installment loans to individuals 51,959 42,912 42,158 41,430 51,746
Other loans 229 141 55 413 112
----------------------------------------------------------------
TOTAL $414,964 $292,790 $259,617 $251,845 $280,691
================================================================
- ----------------------------------------------------------------------------------------------------------
Total loans (net of unearned income and excluding the allowance for loan
losses) were $414,964,000 at December 31, 1995, $122,174,000 or 41.7 percent
more than at December 31, 1994. Approximately $46 million in loans were
acquired
26
9
as a result of the acquisition of American during 1995. The increase in the
Company's loan balances also reflects the impact of the sale of $24.7 million
in fixed rate residential mortgage loans during 1994. No sales of fixed rate
residential loans were transacted in 1995.
At December 31, 1995, the Company's mortgage loan balances secured by
residential properties amounted to $223,813,000 or 53.9 percent of total
loans. The next largest concentration was loans secured by commercial real
estate which totalled $100,879,000 or 24.3 percent. Most of the commercial
real estate loans were made to local businesses and professionals secured by
owner occupied properties. Loans and commitments for 1-4 family residential
properties and commercial real estate are generally secured with first
mortgages on property, with the loan to fair value of the property not
exceeding 80 percent on the date the loan is made. The Company was also a
creditor for consumer loans to individual customers (primarily secured by
motor vehicles) totalling $44,249,000 and unsecured credit cards of
$7,710,000.
Total loans (net of unearned income and excluding the allowance for loan
losses) were $292,790,000 at December 31, 1994, $33,173,000 or 12.8 percent
greater than at December 31, 1993. At December 31, 1994, the Company's
portfolio of mortgage loan balances secured by residential properties amounted
to $144,893,000 or 49.5 percent of total loans and loans secured by commercial
real estate totalled $75,831,000 or 25.9 percent of total loans. Consumer
loans to individual customers and credit card loans totalled $36,525,000 and
$7,263,000, respectively.
The Treasure Coast is a residential community with commercial activity
centered in retail and service businesses serving the local residents.
Therefore, real estate mortgage lending is an important segment of the
Company's lending activities. Exposure to market interest rate volatility with
respect to mortgage loans, is managed by attempting to match maturities and
repricing opportunities for assets against liabilities, when possible. At
December 31, 1995, approximately $141 million or 63 percent of the Company's
mortgage loan balances secured by residential properties were adjustable, of
which $138 million were adjustable rate 15-or 30-year mortgage loans (ARMs)
that reprice based upon the one year constant maturity United States Treasury
Index plus a margin. These 15-and 30-year ARMs generally consist of three
types: 1) those repricing annually by up to one percent with a four percent
cap over the life of the loan, of which balances of approximately $38 million
were outstanding at December 31, 1995, 2) those limited to a two percent per
annum increase and a six percent cap over the life of the loan, of which
approximately $81 million in balances existed at year end 1995, and 3) those
that have a fixed rate for a period of three, five or seven years, at the end
of which they are limited to a two percent per annum increase and a four
percent cap over the life of the loan, of which approximately $19 million were
outstanding at December 31, 1995.
Of the $68 million of new residential loans originated in 1995, $39 million
were adjustable rate and $29 million were fixed rate. The Company generally
sells all of the 30-year fixed rate loan originations while retaining a
portion of 15-year fixed rate residential loans. However, as a result of
interest rates declining during 1995, the Company chose to not sell fixed rate
residential loans. Loans secured by residential properties having fixed rates
totalled approximately $83 million at December 31, 1995, of which 15-and
30-year mortgages totalled approximately $45 million and $23 million,
respectively. Remaining fixed rate balances were comprised of home improvement
loans with short maturities less than 15 years.
- -------------------------------------------------------------------------------------------------------------------------
LOAN MATURITY DISTRIBUTION Table 10
(Dollars in thousands)
Commercial,
Financial & Real Estate
December 31, 1995 Agricultural Construction Total
- -------------------------------------------------------------------------------------------------------------------------
In one year or less $ 5,333 $ 9,709 $15,042
After one year but within five years:
Interest rates are floating or adjustable 2,983 831 3,814
Interest rates are fixed 6,007 0 6,007
In five years or more:
Interest rates are floating or adjustable 1,192 0 1,192
Interest rates are fixed 1,690 0 1,690
-------------------------------------------------------------------
Total $17,205 $10,540 $27,745
===================================================================
- -------------------------------------------------------------------------------------------------------------------------
The Company's historical charge off rates for residential loans has been very
low, with only $31,000 in charge offs for the year 1995. The Company expects
that the 1996 residential loan demand will be comprised of mostly fixed rate
mortgages as a low interest rate environment is anticipated.
Fixed rate and adjustable rate lending for commercial real estate loans
totalled approximately $33 million and $68 million, respectively. Of the $68
million, $45 million of commercial real estate loans adjust annually based on
the one-year constant maturity United States Treasury Index plus a margin.
Remaining adjustable rate commercial real estate loans are comprised of 3-and
5-year balloon mortgages tied to United States Treasury Indices plus a margin
or loans tied to prime rate which adjust accordingly. The term for fixed rate
lending involving commercial real estate is generally seven to ten years.
27
10
Commercial lending activities are directed principally towards businesses
whose demand for funds are within the Company's lending limits, such as
small-to medium-sized professional firms, retail and wholesale outlets, and
light industrial and manufacturing concerns. Such businesses typically are
smaller, often have short operating histories and do not have the
sophisticated record keeping systems of larger entities. Most of such loans
are secured by real estate used by such businesses, although certain lines are
unsecured. Such loans are subject to the risks inherent to lending to small-to
medium-sized businesses including the effects of a sluggish local economy,
possible business failure, and insufficient cash flows. The Company's
commercial loan portfolio totalled $17,205,000 at December 31, 1995 compared
to $11,296,000 at December 31, 1994.
The Company makes a variety of consumer loans, including installment loans,
loans for automobiles, boats, home improvements, and other personal, family
and household purposes, and indirect loans through dealers, to finance
automobiles. Most consumer loans are secured. The Company's indirect
automobile lending risks have been reduced through screening and monitoring of
a smaller number of dealers with whom the Company does business. Management
believes its present practices have substantially reduced such risk. Its
delinquencies and losses in this area improved in 1995 and 1994.
Second mortgage loans and home equity lines also are extended by the Company.
No negative amortization loans or lines are offered at the present time. Terms
of second mortgage loans include fixed rates for up to 10 years on
- --------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF LOAN LOSS EXPERIENCE Table 11
(Dollars in thousands)
Year Ended December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses
Beginning balance $ 3,373 $ 3,622 $ 4,091 $ 3,846 $ 3,744
Provision for loan losses 250 145 150 1,103 2,775
Allowance applicable to loans of purchased company 556 0 0 0 0
Charge offs:
Commercial and financial 53 89 52 109 487
Consumer 395 442 501 788 1,619
Commercial real estate 54 288 378 413 1,041
Residential real estate 31 0 25 96 85
--------------------------------------------------------
TOTAL CHARGE OFFS 533 819 956 1,406 3,232
Recoveries:
Commercial and financial 67 166 64 151 316
Consumer 205 206 253 288 238
Commercial real estate 146 39 14 103 0
Residential real estate 2 14 6 6 5
--------------------------------------------------------
TOTAL RECOVERIES 420 425 337 548 559
--------------------------------------------------------
Net loan charge offs 113 394 619 858 2,673
--------------------------------------------------------
ENDING BALANCE $ 4,066 $ 3,373 $ 3,622 $ 4,091 $ 3,846
========================================================
Loans outstanding at end of year* $414,964 $292,790 $259,617 $251,845 $280,691
Ratio of allowance for loan losses to
loans outstanding at end of year 0.98% 1.15% 1.40% 1.62% 1.37%
Daily average loans outstanding* $355,885 $270,172 $255,289 $262,924 $296,217
Ratio of net charge offs to
average loans outstanding 0.03% 0.15% 0.24% 0.33% 0.90%
- --------------------------------------------------------------------------------------------------------------------------------
* Net of unearned income.
28
11
smaller loans of $30,000 or less. Such loans are sometimes made for larger
amounts, with fixed rates, but with balloon payments upon maturities, not
exceeding five years. In 1992, the Company began offering variable rate second
mortgage loans with terms of up to 10 years. Loan to value ratios for these
loans do not exceed 80 percent of appraised value. Home equity lines are
offered on a variable rate basis only and the maximum loan to value ratio for
such loans is 75 percent of the appraised value when the loan is extended.
Home equity line accounts are subject to a periodic review by the bank, to
limit the Company's exposure to possible decreases in the borrower's income or
in the collateral value of the residence.
Commercial real estate loans are subject to many of the same risks as other
commercial loans. To reduce the risks from loans dependent upon cash flows
from the sale or rental of commercial real estate, the Company primarily makes
such loans on owner occupied properties. Real estate construction loans during
1991 and through 1995 have averaged approximately $5,780,000 and totalled
$10,540,000 at December 31, 1995. The Company generally requires a binding
take-out commitment confirmed to the Company before it will make a real estate
construction or development loan, unless the Company has determined to make
the permanent loan. This reduces the risk that the Company will inadvertently
become the permanent lender.
The Company had commitments to make loans (excluding unused home equity lines
of credit and credit card lines) of $17,687,000 at December 31, 1995, compared
to $17,021,000 at the end of 1994.
ALLOWANCE FOR LOAN LOSSES
Table 11 provides certain information concerning the Company's allowance for
loan losses for the years indicated.
The allowance for loan losses was $4,066,000 at December 31, 1995, $693,000
higher than one year earlier. Of this increase, $556,000 was allowance
applicable to loans of American, acquired in April of 1995. The ratio of the
allowance for loan losses to total loans outstanding (net of unearned income)
was 0.98 percent at December 31, 1995. The ratio was 1.15 percent at December
31, 1994. The allowance for loan losses as a percentage of nonaccrual loans
was 79.6 percent at December 31, 1995, compared to 150.9 percent at December
31, 1994. Nonaccrual loans at December 31, 1995, were $5,105,000 or 1.23
percent compared to $2,235,000 or 0.76 percent of outstanding loans at
December 31, 1994. The model utilized to analyze the adequacy of the allowance
for loan and lease losses takes into account such factors as credit quality,
internal control audit results, staff turnover, local market economics and loan
growth. The resulting lower allowance level necessitated is also reflective of
the bank's favorable and consistently improving delinquency trends and
historical loss performance. These performance results are attributed to
conservative, long-standing and consistently applied loan policies and to a
knowledgeable, experienced and stable staff.
During 1995, the Company experienced net charge offs of $113,000, compared to
$394,000 one year earlier, a 71.3 percent reduction. Net charge offs as a
percentage of average loans outstanding were 0.03 percent for 1995, the lowest
percentage the Company has experienced since its inception in 1983. A peer
group of banks of similar size experienced a net charge off ratio of 0.20
percent through September 30, 1995. Net consumer loan losses, primarily
related to indirect automobile lending, were $190,000 in 1995, versus $236,000
in 1994. Real estate net recoveries of $64,000 in 1995 compared to net charge
offs of $235,000 in 1994. Net commercial and financial loan recoveries were
$14,000 in 1995 compared to $77,000 in 1994.
Table 12 summarizes the Company's allocation of the allowance for loan losses
to each type of loan and information regarding the composition of the loan
portfolio at the dates indicated.
- --------------------------------------------------------------------------------
ALLOWANCE FOR LOAN LOSSES Table 12
(Dollars in thousands)
Allowance Amount
December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
Commercial and
financial loans $ 275 $ 233 $ 295 $ 287 $ 277
Real estate loans 3,108 2,486 2,812 2,908 2,322
Installment loans 683 654 515 896 1,247
----------------------------------------------------
TOTAL $4,066 $3,373 $3,622 $4,091 $3,846
=====================================================
- --------------------------------------------------------------------------------
Percent of Loans in Each Category to Total Loans
December 31 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------
Commercial and
financial loans 4.2% 3.9% 3.8% 3.6% 4.4%
Real estate loans 83.3 81.4 80.0 79.9 77.2
Installment loans 12.5 14.7 16.2 16.5 18.4
--------------------------------------------------------
TOTAL 100.0% 100.0% 100.0% 100.0% 100.0%
========================================================
- -----------------------------------------------------------------------------------
The allowance for loan losses represents management's estimate of an amount
adequate in relation to the risk of future losses inherent in the loan
portfolio. In its continuing evaluation of the allowance and its adequacy,
management considers, among other factors, the Company's loan loss experience,
the amount of past due and nonperforming loans, current and anticipated
economic conditions, and the values of certain loan collateral, and other
assets. The size of the allowance also reflects the
29
12
large amount of permanent residential loans held by the Company whose
historical charge offs and delinquencies have been superior by any comparison.
While it is the Company's policy to charge off in the current period loans in
which a loss is considered probable, there are additional risks of future
losses which cannot be quantified precisely or attributed to particular loans
or classes of loans. Because these risks include the state of economy as well
as conditions affecting individual borrowers, management's judgment of the
allowance is necessarily approximate and imprecise. It is also subject to
regulatory examinations and determinations as to adequacy, which may take into
account such factors as the methodology used to calculate the allowance for
loan losses and the size of the allowance for loan losses in comparison to a
group of peer companies identified by the regulatory agencies.
In assessing the adequacy of the allowance, management relies predominantly on
its ongoing review of the loan portfolio, which is undertaken both to
ascertain whether there are probable losses which must be charged off and to
assess the risk characteristics of the portfolio in the aggregate. This review
considers the judgments of management, and also those of bank regulatory
agencies that review the loan portfolio as part of their regular examination
process. An examination by the Office of the Comptroller of the Currency
during the year revealed no major differences in judgments or methodology
related to the allowance for loan losses.
On December 31, 1994, the allowance for loan losses was $3,373,000, $249,000
lower than one year earlier. The ratio of the allowance for loan losses to net
loans outstanding was 1.15 percent at December 31, 1994, compared to 1.40
percent at December 31, 1993.
For 1994, the Company had net charge offs of $394,000 compared to $619,000 for
the same period in 1993. Real estate loan net charge offs were $235,000 for
1994 versus $383,000 for the comparable period in 1993. Consumer loan losses
were $236,000 for 1994, compared to $248,000 for 1993. Commercial and
financial loan recoveries were $77,000 for 1994 versus $12,000 for 1993.
Since 1991, the Company's policy has been to transfer foreclosed loans to
other real estate owned and to record such other assets at the lower of (i)
the loans carrying value or (ii) 90 percent of the real estate collateral's
current appraised value.
NONPERFORMING ASSETS
At December 31, 1995, the Company's ratio of nonperforming assets to loans
outstanding plus other real estate owned was 1.44 percent, compared to 0.82
percent at December 31, 1994. The majority of the increase in the ratio can be
attributed to nonperforming loans of the acquired bank. This ratio would be
0.89 percent without the acquired problem loans. Nonperforming assets
(other real estate owned and nonaccrual loans) at December 31, 1995, were
$5,994,000, an increase of $3,594,000 compared to December 31, 1994.
Other real estate owned increased $724,000 while nonaccrual loans increased
$2,870,000 over the past twelve months. Nonaccrual loans totalled $2,235,000 at
December 31, 1994, compared to a balance of $3,107,000 at year end 1993.
Nonaccrual loans totalling $3,625,000 at December 31, 1995 were performing,
but because the Company has determined that the collection of principal or
interest in accordance with the original terms of such loans is uncertain, it
has placed such loans on nonaccrual status. Of the amount reported in
nonaccrual loans at December 31, 1995, 96.1 percent is secured with real
estate, the remainder is ninety percent guaranteed by the Small Business
Administration (SBA). Management does not expect significant losses, for which
an allowance for loan losses has not been provided, associated with the
ultimate realization of these assets.
Nonperforming assets are subject to changes in the economy, both nationally
and locally, changes in monetary and fiscal policies, and changes in
conditions affecting various borrowers from the Company's subsidiary bank. No
assurance can be given that nonperforming assets will not in fact increase or
otherwise change. A similar judgmental process is involved in the methodology
used to estimate and establish the Company's allowance for loan losses.
- -------------------------------------------------------------------------------------------------------------
NONPERFORMING ASSETS Table 13
(Dollars in thousands)
December 31 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
Nonaccrual loans (1) $ 5,105 $ 2,235 $ 3,107 $ 4,359 $ 5,333
Renegotiated loans 0 0 0 0 0
Other real estate owned 889 165 4,116 5,898 8,217
--------------------------------------------------------------
TOTAL NONPERFORMING
ASSETS $ 5,994 $ 2,400 $ 7,223 $ 10,257 $ 13,550
==============================================================
Amount of loans outstanding
at end of year (2) $414,964 $292,790 $259,617 $251,845 $280,691
Ratio of total nonperforming assets
to loans outstanding and other
real estate owned at end of period(1). 0.44% 0.82% 2.74% 3.98% 4.69%
Accruing loans past due
90 days or more $ 134 $ 0 $ 15 $ 9 $ 488
- -------------------------------------------------------------------------------------------------------------
(1) Interest income that could have been recorded during 1995 related to
nonaccrual loans was $168,000, none of which was included in interest
income or net income. All nonaccrual loans are secured.
(2) Net of unearned income.
- ------------------------------------------------------------------------------
Nonperforming assets (other real estate owned and nonaccrual loans) at
December 31, 1994, were $2,400,000, a decrease of $4,823,000 or 66.8 percent
30
13
from December 31, 1993. At December 31, 1994, the Company's ratio of
nonperforming assets to loans outstanding plus other real estate owned was 0.82
percent, compared to 2.74 percent at December 31, 1993. The decrease in
nonperforming assets from December 31, 1993 to December 31, 1994 included
decreases in other real estate owned of $3,951,000 and nonaccrual loans of
$872,000.
SECURITIES
Information relating to yields, maturities, carrying values, market values and
unrealized gains (losses) of the Company's securities is set forth in Table
14.
At December 31, 1995 the Company had $159,480,000 or 74.6 percent of total
securities held for sale compared to $131,288,000 or 51.5 percent at December
31, 1994. The increase in the held for sale portfolio is directly related to
regulatory authorities permitting a 45-day window (November 15, 1995 to
December 31, 1995) for financial institutions to reclassify securities from
held to maturity to available for sale without the reclassification creating a
"tainting" of the portfolio which would require reclassification of all held
to maturity securities to held for sale. The 45-day window to reclassify
securities was made available as a result of financial institutions not having
guidance with respect to the inclusion or exclusion of unrealized gains or
losses in capital ratio calculations at December 31, 1993, when SFAS No. 115
was adopted. The Company reclassified approximately $69 million from held to
maturity to held for sale on December 1, 1995.
Total securities declined $45,023,000 or 17.4 percent in 1995, compared to
prior year. This decline is directly related to growth in the loan portfolio
and changes in the portfolio mix.
During 1995 management lowered the total portfolio's interest rate risk by
reducing the average life of the portfolio from 3.8 years to 3.1 years. The
percentage of adjustable and floating rate securities in the securities
portfolio is 25.3 percent, compared to 29.6 percent in 1994. Likewise, the
held for sale portfolio decreased to an average life of 3.7 years from 5.9
years in 1994.
A total of $9,012,000 in securities will mature along with approximately $21
million of periodic principal payments from mortgage back securities in 1996.
Management believes most of these funds will be used to fund increases in its
consumer and commercial loan portfolio.
Lower interest rates caused an increase in the unrealized appreciation of
$9,777,000 at December 31, 1995 for the total portfolio. At December 31, 1994
the Company had unrealized net losses of $8,721,000 or 3.4 percent of
amortized cost.
Company management considers the overall quality of the securities portfolio
to be high. No securities are held which are not traded in liquid markets or
that meet the FFIEC definition of a high risk investment.
The Company's securities portfolio decreased $25,071,000 from December 31,
1993 to December 31, 1994. The investment portfolio as a percentage of earning
assets was 42.1 percent at December 31, 1994, compared to 48.0 percent one
year earlier.
- --------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands) Table 14
Gross Gross
Amortized Unrealized Unrealized Market Average Years
December 31, 1994 Cost Gains Losses Value to Maturity
- --------------------------------------------------------------------------------------------------------------------------
Held for Sale:
U.S. Treasury and
U.S. Government Agencies $ 59,123 $ 73 $ (510) $ 58,686 1.66
Mortgage Backed Securities:
Fixed 23,281 0 (1,432) 21,849 2.67
Adjustable 15,370 16 (25) 15,361 5.28
Mutual Funds 35,577 0 (1,887) 33,690 0.00
Other Securities 1,757 0 (55) 1,702 *
-------------------------------------------------------------------------
TOTAL $135,108 $ 89 $(3,909) $131,288 1.83
=========================================================================
Held for Investment:
U.S. Treasury and
U.S. Government Agencies $ 47,523 $ 7 $(1,633) $ 45,897 6.06
Mortgage Backed Securities
Fixed 43,233 0 (1,495) 41,738 3.83
Adjustable 23,194 0 (1,754) 21,440 10.06
Obligations of States and
Political Subdivisions 13,323 208 (234) 13,297 5.03
Other Securities 100 0 0 100 *
-------------------------------------------------------------------------
TOTAL $127,373 $215 $(5,116) $122,472 5.89
=========================================================================
* Other Securities excluded from calculated average for total securities
- --------------------------------------------------------------------------------
31
14
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE
(Dollars in thousands)
U.S. Treasury and Mortgage Backed Securities
U.S. Government Agencies (Fixed)
--------------------------------------------------------------------------------------------------
Amortized Market Weighted Amortized Market Weighted
Cost Value Yield Cost Value Yield
Maturity at December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Held for Sale:
Within one year $ 7,318 $ 7,295 5.52% $ 2,665 $ 2,719 7.03%
One to five years 18,228 18,519 5.87 25,857 25,876 5.81
Five to ten years 8,966 9,306 6.54 7,665 7,745 6.06
Over ten years 41,083 40,876 6.28
No contractual maturity
----------------------------------------------------------------------------------------------
TOTAL VALUE $34,512 $35,120 5.97% $77,270 $77,216 6.13%
==============================================================================================
Held for Investment:
Within one year
One to five years $10,556 $10,868 5.23% $ 37 $ 37 5.38%
Five to ten years 1,916 2,000 7.24 9,203 9,185 6.80
Over ten years 4,857 5,130 7.32 10,095 10,247 6.42
---------------------------------------------------------------------------------------------
TOTAL VALUE $17,329 $17,998 6.04% $19,335 $19,469 6.60%
=============================================================================================
Maturity at December 31, 1994
Held for Sale $59,123 $58,686 6.70% $23,281 $21,849 5.33%
=============================================================================================
Held for Investment $47,523 $45,897 6.36% $43,233 $41,738 6.63%
=============================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
(1) On a fully taxable equivalent basis.
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE
(Dollars in thousands)
Mortgage Backed Securities Obligations of States and Political
(Adjustable) Subdivisions (1)
-------------------------------------------------------------------------------------------------
Amortized Market Weighted Amortized Market Weighted
Cost Value Yield Cost Value Yield
Maturity at December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Held for Sale:
Within one year
One to five years
Five to ten years
Over ten years $ 10,638 $10,789 6.84%
No contractual maturity
----------------------------------------------------------------------------------------------
TOTAL VALUE $ 10,638 $10,789 6.84% $ 0 $ 0
==============================================================================================
Held for Investment:
Within one year $ 1,717 $ 1,727 7.29%
One to five years 7,195 7,518 8.92
Five to ten years 2,580 2,725 8.88
Over ten years $ 4,502 $ 4,525 6.51% 1,400 1,463 8.75
----------------------------------------------------------------------------------------------
TOTAL VALUE $ 4,502 $ 4,525 6.51% $12,892 $13,433 8.68%
==============================================================================================
Maturity at December 31, 1994
Held for Sale $15,370 $15,361 6.73% $ 0 $ 0 0.00%
==============================================================================================
Held for Investment $23,194 $21,440 5.30% $13,323 $13,297 8.66%
==============================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
(1) On a fully taxable equivalent basis.
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT SECURITIES YIELD, MATURITY AND MARKET VALUE
(Dollars in thousands)
Table 14
Mutual Funds Other (1) Total
-------------------------------------------------------------------------------------------------------
Amortized Market Weighted Amortized Market Weighted Amortized Market Weighted
Cost Value Yield Cost Value Yield Cost Value Cost
-------------------------------------------------------------------------------------------------------
Held for Sale:
Within one year $ 9,983 $ 10,014 5.92%
One to five years 44,085 44,395 5.84%
Five to ten years 16,631 17,051 6.32%
Over ten years 51,721 51,665 6.39%
No contractual maturity $35,577 $34,547 6.12% $1,794 $1,808 5.30% 37,371 36,355 6.08%
-------------------------------------------------------------------------------------------------------
TOTAL VALUE $35,577 $34,547 6.12% $1,794 $1,808 5.30% $159,791 $159,480 6.13%
=======================================================================================================
Held for Investment:
Within one year $ 1,717 $ 1,727 7.29%
One to five years 17,888 18,523 6.73%
Five to ten years $ 100 $ 100 7.50% 13,699 13,910 7.25%
Over ten years 20,854 21,365 6.81%
-------------------------------------------------------------------------------------------------------
TOTAL VALUE $ 0 $ 0 $ 100 $ 100 7.50% $ 54,158 $ 55,525 6.91%
=======================================================================================================
Maturity at December
31, 1994
Held for Sale $35,577 $33,690 5.54% $1,757 $1,702 6.48% $135,108 $131,288 6.16%
=======================================================================================================
Held for Investment $ 0 $ 0 0.00% $ 100 $ 100 7.50% $127,373 $122,472 6.50%
=======================================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Gross Average
Amortized Unrealized Unrealized Market Years to
December 31, 1995 Cost Gains Losses Value Maturity
- -----------------------------------------------------------------------------------------------------------------------------------
Held for Sale:
U.S. Treasury and U.S. Government Agencies $ 34,512 $ 645 $ (37) $ 35,120 3.58
Mortgage Backed Securities:
Fixed 77,270 387 (441) 77,216 3.27
Adjustable 10,638 164 (13) 10,789 7.40
Mutual Funds 35,577 0 (1,030) 34,547 0.00
Other Securities 1,794 14 0 1,808 *
----------------------------------------------------------------------------
TOTAL $159,791 $1,210 $(1,521) $159,480 2.91
============================================================================
Held for Investment:
U.S. Treasury and U.S. Government Agencies $ 17,329 $ 669 $ 0 $ 17,998 2.11
Mortgage Backed Securities
Fixed 19,335 236 (102) 19,469 3.75
Adjustable 4,502 23 (0) 4,525 7.52
Obligations of States and Political Subdivisions 12,892 544 (3) 13,433 4.35
Other Securities 100 0 0 100 *
----------------------------------------------------------------------------
TOTAL $ 54,158 $1,472 $ (105) $ 55,525 3.67
============================================================================
(*) Other Securities excluded from calculated average for total securities
- ----------------------------------------------------------------------------------------------------------------------------------
DEPOSITS
Total deposits increased $101,338,000 or 18.1 percent to $660,967,000 at
December 31, 1995, compared to one year earlier. Approximately $62 million of
the increase was attributable to the American acquisition. The commercial bank
deposits acquired are primarily core deposits with interest rates paid and
characteristics very similar to the Company's existing customer accounts.
Certificates of deposit under $100,000 increased $57,556,000 or 30.1 percent
and certificates of deposit of $100,000 or more increased $14,966,000 or 56.8
percent over the past twelve months, while lower cost savings deposits
(including NOW and money market deposits) increased $9,641,000 or 3.6 percent.
Noninterest bearing demand deposits grew $19,175,000 or 24.9 percent.
Total deposits increased $26,143,000 or 4.9 percent to $559,629,000 at
December 31, 1994, compared to one year earlier.
The increase was due to growth in certificates of deposit of $22,642,000 or
13.4 percent, an increase in noninterest bearing demand deposits of
$15,493,000 or 25.2 percent, and a rise in certificates of deposit of $100,000
or more of $1,903,000 or 7.8 percent. Savings deposits (including NOW and
money market deposit accounts) declined $13,895,000 or 5.0 percent.
The increase in certificates of deposits in 1995 and 1994 was directly related
to higher interest rates offered on certificates, reflecting the general rise
in interest rates during 1994, and resulting renewed interest by customers in
investing in certificates of deposit. In part, the increase in demand deposits
was related to a $5,268,000 and $9,230,000 increase in public deposits at
December 31, 1995 and December 31, 1994, respectively, primarily related to
tax receipts collected by the local tax collector. Average noninterest bearing
demand deposits comprised 11.8 percent of average deposits for the year ended
December 31, 1995, slightly higher than the 11.7 percent recorded for the same
period one year earlier. The Company remains the largest commercial bank in
its primary market.
32
15
- -------------------------------------------------------------------
MATURITY OF CERTIFICATES OF DEPOSIT Table 15
OF $100,000 OR MORE
(Dollars in thousands)
- -------------------------------------------------------------------
% of % of
December 31 1995 Total 1994 Total
- -------------------------------------------------------------------
Maturity Group:
Under 3 months $15,249 36.9% $ 5,811 22.0%
3 to 6 months 11,867 28.7% 7,481 28.4%
6 to 12 months 8,309 20.1% 3,446 13.1%
Over 12 months 5,904 14.3% 9,625 36.5%
-------------------------------------------
TOTAL $41,329 100.0% $26,363 100.0%
===========================================
SHORT TERM BORROWINGS
At December 31, 1995, $43,907,000 in securities sold under agreements to
repurchase were outstanding, a decrease of $732,000 compared to year end 1994.
At year end 1995 and 1994, approximately $40 million in funds were maintained
by the local tax collector and approximately $3 million in funds were
maintained by the local school board.
INTEREST RATE SENSITIVITY
Interest rate movements and deregulation of interest rates have made managing
the Company's interest rate sensitivity increasingly important. The Company's
Asset/Liability Management Committee (ALCO) is responsible for managing the
Company's exposure to changes in market interest rates. This committee
attempts to maintain stable net interest margins by generally matching the
volume of assets and liabilities maturing, or subject to repricing, and by
adjusting rates to market conditions and changing interest rates.
Interest rate exposure is managed by monitoring the relationship between
earning assets and interest bearing liabilities, focusing primarily on those
that are rate
33
16
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.)
- --------------------------------------------------------------------------------------------
INTEREST RATE SENSITIVITY ANALYSIS (1) Table 16
(Dollars in thousands)
0-3 4-12 1-5 Over 5
December 31, 1995 Months Months Years Years Total
- --------------------------------------------------------------------------------------------
Federal funds sold $ 58,400 $ 0 $ 0 $ 0 $ 58,400
Securities (2) 53,365 19,418 77,303 63,863 213,949
Loans (3) 107,640 120,926 68,222 113,071 409,859
--------------------------------------------------------------
Earning assets 219,405 140,344 145,525 176,934 682,208
Savings deposits (4) 274,617 0 0 0 274,617
Certificates of deposit 98,996 148,468 42,568 65 290,097
Federal funds purchased
and other short term
borrowings 43,907 0 0 0 43,907
--------------------------------------------------------------
Interest bearing
liabilities 417,520 148,468 42,568 65 608,621
--------------------------------------------------------------
Interest sensitivity gap $(198,115) $ (8,124) $ 102,957 $176,869 $ 73,587
==============================================================
Cumulative gap $(198,115) $(206,239) $(103,282) $ 73,587
==============================================================
Cumulative gap to
earning assets (%) (29.0) (30.2) (15.1) 10.8
Earning assets to
interest bearing
liabilities (%) 52.5 94.5 341.9 N/M
- --------------------------------------------------------------------------------------------
(1) The repricing dates may differ from maturity dates for certain assets due
to prepayment assumptions.
(2) Securities are stated at amortized cost.
(3) Excludes nonaccrual loans.
(4) This category is comprised of NOW, savings, and money market deposits.
If NOW and savings deposits (totalling $117,728,000) were deemed to be
repriceable in"4-12 months," the interest sensitivity gap and cumulative
gap would be $81,265,000 indicating 11.9% of total earning assets and
73.2% of earning assets to interest bearing liabilities for the "0-3
months" category.
N/M Not meaningful.
On December 31, 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 30.2 percent. This means that the Company's assets
reprice more slowly than its deposits. In a declining interest rate
environment, the cost of the Company's deposits and other liabilities may be
expected to fall faster than the interest received on its earnings assets,
thus increasing the net interest spread. If interest rates generally increase,
the negative gap means that the interest received on earning assets may be
expected to increase more slowly than the interest paid on the Company's
liabilities, therefore decreasing the net interest spread.
It has been the Company's experience that deposit balances for NOW and savings
accounts are stable and subjected to limited repricing when interest rates
increase or decrease within a range of 200 basis points. 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
December 31, 1995, net interest income would decline 12.3 percent if interest
rates would immediately rise 200 basis points.
The Company does not presently use interest rate protection products in
managing its interest rate sensitivity.
LIQUIDITY MANAGEMENT
The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all financial commitments and to capitalize on
opportunities for business expansion. Liquidity management addresses the
Company's ability to meet deposit withdrawals either on demand or at
contractual maturity and to make new loans and investments as opportunities
arise.
Contractual maturities for assets and liabilities are reviewed to meet current
and future liquidity requirements. Sources of liquidity, both anticipated and
unanticipated, are maintained through a portfolio of high quality marketable
assets, such as residential mortgage loans, investment securities, and federal
funds sold. The Company has access to federal funds lines of credit and is
able to provide short term financing of its activities by selling, under
agreement to repurchase, United
34
17
States Treasury securities and securities of United States Government agencies
and corporations not pledged to secure public deposits or trust funds. At
December 31, 1995, the Company had available federal funds lines of credit of
$37,500,000. At December 31, 1995, the Company had $93,352,000 of United
States Treasury and Government agency securities and mortgage backed
securities not pledged and available for use under repurchase agreements. At
December 31, 1994, the amount of securities available and unpledged was
$140,059,000.
Liquidity, as measured in the form of cash and cash equivalents, totalled
$115,018,000 at December 31, 1995, compared to $87,580,000 at December 31,
1994. Cash and equivalents vary with seasonal deposit movements and are
generally higher in the winter than in the summer, and vary with the level of
principal repayments occurring in the Company's investment securities
portfolio and loan portfolio.
As is typical of financial institutions, cash flows from investing (primarily
in loans and securities) and from financing (primarily through deposit
generation and short term borrowings) are greatly in excess of cash flows from
operations. In 1995, the cash flow from operations of $11,050,000 was 33.0
percent higher than during the same period of 1994. Cash flows from investing
and financing activities reflect the increase in loan and deposit balances
experienced in 1995. In 1994, the cash flow from operations of $8,432,000 was
4.0 percent higher than in 1993.
EFFECTS ON INFLATION AND CHANGING PRICES
The financial statements and related financial data presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms
of historical dollars, without considering changes in the relative purchasing
power of money, overtime, due to inflation.
Unlike most industrial companies, virtually all of the assets and liabilities
of a financial institution are monetary in nature. As a result, interest rates
have a more significant impact on a financial institution's performance than
the general levels of inflation. However, inflation affects financial
institutions' increased cost of goods and services purchased, the cost of
salaries and benefits, occupancy expense, and similar items. Inflation and
related increases in interest rates generally decrease the market value of
investments and loans held and may adversely affect liquidity, earnings, and
stockholders' equity. Mortgage originations and refinancings tend to slow as
interest rates increase, and likely will reduce the Company's earnings from
such activities and the income from the sale of residential mortgage loans in
the secondary market.
FASB 107 DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company has calculated and reported the fair value of its financial
instruments in accordance with the Statement of Financial Accounting Standards
(SFAS) No. 107. While market value information has been reported for its
investment securities portfolio in prior years based on quoted market prices,
this statement also requires the estimating of fair values for financial
instruments with no quoted market prices. For most instruments with no quoted
market values, there are a variety of judgments which must be applied with a
wide variation in reported results. Management has followed the requirements
of the statement and used an acceptable method to estimate fair value for
these instruments. However, various other values could result if different
assumptions were used. Therefore, management believes it is not relevant and
potentially misleading to compare the amount of appreciation or depreciation
of financial instruments with no quoted values to any other financial
institution.
Also, although the statement does not prohibit estimating and reporting the
fair value of deposits, management has elected not to estimate a value for its
core deposit portfolio because of reliability and comparability issues.
35
18
Selected Quarterly Information
- ----------------------------------------------------------------------------------------------------------------------
Consolidated Quarterly Average Balances, Yields and Rates (1)
1995 Quarters
- ----------------------------------------------------------------------------------------------------------------------
Fourth Third Second
- ----------------------------------------------------------------------------------------------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Rate Balance Rate
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
Earning assets
Securities
Taxable $206,519 6.20% $228,446 6.30% $231,882 6.44%
Nontaxable 13,403 8.42% 13,406 8.38% 13,616 8.43%
-------------------------------------------------------------------------
TOTAL SECURITIES 219,922 6.33% 241,852 6.41% 245,498 6.55%
Federal funds sold and
other short term investments 40,207 5.83% 22,964 5.82% 49,489 6.05%
Loans (2) 399,262 8.56% 376,029 8.58% 349,378 8.65%
-------------------------------------------------------------------------
TOTAL EARNING ASSETS 659,391 7.65% 640,845 7.66% 644,365 7.65%
Allowance for loan losses (4,032) (3,975) (3,933)
Cash and due from banks 22,417 24,255 25,022
Bank premises and equipment 16,771 17,216 17,366
Other assets 14,876 14,782 14,379
-------------------------------------------------------------------------
$709,423 $693,123 $697,199
=========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities
NOW (including Super NOW) $77,393 1.49% $119,729 1.49% $122,990 1.61%
Savings deposits 61,585 1.89% 62,711 1.93% 64,655 1.96%
Money market accounts 126,229 2.40% 78,615 3.04% 79,690 3.12%
Time deposits 293,508 5.64% 291,049 5.66% 283,124 5.53%
Federal funds purchased and
other short term borrowings 6,419 4.20% 2,710 4.39% 5,972 4.63%
-------------------------------------------------------------------------
TOTAL INTEREST BEARING LIABILITIES 565,134 3.92% 554,814 3.96% 556,431 3.89%
Demand deposits 76,848 72,137 74,219
Other liabilities 4,871 3,644 5,055
-------------------------------------------------------------------------
646,853 630,595 635,705
Shareholders' equity 62,570 62,528 61,494
-------------------------------------------------------------------------
$709,423 $693,123 $697,199
=========================================================================
Interest expense as % of earning assets 3.36% 3.43% 3.36%
Net interest income as % of earning assets 4.29% 4.23% 4.29%
- ----------------------------------------------------------------------------------------------------------------------
(1) The tax equivalent adjustment is based on a 34% tax rate. All
yields/rates are calculated on an annualized basis.
(2) Nonaccural loans are included in loan balances. Fees on loans are
included in interest on loans.
36
19
- -----------------------------------------------------------------------------------------------------------------------
1994 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
- -----------------------------------------------------------------------------------------------------------------------
$240,928 6.33% $245,268 6.07% $258,133 6.02% $267,628 5.99% $276,887 6.08%
13,798 8.26% 13,829 8.42% 14,601 8.47% 14,102 8.59% 13,414 8.65%
- -----------------------------------------------------------------------------------------------------------------------
254,726 6.44% 259,097 6.19% 272,734 6.15% 281,730 6.12% 290,301 6.21%
44,550 5.94% 29,003 5.23% 3,730 4.36% 9,317 4.00% 14,414 3.18%
297,533 8.77% 285,861 8.21% 273,451 8.09% 263,179 7.94% 257,852 8.05%
- -----------------------------------------------------------------------------------------------------------------------
596,809 7.57% 573,961 7.14% 549,915 7.10% 554,226 6.95% 562,567 6.97%
(3,432) (3,373) (3,578) (3,618) (3,612)
24,942 26,075 21,411 23,373 24,093
15,707 15,983 16,044 16,186 16,523
8,791 10,852 11,701 12,085 13,191
- -----------------------------------------------------------------------------------------------------------------------
$642,817 $623,498 $595,493 $602,252 $612,762
=======================================================================================================================
$116,662 1.70% $118,361 1.69% $116,577 1.62% $120,724 1.60% $121,757 1.57%
65,036 1.96% 69,570 1.98% 74,096 1.97% 78,882 1.94% 81,266 2.01%
74,363 3.12% 75,208 2.82% 80,488 2.60% 85,852 2.40% 85,468 2.33%
240,630 5.00% 215,034 4.40% 199,810 4.06% 190,622 3.87% 189,992 3.85%
16,328 4.77% 13,337 4.58% 1,812 3.72% 3,262 3.07% 13,468 2.20%
- -----------------------------------------------------------------------------------------------------------------------
513,019 3.58% 491,510 3.17% 472,783 2.88% 479,342 2.71% 491,951 2.68%
65,919 68,627 60,586 62,355 61,284
3,453 3,721 3,822 3,065 3,444
- -----------------------------------------------------------------------------------------------------------------------
582,391 563,858 537,191 544,762 556,679
60,426 59,640 58,302 57,490 56,083
- -----------------------------------------------------------------------------------------------------------------------
$642,817 $623,498 $595,493 $602,252 $612,762
=======================================================================================================================
3.08% 2.71% 2.48% 2.34% 2.34%
4.49% 4.43% 4.62% 4.61% 4.63%
- -----------------------------------------------------------------------------------------------------------------------
37
20
Selected Quarterly Information
----------------------------------------------------------------------------------------------------------------------------
Quarterly Consolidated Income Statements
1995 Quarters 1994 Quarters
------------------------------------- --------------------------------
(Dollars in thousands except per share data) Fourth Third Second First Fourth Third Second First
-----------------------------------------------------------------------------------------------------------------------------
Net interest income:
Interest income $12,622 $12,284 $12,203 $11,042 $10,243 $ 9,736 $ 9,506 $ 9,556
Interest expense 5,588 5,537 5,402 4,534 3,922 3,436 3,238 3,245
---------------------------------------------------------------------------
Net interest income 7,034 6,747 6,801 6,508 6,321 6,300 6,268 6,311
Provision for loan losses 125 125 0 0 0 0 95 50
---------------------------------------------------------------------------
Net interest income after provision for losses 6,909 6,622 6,801 6,508 6,321 6,300 6,173 6,261
Noninterest income:
Service charges on deposit accounts 667 655 633 499 524 499 482 528
Trust fees 513 525 455 415 445 403 436 438
Other service charges and fees 281 291 259 267 236 257 266 269
Brokerage commissions and fees 475 369 412 299 266 249 293 382
Other 139 123 121 119 126 110 119 147
Securities gains (losses) 218 269 46 (53) (5) (37) 809 (15)
---------------------------------------------------------------------------
Total noninterest income 2,293 2,232 1,926 1,546 1,592 1,481 2,405 1,749
Noninterest expenses:
Salaries and wages 2,430 2,455 2,442 2,323 2,216 2,097 2,193 2,176
Pension and other employee benefits 509 493 497 452 419 488 451 457
Occupancy 576 604 576 575 572 548 557 553
Furniture and equipment 436 495 485 484 481 503 510 533
Marketing 324 328 351 364 307 262 332 361
Legal and professional fees 192 228 175 147 193 176 321 198
FDIC assessments 102 176 225 225 260 295 318 318
Foreclosed and repossessed asset
management and dispositions 46 14 31 (27) (250) 99 84 87
Amortization of intangibles 165 146 86 21 23 22 22 21
Other 1,357 1,198 1,239 1,301 1,159 1,043 1,374 1,226
---------------------------------------------------------------------------
Total noninterest expenses 6,137 6,137 6,107 5,865 5,380 5,533 6,162 5,930
---------------------------------------------------------------------------
Income before income taxes 3,065 2,717 2,620 2,189 2,533 2,248 2,416 2,080
Provision for income taxes 1,172 961 906 726 897 731 790 673
---------------------------------------------------------------------------
Net income $ 1,893 $ 1,756 $ 1,714 $ 1,463 $ 1,636 $ 1,517 $ 1,626 $ 1,407
===========================================================================
PER COMMON SHARE DATA
Net income $ 0.44 $ 0.40 $ 0.40 $ 0.34 $ 0.38 $ 0.35 $ 0.38 $ 0.33
===========================================================================
Cash dividends declared:
Class A common stock $ 0.15 $ 0.13 $ 0.13 $ 0.13 $ 0.13 $ 0.12 $ 0.12 $ 0.12
Market price Class A common stock:
Low close 21 5/8 18 17 3/4 16 1/4 16 3/4 17 1/4 16 3/4 16 1/2
High close 25 1/4 22 1/2 19 1/2 19 1/4 19 1/2 19 3/4 18 1/4 18 1/2
Bid price at end of period 21 3/4 22 18 1/2 18 5/16 16 3/4 19 1/4 17 3/4 17 3/8
-----------------------------------------------------------------------------------------------------------------------------
38
21
Financial Statements
--------------------------------------------------------------------------
Management's Report on Responsibilities for Financial Reporting
Management is responsible for the preparation and content of the accompa-
nying financial statements and the other information contained in this
report. Management believes that the financial statements have been
prepared in conformity with appropriate, generally accepted accounting
principles applied on a consistent basis and present fairly Seacoast
Banking Corporation of Florida's consolidated financial condition and
results of operations. Where amounts must be based on estimates and
judgments, they represent the best estimates of management.
Management maintains and relies upon an accounting system and related
internal accounting controls to provide reasonable assurance that
transactions are properly executed and recorded and that the company's
assets are safeguarded. Emphasis is placed on proper segregation of duties
and authorities, the development and dissemination of written policies and
procedures and a complete program of internal audits and management
follow-up. In recognition of cost-benefit relationships and inherent
control limitations, some features of the control systems are designed to
detect rather than prevent errors, irregularities and departures from
approved policies and practices. Management believes the system of controls
has prevented or detected on a timely basis any occurrences that could be
material to the financial statements and that timely corrective actions
have been initiated when appropriate.
The accompanying 1995 financial statements have been audited by Arthur
Andersen LLP, certified public accountants. As part of their audit, Arthur
Andersen LLP evaluated the accounting systems and related internal
accounting controls only to the extent they deemed necessary to determine
their auditing procedures.
Their audit would not necessarily disclose all internal accounting control
weaknesses because of the limited purpose of their evaluation. Although the
scope of Arthur Andersen LLP's audit did not encompass a complete review of
and they have not expressed an opinion on the overall system of internal
accounting control, they reported that their evaluation disclosed no
conditions which they consider to be material internal accounting control
weaknesses.
The Board of Directors pursues its oversight role for accounting and
internal accounting control matters through an Audit Committee of the Board
of Directors comprised entirely of outside Directors. The Audit
Committee meets periodically with management, internal auditors and
independent accountants. The independent accountants and internal auditors
have full and free access to the Audit Committee and meet with it
privately, as well as with management present, to discuss internal control
accounting and auditing matters.
/s/ Dale M. Hudson /s/ William R. Hahl /s/ John R. Turgeon
- ----------------------- ------------------------- --------------------
DALE M. HUDSON, WILLIAM R. HAHL, JOHN R. TURGEON,
President and Senior Vice President and Controller
Chief Executive Officer Chief Financial Officer
39
22
Financial Statements
---------------------------------------------------------------------------
Report of Independent Certified Public Accountants
Board of Directors and Shareholders
Seacoast Banking Corporation of Florida
Stuart, Florida
We have audited the accompanying consolidated balance sheets of Seacoast
Banking Corporation of Florida and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Seacoast Banking
Corporation of Florida and subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
As discussed in Notes J and A to the consolidated financial statements,
effective January 1, 1993 and December 31, 1993, respectively, the Company
changed its methods of accounting for income taxes and for certain
investment securities.
Arthur Andersen LLP
Miami, Florida,
January 16, 1996.
40
23
Consolidated Statements of Income
--------------------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars except per share data)
Year Ended December 31 1995 1994 1993
--------------------------------------------------------------------------------------------
Interest on securities
Taxable $ 14,337 $ 15,818 $ 17,695
Nontaxable 780 812 797
Interest and fees on loans 30,707 21,782 20,964
Interest on federal funds sold 2,327 629 234
-------------------------------------------
TOTAL INTEREST INCOME 48,151 39,041 39,690
Interest on deposits 5,507 5,500 5,576
Interest on time certificates 15,195 8,072 7,920
Interest on borrowed money 359 269 135
-------------------------------------------
TOTAL INTEREST EXPENSE 21,061 13,841 13,631
-------------------------------------------
NET INTEREST INCOME 27,090 25,200 26,059
Provision for loan losses 250 145 150
NET INTEREST INCOME AFTER -------------------------------------------
PROVISION FOR LOAN LOSSES 26,840 25,055 25,909
-------------------------------------------
Noninterest income
Securities gains 480 752 1,204
Other 7,517 6,475 7,588
Noninterest expenses 24,246 23,005 24,345
-------------------------------------------
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE 10,591 9,277 10,356
Provision for income taxes 3,765 3,091 3,488
-------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT
OF A CHANGE IN ACCOUNTING PRINCIPLE 6,826 6,186 6,868
Cumulative effect on prior years of
a change in accounting for income taxes 0 0 264
-------------------------------------------
NET INCOME $ 6,826 $ 6,186 $ 7,132
===========================================
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Per share common stock
Income before cumulative effect of a
change in accounting principle $ 1.58 $ 1.44 $ 1.60
Cumulative effect on prior years of a
change in accounting for income taxes 0.00 0.00 0.06
-------------------------------------------
NET INCOME $ 1.58 $ 1.44 $ 1.66
===========================================
Average shares outstanding 4,309,590 4,305,592 4,291,949
--------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
41
24
Consolidated Balance Sheets
-----------------------------------------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
December 31 1995 1994
------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 56,618 $ 25,230
Federal funds sold 58,400 62,350
Securities:
Securities held for sale (at market) 159,480 131,288
Securities held for investment (market values: 1995 - $55,525 and 1994 - $122,472) 54,158 127,373
-----------------------
TOTAL SECURITIES 213,638 258,661
Loans 414,964 292,790
Less: Allowance for loan losses 4,066 3,373
-----------------------
NET LOANS 410,898 289,417
Bank premises and equipment 16,104 15,751
Other real estate owned 889 165
Core deposit and other intangibles 2,475 480
Goodwill 4,409 0
Other assets 7,917 10,657
-----------------------
TOTAL ASSETS $771,348 $662,711
=======================
------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
42
25
- --------------------------------------------------------------------------------------------------------------------------------
(In thousands of dollars)
December 31 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Demand deposits (noninterest bearing) $ 96,253 $ 77,078
Savings deposits 274,617 264,976
Other time deposits 248,768 191,212
Time certificates of $100,000 or more 41,329 26,363
-----------------------------
TOTAL DEPOSITS 660,967 559,629
Federal funds purchased and securities sold under agreement to repurchase,
maturing within 30 days 43,907 44,639
Other liabilities 4,274 2,859
-----------------------------
709,148 607,127
Commitments and Contingent Liabilities (Notes I, K and P)
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00 per share - authorized 1,000,000 shares, none issued
or outstanding 0 0
Class A common stock, par value $.10 per share (liquidation preference of $2.50 per share)
- authorized 10,000,000 shares, issued 3,770,819 and outstanding 3,700,013
shares in 1995 and issued and outstanding 3,718,724 in 1994 377 372
Class B common stock, par value $.10 per share - authorized 810,000 shares, issued and
outstanding 517,211 shares in 1995 and 563,354 shares in 1994 52 56
Additional paid-in capital 18,612 18,498
Retained earnings 45,540) 41,049
Less: Treasury Stock (70,806 shares), at cost (1,676) 0
-----------------------------
62,905 59,975
Securities valuation allowance (705) (4,391)
-----------------------------
TOTAL SHAREHOLDERS' EQUITY 62,200 55,584
-----------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $771,348 $662,711
=============================
- ---------------------------------------------------------------------------------------------------------------------------------
43
26
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
(In thousands of dollars)
Year Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Interest received $ 49,180 $39,869 $40,826
Fees and commissions received 7,515 6,431 7,311
Interest paid (20,815) (13,723) (14,050)
Cash paid to suppliers and employees (21,598) (21,037) (21,887)
Income taxes paid (3,232) (3,108) (4,093)
----------------------------------------
Net cash provided by operating activities 11,050 8,432 8,107
Cash flows from investing activities
Maturities of securities held for sale 36,827 20,200 400
Maturities of securities held for investment 25,759 12,797 45,024
Proceeds from sale of securities held for sale 115,107 72,521 16,110
Proceeds from sale of securities held for investment 0 0 26,201
Purchase of securities held for sale (109,132) (83,358) (10,755)
Purchase of securities held for investment (5,112) (11,292) (60,030)
Proceeds from sale of loans 0 24,699 12,202
Net new loans and principal repayments (77,011) (44,643) (35,497)
Proceeds from the sale of other real estate owned 239 4,143 2,580
Deletions (additions) to bank premises and equipment 43 (1,030) (1,548)
Purchase of American Bank Captial Corporation of Florida, net of cash (4,659) 0 0
Net change in other assets (87) (299) 97
----------------------------------------
Net cash used in investing activities (18,026) (6,262) (5,216)
Cash flows from financing activities
Net increase (decrease) in deposits 39,042 26,146 (17,686)
Net increase (decrease) in federal funds purchased and repurchase agreements (732) 4,106 32,115
Issuance of common stock-Employee Stock Purchase and Profit Sharing Plans 115 181 360
Exercise of stock options (58) 88 0
Treasury stock acquired (1,676) 0 0
Dividends paid (2,277) (2,070) (1,893)
----------------------------------------
Net cash provided by financing activities 34,414 28,451 12,896
----------------------------------------
Net increase in cash and cash equivalents 27,438 30,621 15,787
Cash and cash equivalents at beginning of year 87,580 56,959 41,172
----------------------------------------
Cash and cash equivalents at end of year $115,018 $87,580 $56,959
========================================
- --------------------------------------------------------------------------------------------------------------------------
See Note Q for supplemental disclosures.
See notes to consolidated financial statements.
44
27
Consolidated Statements of Shareholders' Equity
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
Common Stock
-------------------------------------------------
Class A Class B Additional
------------------------------------------------- Paid-in Retained
(In thousands of dollars) Shares Amount Shares Amount Capital Earnings
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 3,656,661 $366 587,873 $59 $17,872 $31,694
Exchange of Class B common stock for
Class A common stock 16,548 2 (16,548) (2)
Issuance of Class A common stock for
Employee Stock Purchase and Profit
Sharing Plans 19,205 1 359
Net income 7,132
Cash dividends declared (1,893)
Net change in securities
valuation equity (allowance)
-----------------------------------------------------------------------------
Balance at December 31, 1993 3,692,414 369 571,325 57 18,231 36,933
Exchange of Class B common stock for
Class A common stock 7,971 1 (7,971) (1)
Issuance of Class A common stock for
Employee Stock Purchase and
Profit Sharing Plans 10,339 1 180
Exercise of stock options 8,000 1 87
Net income 6,186
Cash dividends declared (2,070)
Net change in securities
valuation equity (allowance)
-----------------------------------------------------------------------------
Balance at December 31, 1994 3,718,724 372 563,354 56 18,498 41,049
Exchange of Class B common stock for
Class A common stock 46,143 4 (46,143) (4)
Issuance of Class A Common stock for
Employee Stock Purchase and Profit
Sharing Plans 5,952 1 114
Treasury stock acquired (71,500)
Treasury stock issued for Employee
Stock Purchase and Profit Sharing Plans 694
Exercise of stock options (58)
Net income 6,826
Cash dividends declared (2,277)
Net change in securities
valuation equity (allowance)
-----------------------------------------------------------------------------
Balance at December 31, 1995 3,700,013 $377 517,211 $52 $18,612 $45,540
=============================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
Securities
Valuation
Treasury Equity
(In thousands of dollars) Stock (Allowance) Total
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 $ 0 $ (284) $49,707
Exchange of Class B common stock for
Class A common stock
Issuance of Class A common stock for
Employee Stock Purchase and Profit
Sharing Plans 360
Net income 7,132
Cash dividends declared (1,893)
Net change in securities
valuation equity (allowance) 4,951 4,951
-----------------------------------------------------------------------------
Balance at December 31, 1993 0 4,667 60,257
Exchange of Class B common stock for
Class A common stock
Issuance of Class A common stock for
Employee Stock Purchase and
Profit Sharing Plans 181
Exercise of stock options 88
Net income 6,186
Cash dividends declared (2,070)
Net change in securities
valuation equity (allowance) (9,058) (9,058)
-----------------------------------------------------------------------------
Balance at December 31, 1994 0 (4,391) 55,584
Exchange of Class B common stock for
Class A common stock
Issuance of Class A Common stock for
Employee Stock Purchase and Profit
Sharing Plans 115
Treasury stock acquired (1,692) (1,692)
Treasury stock issued for Employee
Stock Purchase and Profit Sharing Plans 16 16
Exercise of stock options (58)
Net income 6,826
Cash dividends declared (2,277)
Net change in securities
valuation equity (allowance) 3,686 3,686
-----------------------------------------------------------------------------
Balance at December 31, 1995 $(1,676) $ (705) $62,200
=============================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
45
28
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Seacoast Banking Corporation of Florida and Subsidiaries
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries.
Intercompany transactions and balances have been eliminated in consolidation.
Nature of Operations: The company is one bank holding company whose operations
and locations are more fully described under the heading "Banking on Florida's
Treasure Coast" on the inside of the front cover and on page 1 of this annual
report.
Use of Estimates: The preparation of these financial statements required the
use of certain estimates by management in determining the Company's assets,
liabilities, revenues and expenses. Actual results could differ from those
estimates.
Securities: Effective December 31, 1993, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Securities that may be sold as part of the
Company's asset/liability management or in response to, or in anticipation of
changes in interest rates and resulting prepayment risk, or for other factors
are stated at market value. Such securities are held for sale with unrealized
gains or losses reflected as a component of Shareholders' Equity, net of tax.
Debt securities that the Company has the ability and intent to hold to maturity
are carried at amortized cost. Interest income on securities, including
amortization of premiums and accretion of discounts is recognized using the
interest method.
The Company generally anticipates prepayments of principal in the calculation
of the effective yield for collateralized mortgage obligations and mortgage-
backed securities. The adjusted cost of each specific security sold is used to
compute gains or losses on the sale of securities.
Other Real Estate Owned: Other real estate owned consists of real estate
acquired in lieu of unpaid loan balances. These assets are carried at an amount
equal to the loan balance prior to foreclosure plus costs incurred for
improvements to the property, but no more than the estimated fair value of the
property.
Bank Premises and Equipment: Bank premises and equipment are stated at cost,
less accumulated depreciation and amortization. Depreciation is computed
principally by the straight line method, over the estimated useful lives as
follows: building - 25-40 years, furniture and equipment - 4-12 years.
Purchase Method of Accounting: Net assets of companies acquired in purchase
transactions are recorded at fair value at date of acquisition. Core deposit
intangibles are amortized on a straight line basis over estimated periods
benefited, not exceeding 10 years. Goodwill is amortized on a straight line
basis over 15 years.
Revenue Recognition: Interest on loans is accrued based upon the principal
amount outstanding. The accrual of interest income is discontinued when a loan
becomes 90 days past due as to principal or interest.
When interest accruals are discontinued, interest credited to income in the
current year is reversed and interest accrued in the prior year is charged to
the allowance for loan losses.
Management may elect to continue the accrual of interest when the estimated net
realizable value of collateral is sufficient to cover the principal balance and
accrued interest.
Provision for Loan Losses: The provision for loan losses is management's
judgement of the amount necessary to increase the allowance for loan losses to
a level sufficient to cover losses in the collection of loans.
Net Income Per Share: Net income per share is based upon the weighted average
number of shares of both Class A and Class B common stock and equivalents
outstanding during the respective years.
Cash Flow Information: For the purposes of the consolidated statements of cash
flows, the Company considers cash and due from banks and federal funds sold as
cash and cash equivalents.
NOTE B - CASH, DIVIDEND AND LOAN RESTRICTIONS
In the normal course of business, the Company and its subsidiary bank enter
into agreements, or are subject to regulatory agreements, that result in cash,
debt and dividend restrictions. A summary of the most restrictive items
follows: The Company's subsidiary bank is required to maintain average reserve
balances with the Federal Reserve Bank. The average amount of those reserve
balances for the year ended December 31, 1995 was approximately $6,500,000.
Under Federal Reserve regulation, the Company's subsidiary bank is limited as
to the amount it may loan to its affiliates, including the Company, unless such
loans are collateralized by specified obligations. At December 31, 1995, the
maximum amount available for transfer from the subsidiary bank to the Company
in the form of loans approximated 18 percent of consolidated net assets.
The approval of the Comptroller of the Currency is required if the total of all
dividends declared by a national bank in any calendar year exceeds the bank's
profits, as defined, for that year combined with its retained net profits for
the preceding two calendar years. Under this restriction the Company's
subsidiary bank can distribute as dividends to the Company in 1996, without
prior approval of the Comptroller of the Currency, approximately $9,500,000.
46
29
NOTE C - SECURITIES
The amortized cost and market value of securities follow:
Gross Gross
Amortized Unrealized Unrealized Market
(In thousands of dollars) Cost Gains Losses Value
- -----------------------------------------------------------------------------------------------------
December 31, 1995
Securities Held for Sale:
U.S. Treasury and U.S. Government agencies $ 34,512 $ 645 $ (37) $ 35,120
Mortgage backed securities 87,908 551 (454) 88,005
Mutual funds 35,577 0 (1,030) 34,547
Other securities 1,794 14 0) 1,808
-------------------------------------------------------
$159,791 $1,210 $ (1,521) $159,480
=======================================================
Securities Held for Investment:
U.S. Treasury and U.S.Government agencies $ 17,329 $ 669 $ 0 $ 17,998
Mortgage backed securities 23,837 259 (102) 23,994
Tax exempt 12,892 544 (3) 13,433
Other securities 100 0 0) 100
-------------------------------------------------------
$ 54,158 $1,472 $ (105) $ 55,525
=======================================================
December 31, 1994
Securities Held for Sale:
U.S. Treasury and U.S.Government agencies $ 59,123 $ 73 $ (510) $ 58,686
Mortgage backed securities 38,651 16 (1,457) 37,210
Mutual funds 35,577 0 (1,887) 33,690
Other securities 1,757 0 (55) 1,702
-------------------------------------------------------
$135,108 $ 89 $ (3,909) $131,288
=======================================================
Securities Held for Investment:
U.S. Treasury and U.S.Government agencies $ 47,523 $ 7 $ (1,633) $ 45,897
Mortgage backed securities 66,427 0 (3,249) 63,178
Tax exempt 13,323 208 (234) 13,297
Other securities 100 0 0) 100
-------------------------------------------------------
$127,373 $ 215 $ (5,116) $122,472
=======================================================
- -----------------------------------------------------------------------------------------------------
The amortized cost and market value of securities at December 31, 1995, by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or repay
obligations with or without call or prepayment penalties.
Held for Investment Held for Sale
------------------------------------------
Amortized Market Amortized Market
(IN THOUSANDS OF DOLLARS) Cost Value Cost Value
- -----------------------------------------------------------------------------------
DUE IN ONE YEAR OR LESS $1,717 $1,727 $7,318 $7,295
DUE AFTER ONE YEAR THROUGH FIVE YEARS 17,851 18,486 18,228 18,519
DUE AFTER FIVE YEARS THROUGH TEN YEARS 4,496 4,724 8,966 9,306
DUE AFTER TEN YEARS 6,257 6,594 0 0
----------------------------------------
30,321 31,531 34,512 35,120
MORTGAGE BACKED SECURITIES 23,837 23,994 87,908 88,005
NO CONTRACTUAL MATURITY 0 0 37,371 36,355
----------------------------------------
$54,158 $55,525 $159,791 $159,480
========================================
- -----------------------------------------------------------------------------------
Proceeds from sales of securities during 1995 were $115,107,000 with gross
gains of $778,000 and gross losses of $298,000. During 1994, proceeds from
sales of securities were $72,521,000 with gross gains of $1,178,000 and gross
losses of $426,000. During 1993, proceeds from sales of securities were
$42,311,000 with gross gains of $1,362,000 and gross losses of $158,000.
Securities with a carrying value of $70,939,000 at December 31, 1995, were
pledged to secure United States Treasury deposits, other public deposits and
trust deposits.
NOTE D - LOANS
An analysis of loans follows:
December 31 (In thousands of dollars) 1995 1994
- ---------------------------------------------------------
Real estate construction $ 10,540 $ 8,728
Real estate mortgage 335,031 229,713
Commercial and financial 17,205 11,296
Installment loans to individuals 51,959 42,912
Other 229 141
------------------
$414,964 $292,790
==================
- ---------------------------------------------------------
One of the sources of the Company's business is loans to directors, officers
and other members of management. These loans are made on the same terms as all
other loans and do not involve more than normal risk of collectibility. The
aggregate dollar amount of these loans was approximately $3,786,000 and
$3,047,000 at December 31, 1995 and 1994, respectively. During 1995, $1,685,000
of new loans were made and repayments totalled $946,000.
See page 26 of Management's Discussion and Analysis for information about
concentrations of credit risk of all financial instruments.
NOTE E - IMPAIRED LOANS AND ALLOWANCE FOR LOAN LOSSES
The Company adopted Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan," and Statement of Financial
Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures," as of January 1, 1995. These statements
require that certain impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's original effective interest
rate. As a practical expedient, impairment may be measured based on the loan's
observable market price or the fair value of collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the
recorded investment in the loan, the impairment is recorded through a valuation
allowance.
The Company had previously measured the allowance for loan losses using methods
similar to those described in Statement of Financial Accounting Standard No.
114. As a result of adopting these statements, no additional allowance for loan
losses was required as of January 1, 1995.
The Company's recorded investment in impaired loans and the related valuation
allowance are as follows:
RECORDED VALUATION
DECEMBER 31, 1995 (IN THOUSANDS OF DOLLARS) INVESTMENT ALLOWANCE
- --------------------------------------------------------------------------
IMPAIRED LOANS:
VALUATION ALLOWANCE REQUIRED $ 585 $ 14
NO VALUATION ALLOWANCE REQUIRED 681 0
--------------------
$1,266 $ 14
--------------------
- --------------------------------------------------------------------------
47
30
The valuation allowance is included in the allowance for loan losses. The
average recorded investment in impaired loans for the year ended December 31,
1995 was $204,000.
Interest payments received on impaired loans are recorded as interest income
unless collection of the remaining recorded investment is doubtful at which
time payments received are recorded as reductions to principal. The Company
recognized interest income on impaired loans of $22,000 for the year ended
December 31, 1995.
Transactions in the allowance for loan losses are summarized as follows:
Year Ended December 31 (In thousands of dollars) 1995 1994 1993
- ----------------------------------------------------------------------------------------------
Balance, beginning of year $3,373 $3,622 $4,091
Provision charged to operating expense 250 145 150
Allowance applicable to loans of purchased company 556 0 0
Charge offs (533) (819) (956)
Recoveries 420 425 337
--------------------------------
Balance, end of year $4,066 $3,373 $3,622
================================
- ----------------------------------------------------------------------------------------------
NOTE F - BANK PREMISES AND EQUIPMENT
Bank premises and equipment are summarized as follows:
Accumulated Net
Depreciation & Carrying
(In thousands of dollars) Cost Amortization Value
- ----------------------------------------------------------------------------------------------------
December 31, 1995
Premises (including land of $2,769) $17,428 $ 4,727 $12,701
Furniture and equipment 11,733 8,330 3,403
-----------------------------------------------
$29,161 $13,057 $16,104
===============================================
December 31, 1994
Premises (including land of $3,084) $16,303 $ 4,208 $12,095
Furniture and equipment 10,987 7,331 3,656
-----------------------------------------------
$27,290 $11,539 $15,751
===============================================
- ----------------------------------------------------------------------------------------------------
NOTE G - SHORT TERM BORROWINGS
All of the Company's borrowings were comprised of federal funds purchased and
securities sold under agreements to repurchase with maturities primarily from
overnight to seven days.
(In thousands of dollars) 1995 1994 1993
- ----------------------------------------------------------------------------------------------
Maximum amount outstanding at any month end $ 43,907 $ 44,639 $ 40,533
Average interest rate outstanding at end of year 3.91% 4.56% 2.06%
Average amount outstanding $ 7,816 $ 7,949 $ 5,643
Weighted average interest rate 4.59% 3.38% 2.39%
- ----------------------------------------------------------------------------------------------
The Company's subsidiary bank has unused lines of credit to purchase federal
funds from its correspondent banks of $37,500,000 at December 31, 1995.
NOTE H - EMPLOYEE BENEFITS
During the plan year ended October 31, 1992, a resolution was adopted to freeze
benefit accruals of the Company's defined benefit pension plan as of October
31, 1992, and to terminate the plan. A curtailment gain was calculated upon
freezing the benefits which was not recognized in income as the Company intends
to amend the plan's benefit formula to allocate all plan assets after plan
expenses to the participants.
The following table sets forth the plan's funded status and amounts recognized
in the Company's financial statements at December 31:
(In thousands of dollars) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $3,034 in 1995, $2,611 in 1994
and $2,968 in 1993 $ (3,168) $ (2,760) $ (3,373)
=================================================
Projected benefit obligation for service
rendered to date of curtailment $ (3,168) $ (2,760) $ (3,373)
Plan assets at fair value, primarily listed stocks
and U.S. government bonds 4,089 3,885 4,163
-------------------------------------------------
Projected benefit obligation less than plan assets 921 1,125 790
Unrecognized net loss from past
experience different from that assumed and
effects of changes in assumptions 308 77 394
Unrecognized net assets at January 1, 1987,
being recognized over 15 years (622) (725) (828)
-------------------------------------------------
Prepaid pension cost included in other assets $ 607 $ 477 $ 356
=================================================
Net pension cost:
Service cost $ 0 $ 0 $ 0
Interest cost on projected benefit obligation 233 252 233
Actual return on plan assets (348) (373) (403)
Net amortization and deferral (14) 0 (93)
-------------------------------------------------
Net periodic pension income $ (129) $ (121) $ (263)
=================================================
Assumptions used in determining the projected
benefit obligation were:
Weighted average discount rates 7.0% 8.5% 7.5%
Expected long-term rate of return on assets 8.0% 9.0% 9.0%
The Company's profit sharing plan which covers substantially all employees
after one year of service includes a matching benefit feature for employees
electing to defer the elective portion of their profit sharing compensation. In
addition, amounts of compensation contributed by employees are matched on a
percentage basis under the plan. The profit sharing contributions charged to
operations were $572,000 in 1995, $539,000 in 1994 and $722,000 in 1993.
48
31
The Company's stock option and stock appreciation rights plan was approved by
the Company's shareholders on April 25, 1991. The number of shares of Class A
common stock that may be purchased pursuant to the 1991 plan shall not exceed
300,000 shares. The exercise price at the dates options are granted
approximated the fair market value of the Class A common stock on those dates.
The following table presents a summary of stock option activity for 1994 and
1995:
Number Option Price
of Shares Per Share
-----------------------------------------------
Options outstanding,
January 1, 1994 212,500 $11.00 - 19.00
Exercised (8,000) 11.00
Granted 8,000 19.75
Cancelled (7,000) 17.75 - 19.00
------------------------
Options outstanding,
December 31, 1994 205,500 11.00 - 19.75
Exercised (8,000) 11.00
Granted 60,000 17.50
Cancelled (8,000) 19.75
------------------------
Options outstanding,
December 31, 1995 249,500 11.00 - 19.00
========================
Options exercisable,
December 31, 1994 38,000
December 31, 1995 96,000
-----------------------------------------------
NOTE I - LEASE COMMITMENTS
The Company is obligated under various noncancelable operating leases for
equipment, buildings and land. At December 31, 1995, future minimum lease
payments under leases with initial or remaining terms in excess of one year are
as follows:
(In thousands of dollars)
---------------------------------
1996 $ 1,109
1997 858
1998 668
1999 569
2000 407
Thereafter 6,758
--------
$ 10,369
========
---------------------------------
Rent expense charged to operations was $995,000 in 1995, $1,033,000 in 1994 and
$995,000 in 1993. Certain leases contain provisions for renewal and change with
the consumer price index.
Certain property is leased from related parties of the Company at prevailing
rental rates. Lease payments to these individuals were $185,000 in 1995,
$259,000 in 1994 and $202,000 in 1993.
NOTE J - INCOME TAXES
The provision for income taxes including tax effects of security transaction
gains (1995 - $175,000; 1994 - $267,000; 1993 - $436,000) are as follows:
Year Ended December 31 (In thousands of dollars) 1995 1994 1993
-------------------------------------------------------------------------
Current
Federal $3,311 $2,313 $3,398
State 403 150 368
Deferred
Federal 46 554 (251)
State 5 74 (27)
------------------------
$3,765 $3,091 $3,488
========================
-------------------------------------------------------------------------
Temporary differences in the recognition of revenue and expense for tax and
financial reporting purposes resulted in deferred income taxes as follows:
(In thousands of dollars) 1995 1994 1993
-------------------------------------------------
Depreciation $(135) $(260) $(39)
Allowance for loan losses 2 152 (126)
Interest and fee income 63 (126) 15
Other real estate owned (4) 736 (245)
Tax accounting change 26 113 112
Other 99 13 5
-------------------
$51 $628 $(278)
===================
------------------------------------------------
The difference between the total expected tax expense (computed by applying the
U.S. Federal tax rate of 34 percent to pretax income) and the reported income
tax expense relating to income before income taxes is as follows:
Year Ended December 31 (In thousands of dollars) 1995 1994 1993
- -------------------------------------------------------------------------------------
34% of income before income taxes $3,601) $3,154 $3,521
Increase (decrease) resulting from the effects of:
Tax-exempt interest on obligations of
states and political subdivisions (234) (253) (250)
State income taxes (139) (76) (116)
Dividend exclusion (7) (8) (10)
Amortization of intangibles 108 0 0
Other 28 50 2
------------------------
Federal tax provision 3,357 2,867 3,147
State tax provision 408 224 341
------------------------
Applicable income taxes $3,765 $3,091 $3,488
========================
- -------------------------------------------------------------------------------------
49
32
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The adoption of
SFAS 109 changed the Company's method of accounting for income taxes from the
deferred method (APB 11) to an asset and liability approach. Previously, the
Company deferred the effects of timing differences between financial reporting
and taxable income at then current tax rates. The asset and liability approach
requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
The net deferred tax assets are comprised of the following:
December 31 (In thousands of dollars) 1995 1994
-------------------------------------------------------
Allowance for loan losses $ 1,210 $ 1,212
Other real estate owned 15 11
Tax accounting change 0 26
Net unrealized securities losses 402 2,412
Other 0 30
----------------
Gross deferred tax assets 1,627 3,691
Depreciation (887) (1,022)
Interest and fee income (332) (269)
Other (68) (0)
----------------
Gross deferred tax liabilities (1,287) (1,291)
Deferred tax asset valuation allowance 0 0
----------------
Net deferred tax assets $ 340 $ 2,400
================
-------------------------------------------------------
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value:
Cash and cash equivalants
The carrying amount was used as a reasonable estimate of fair value.
Securities
The fair value of U.S. Treasury and U.S. Government agency, mutual fund and
mortgage backed securities are estimated based on bid prices published in
financial newspapers or bid quotations received from securities dealers.
The fair value of many state and municipal securities are not readily available
through market sources, so fair value estimates are based on quoted market
price or prices of similar instruments.
Loans
Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, mortgage,
credit card, etc. Each loan category is further segmented into fixed and
adjustable rate interest terms and by performing and nonperforming categories.
The fair value of loans, except residential mortgage and credit card loans, is
calculated by discounting scheduled cash flows through the estimated maturity
using estimated market discount rates that reflect the credit and interest rate
risk inherent in the loan. For residential mortgage loans, fair value is
estimated by discounting contractual cash flows adjusting for prepayment
assumptions using discount rates based on secondary market sources adjusted to
reflect differences in servicing and credit costs. For credit card loans, cash
flows and maturities are based on contractual terms. The fair value estimate
for credit card loans is based on the carrying value of existing loans at
December 31, 1995 and 1994. This estimate does not include the value that
relates to estimated cash flows from new loans generated from existing
cardholders over the remaining life of the portfolio.
Deposit Liabilities
The fair value of demand deposits, savings accounts and money market deposits
is the amount payable on demand at the reporting date. The fair value of fixed
maturity certificates of deposit is estimated using the rates currently offered
for deposits of similar remaining maturities.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
present creditworthiness of the counterparties.
1995 1994
------------------------------------------------------------------------------
December 31 Carrying Fair Carrying Fair
(In thousands of dollars) Amount Value Amount Value
------------------------------------------------------------------------------
Financial Assets
Cash and Cash Equivalents $115,018 $115,018 $ 87,580 $ 87,580
Securities 213,638 215,005 258,661 253,760
Loans, net 410,898 415,647 289,417 282,855
Financial Liabilities
Deposits 660,967 662,141 559,629 558,356
Borrowings 43,907 43,907 44,639 44,639
Contingent Liabilities
Commitments to Extend Credit 0 335 0 294
Standby Letters of Credit 0 11 0 21
------------------------------------------------------------------------------
50
33
NOTE L - NONINTEREST INCOME AND EXPENSES
Details of noninterest income and expenses follow:
Year Ended December 31 (In thousands of dollars) 1995 1994 1993
- -----------------------------------------------------------------------------------
Noninterest income
Service charges on deposit accounts $ 2,454 $ 2,033 $ 2,208
Trust fees 1,908 1,722 1,785
Other service charges and fees 1,098 1,028 1,105
Brokerage commissions and fees 1,555 1,190 1,753
Other 502 502 737
-------------------------
7,517 6,475 7,588
Securities gains 480 752 1,204
-------------------------
$ 7,997 $ 7,227 $ 8,792
=========================
Noninterest expenses
Salaries and wages $ 9,650 $ 8,682 $ 9,188
Pension and other employee benefits 1,951 1,815 1,850
Occupancy 2,331 2,230 2,251
Furniture and equipment 1,900 2,027 2,231
Marketing 1,367 1,262 996
Legal and professional fees 742 888 860
FDIC assessments 728 1,191 1,297
Foreclosed and repossessed asset
management and dispositions 64 20 1,119
Amortization of intangibles 418 88 84
Other 5,095 4,802 4,469
-------------------------
$24,246 $23,005 $24,345
=========================
- -----------------------------------------------------------------------------------
NOTE M - SHAREHOLDERS' EQUITY
The Company has reserved 100,000 Class A common shares for issuance in
connection with an employee stock purchase plan and 150,000 Class A common
shares for issuance in connection with an employee profit sharing plan. At
December 31, 1995, an aggregate of 35,236 shares and 52,422 shares,
respectively, have been issued as a result of employee participation in these
plans.
Holders of Class A common stock are entitled to one vote per share on all
matters presented to shareholders. Holders of Class B common stock are entitled
to 10 votes per share on all matters presented to shareholders. Class A and
Class B common stock vote together as a single class on all matters, except as
required by law or as provided otherwise in the Company's Articles of
Incorporation. Each share of Class B common stock is convertible into one share
of Class A common stock at any time prior to a vote of shareholders authorizing
a liquidation or dissolution of the Company.
NOTE N - ACQUISITION
On April 14, 1995, the Company acquired American Bank Capital Corporation of
Florida and its subsidiary, American Bank of Martin County. The transaction was
treated as a purchase with the Company paying $9.3 million. The following
represents the unaudited pro forma impact as of and for the year ended December
31, 1994, assuming the acquisition occurred January 1, 1994:
December 31, 1994 (In thousands of dollars)
- ------------------------------------------------------------------------------------
Total assets $726,244
Total loans 340,022
Total deposits 621,524
Shareholders' equity 55,584
Intangible assets 7,662
Tangible Tier 1 capital to adjusted assets 7.46
(In thousands of dollars
For the year ended December 31, 1994 except per share amounts)
- ------------------------------------------------------------------------------------
Net interest income $27,328
Noninterest income 7,771
Noninterest expense 24,330
Net income 6,910
Net income per share 1.60
- -----------------------------------------------------------------------------------
NOTE O - SEACOAST BANKING CORPORATION OF FLORIDA
(PARENT COMPANY ONLY) FINANCIAL INFORMATION
BALANCE SHEETS
December 31 (In thousands of dollars) 1995 1994
- -----------------------------------------------------------------------------------
ASSETS
Cash $ 10 $ 10
Securities purchased under agreement to
resell with subsidiary bank, maturing
within 30 days 3,772 4,985
Securities held for sale 1,596 1,449
Investment in subsidiaries 56,875 49,079
Other assets 32 157
----------------------
$62,285 $55,680
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Other liabilities $85 $96
Shareholders' Equity 62,200 55,584
----------------------
$62,285 $55,680
======================
- -----------------------------------------------------------------------------------
51
34
STATEMENTS OF INCOME
Year Ended December 31 (In thousands of dollars) 1995 1994 1993
- ---------------------------------------------------------------------------------------------
INCOME
Dividends
Subsidiary $2,668 $2,378 $2,027
Other 30 33 42
Interest 292 235 166
------------------------
2,990 2,646 2,235
EXPENSES 408 553 363
------------------------
Income before income tax credit and equity in
undistributed income of subsidiaries 2,582 2,093 1,872
Income tax credit (38) (109) (67)
------------------------
Income before equity in undistributed income
of subsidiaries 2,620 2,202 1,939
Equity in undistributed income of
subsidiaries 4,206 3,984 5,193
------------------------
NET INCOME $6,826 $6,186 $7,132
========================
- -------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
Year Ended December 31 (In thousands of dollars) 1995 1994 1993
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 292 $ 235 $ 166
Dividends received 2,701 2,414 2,073
Income taxes received 109 67 60
Cash paid to suppliers (419) (563) (383)
-------------------------
Net cash provided by operating activities 2,683 2,153 1,916
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of securities 0 0 300
Decrease (increase) in securities
purchased under agreement to resell,
maturing in 30 days 1,213 (352) (683)
-------------------------
Net cash provided by (used in) investing activities 1,213 (352) (383)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock - Employee Stock
Purchase and Profit Sharing Plans 115 181 360
Exercise of Stock Options (58) 88 0
Treasury Stock purchased (1,676) 0 0
Dividends paid (2,277) (2,070) (1,893)
-------------------------
Net cash used in financing activities (3,896) (1,801) (1,533)
-------------------------
Net change in cash 0 0 0
Cash at beginning of year 10 10 10
-------------------------
Cash at end of year $ 10 $ 10 $ 10
=========================
Year Ended December 31 (In thousands of dollars) 1995 1994 1993
- --------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $6,826 $6,186 $7,132
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization 4 4 4
Equity in undistributed income of subsidiaries (4,206) (3,984) (5,193)
Change in other assets 70 (41) (3)
Change in other liabilities (11) (12) (24)
------------------------
Net cash provided by operating activities $2,683 $2,153 $1,916
========================
- --------------------------------------------------------------------------------------------
NOTE P - CONTINGENT LIABILITIES AND COMMITMENTS WITH OFF BALANCE SHEET RISK
The Company and its subsidiary bank, because of the nature of their business,
are at all times subject to numerous legal actions, threatened or filed.
Management, based upon advice of legal counsel, does not expect that the final
outcome of threatened or filed suits will have a materially adverse effect on
its results of operations or financial condition.
The Company's subsidiary bank is a party to financial instruments with off
balance sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to extend
credit and standby letters of credit.
The subsidiary bank's exposure to credit loss in the event of non-performance
by the other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contract or notional amount
of those instruments. The subsidiary bank uses the same credit policies in
making commitments and standby letters of credit as it does for on balance
sheet instruments.
Contract or
Notional Amount
December 31 (In thousands of dollars) 1995 1994
------------------------------------------------------------
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $33,502 $29,431
Standby letters of credit and
financial guarantees written:
Secured 898 1,958
Unsecured 168 146
------------------------------------------------------------
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
52
35
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The subsidiary bank evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the bank upon extension of credit,
is based on management's credit evaluation of the counterparty. Collateral held
varies but may include accounts receivable, inventory, equipment, and
commercial and residential real estate. Of the $33,502,000 outstanding at
December 31, 1995, $24,715,000 is secured by 1-4 family residential properties.
Standby letters of credit are conditional commitments issued by the subsidiary
bank to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. The subsidiary bank holds collateral supporting those commitments
for which collateral is deemed necessary. The extent of collateral held for the
above secured standby letters of credit at December 31, 1995 and 1994 amounted
to $1,228,000 and $3,476,000, respectively.
NOTE Q - SUPPLEMENTAL DISCLOSURES FOR CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
Year Ended December 31 1995 1994 1993
- -----------------------------------------------------------------------------------------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities
Net Income $ 6,826 $ 6,186 $ 7,132
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 2,594 2,717 2,994
Provision for loan losses 250 145 150
Provision (credit) for deferred taxes 51 628 (278)
Cumulative effect on prior years
of a change in accounting principle 0 0 (264)
Gain on sale of securities (480) (752) (1,204)
Gain on sale of loans 0 (45) (277)
(Gain) loss on sale and write down
of foreclosed assets (18) (192) 1,003
Loss on disposition of equipment 53 96 151
Change in interest receivable 615 21 83
Change in interest payable 247 118 (419)
Change in prepaid expenses 0 112 (147)
Change in accrued taxes 497 (686) (320)
Change in other liabilities 415 84 (497)
-------------------------------
Total adjustments 4,224 2,246 975
-------------------------------
Net cash provided by operating activities $11,050 $ 8,432 $ 8,107
===============================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Market value adjustment to securities $ 3,509 $(11,132) $ 7,596
Transfer from securities held for sale
to securities held for investment 16,147 64,885 0
Transfer from securities held for
investments to securities held for sale 68,764 0 0
Transfers from loans to other
real estate owned 945 0 1,603
Transfer from loans to loans held for sale 0 0 13,578
- -----------------------------------------------------------------------------------------
NOTE R - REASSESSMENT OF SECURITIES' CLASSIFICATIONS
The Company used the opportunity provided by an implementation guide on SFAS
No. 115 to reclassify approximately $69 million from held for investment to the
held for sale portfolio.
In connection with this reclassification, gross unrealized gains of $785,000
and gross unrealized losses of $413,000 were recorded in held for sale
securities and in shareholders' equity (net of tax) in 1995.
53