-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cN3lz08H9+yDnHgimOkLSzw32teKa0sGh2U/imQFDRxjhkFqJrNiZ9P4Bj0fgKez 7hv735QWIb8l0CZo+wzKQQ== 0000730708-95-000005.txt : 19950516 0000730708-95-000005.hdr.sgml : 19950516 ACCESSION NUMBER: 0000730708-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEACOAST BANKING CORP OF FLORIDA CENTRAL INDEX KEY: 0000730708 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 592260678 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13660 FILM NUMBER: 95539279 BUSINESS ADDRESS: STREET 1: 815 COLORADO AVE STREET 2: P O BOX 9012 CITY: STUART STATE: FL ZIP: 34994 BUSINESS PHONE: 4072874000 MAIL ADDRESS: STREET 1: 815 COLORADO AVE STREET 2: P O BOX 9012 CITY: STUART STATE: FL ZIP: 34995 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [ ] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended Commission file MARCH 31, 1995 No. 0-13660 SEACOAST BANKING CORPORATION OF FLORIDA (Exact name of registrant as specified in its charter) Florida 59-2260678 (State or other jurisdiction of (IRS employer incorporation or organization) identification number) 815 Colorado Avenue, Stuart FL 34994 (Address of principal executive offices) (Zip code) (407) 287-4000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: Class A Common Stock, Par Value $.10 (Title of class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [x] NO [ ] Indicate the number of shares outstanding of each of the registrant's classes of common stock as of March 31, 1995: Class A Common Stock, $.10 Par Value - 3,726,221 shares Class B Common Stock, $.10 Par Value - 557,154 shares INDEX SEACOAST BANKING CORPORATION OF FLORIDA Part I FINANCIAL INFORMATION PAGE # Item 1 Financial Statements (Unaudited) Condensed consolidated balance sheets - March 31, 1995, December 31, 1994 and March 31, 1994 3 - 4 Condensed consolidated statements of income - Three months ended March 31, 1995 and 1994 5 - 6 Condensed consolidated statements of cash flows - Three months ended March 31, 1995 and 1994 7 - 9 Notes to condensed consolidated financial statements 10 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Part II OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K (a) Restricted Stock Agreement (b) Reports on Form 8-K SIGNATURES Part I. FINANCIAL INFORMATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) Seacoast Banking Corporation of Florida and Subsidiaries Mar, 31 Dec, 31 Mar, 31 (Dollars in thousands) 1995 1994 1994 ASSETS Cash and due from banks 25019 25230 23998 Federal funds sold 55750 62350 9600 Securities: At market 107810 131288 242110 At amortized cost (market values: $134,961 at 3/31/95, $122,472 at 12/31/94 & $ 63,779 at 3/31/94 135749 127373 63134 TOTAL SECURITIES 243559 258661 305244 Loans, net of unearned income 303932 292790 256617 Less: Allowance for loan losses (3337) (3373) (3604) NET LOANS 300595 289417 253013 Bank premises and equipment 15159 15751 16302 Other real estate owned 0 165 3617 Other assets 10428 11137 8932 650510 662711 620706 LIABILITIES & SHAREHOLDERS' EQUITY LIABILITIES Deposits 581530 559629 550761 Federal funds purchased & securities sold under agreements to repurchase maturing within 30 days 8584 44639 8722 Other liabilities 2767 2859 3259 592881 607127 562742
CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (Unaudited) Seacoast Banking Corporation of Florida and Subsidiaries Mar 31, Dec 31, Mar 31, (Dollars in thousands) 1995 1994 1994 SHAREHOLDERS' EQUITY Preferred stock 0 0 0 Class A common stock 373 372 370 Class B common stock 56 56 57 Additional paid-in capital 18520 18498 18381 Retained earnings 41960 41049 37834 60909 59975 56642 Securities valuation equity (3280) (4391) 1322 (allowance) TOTAL SHAREHOLDERS' EQUITY 57629 55584 57964 650510 662711 620706
Note: The balance sheet at December 31, 1994 has been derived from the audited financial statements at that date. See notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Seacoast Banking Corporation of Florida and Subsidiaries Three Months Ended March 31, (Dollars in thousands, except per share 1994 1993 data) Interest and dividends on investment 3957 4350 securities 6432 5093 Interest and fees on loans 653 113 Interest on federal funds sold TOTAL INTEREST INCOME 11042 9556 Interest on deposits 1375 1367 Interest on time certificates 2967 1805 Interest on borrowed money 192 73 TOTAL INTEREST EXPENSE 4534 3245 NET INTEREST INCOME 6508 6311 Provision for loan losses 0 50 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 6508 6261 Noninterest income Securities gains (losses) (53) (15) Other income 1599 1764 TOTAL NONINTEREST INCOME 1546 1749 TOTAL NONINTEREST EXPENSES 5865 5930 INCOME BEFORE INCOME TAXES 2189 2080 Provision for income taxes 726 673 NET INCOME 1463 1407
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Seacoast Banking Corporation of Florida and Subsidiaries Three Months Ended March 31, (Dollars in thousands, except per 1994 1993 share data) PER SHARE COMMON STOCK: NET INCOME 0.34 0.33 CASH DIVIDENDS DECLARED: Class A 0.130 0.120 Class B 0.109 0.100 Average shares outstanding 4309763 4298982
See notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Seacoast Banking Corporation of Florida and Subsidiaries (In thousands of dollars) Three Months Ended March 31 1995 1994 Increase(Decrease) in Cash and Cash Equivalents Cash flows from operating activities Interest received 11395 10059 Fees and commissions received (1599) 1724 Interest paid (4340) (3275) Cash paid to suppliers and employees (6451) (6333) Income taxes paid 0 (290) Net cash provided by operating activities 2203 1885 Cash flows from investing activities Proceeds from maturity of securities classified at market 11619 6624 Proceeds from maturity of securities classified at amortized cost 1721 4596 Proceeds from sale of securities classified at market 19526 5233 Proceeds from sale of securities classified at amortized cost 0 0 Purchase of securities classified at market (16231)(42509) Purchase of securities classified at amortized cost 0 (983) Proceeds from sale of loans 0 24160 Net new loans and principal repayments (11178) (7610) Proceeds from the sale of other real estate owned 219 370 Sale(purchase) of premises and equipment 125 (146) Net change in other assets (129) (76) Net cash provided by (used in) investing activities 5672 (10341)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)(Unaudited) Seacoast Banking Corporation of Florida and Subsidiaries (In thousands of dollars) Three Months Ended March 31 1995 1994 Cash flows from financing activities Net increase in deposits 21897 17261 Net decrease in federal funds purchased and securities sold under agreements to repurchase (36055) (31811) Sale of common stock -- Employee Stock Purchase Plan and Employee Profit -- Sharing Plan 22 64 Exercise of stock options 0 88 Dividends paid (550) (507) Net cash used in financing activities (14686) (14905) Net decrease in cash and cash equivalents (6811) (23361) Cash and cash equivalents at beginning of year 87580 56959 Cash and cash equivalents at end of period 80769 33598
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)(Unaudited) Seacoast Banking Corporation of Florida and Subsidiaries (In thousands of dollars) Three Months Ended March 31 1995 1994 Reconciliation of Net Income to Cash Provided by Operating Activities Net Income 1463 1407 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 605 741 Provision for loan losses 0 (50) Loss on sale of securities 53 15 Gain on sale of loans 0 (40) Loss(gain) on sale and writedown of foreclosed assets (54) 129 Loss on disposition of fixed assets 28 19 Change in interest receivable 208 248 Change in interest payable 194 (30) Change in prepaid expenses (730) (720) Change in accrued taxes 913 507 Change in other liabilities (477) (441) Total adjustments 740 478 Net cash provided by operating activities 2203 1885 Supplemental disclosure of noncash investing activities: Transfers from loans to other real estate owned 0 0 Market value adjustment to securities 1560 (5257) Transfer from securities held for sale to held for investment 10049 0
See notes to condensed consolidated financial statement. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1995, are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1994. NOTE B - CONTINGENT LIABILITIES Various claims and lawsuits are pending against the Company and its subsidiaries. Although the amount of any ultimate liability with respect to such matters cannot be determined, in the opinion of management, after consultation with legal counsel, those claims and other lawsuits, when resolved, will not have a material adverse effect on the consolidated financial condition of the Company and it's subsidiaries. NOTE C - ACQUISITION On April 14, 1995, the Company acquired American Bank Capital Corporation of Florida and its subsidiary, American Bank of Martin County. The transaction was treated as a purchase with the Company paying $9.3 million. The following represents the proforma impact as of and for the year ended December 31, 1994, assuming the acquisition occurred January 1, 1994: (Dollars in December 31, 1994 thousands) Total assets 726244 Total loans 340022 Total deposits 621524 Shareholders'equity 55584 Intangible assets 7662 Tangible Tier 1 capital to 7.46% adjusted assets
(Dollars in thousands except per share amounts) For the year ended December 31, 1994 Net interest income 27328 Noninterest income 7771 Noninterest expense 24330 Net income 6910 Earnings per share 1.60
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FIRST QUARTER 1995 The following discussion and analysis is designed to provide a better understanding of the significant factors related to the company's results of operations and financial condition. Such discussion and analysis should be read in conjunction with the company's Condensed Consolidated Financial Statements and the notes attached thereto. EARNINGS SUMMARY Net income for the first quarter of 1995 totalled $1,463,000 or $0.34 per share, compared with $1,407,000 or $0.33 per share in the first quarter of 1994 and $1,636,000 or $0.38 per share in the fourth quarter of 1994. Net income for the fourth quarter of 1994 included an after tax gain on sales of other real estate owned of $233,000 or $0.05 per share. Return on average assets was 0.92 percent and return on average shareholders' equity was 9.82 percent for the first quarter of 1995, compared to first quarter 1994's performance of 0.93 percent and 10.17 percent, respectively, and the prior year's fourth quarter results of 1.04 percent and 10.88 percent, respectively. NET INTEREST INCOME Earnings in the first three months of 1995 benefited from an improved net interest margin. On a tax equivalent basis the margin increased to 4.49 percent from 4.43 percent for the fourth quarter of 1994. Due to competing institutions in our market holding deposit rates level for NOW and savings deposits and increasing rates marginally for money market accounts, the rate paid for interest bearing liabilities for the first quarter of 1995 was limited to a 41 basis point increase from the fourth quarter of 1994. Enhancing the margin since fourth quarter of 1994 were increases in the yield on loans of 56 basis points, resulting from improved loan demand and periodic repricing of adjustable rate mortgages. Also, the yield on federal funds sold increased 71 basis points. For the first quarter a year ago, the net interest margin recorded was 4.63 percent. An increase in the general level of interest rates over the last twelve months has resulted in a 60 basis point increase in the yield on average earning assets to 7.57 percent. Similarly, but to a higher degree, the rate paid for interest bearing liabilities has increased 90 basis points to 3.58 percent. Average earning assets for the first quarter of 1995 increased $34,242,000 or 6.1 percent to $596,809,000, compared to prior year's first quarter. Loan demand picked up pace in the latter half of 1994 and into 1995 providing a $39,681,000 or 15.4 percent increase in average loans to $297,533,000. Average investment securities declined $35,575,000 or 12.3 percent, while average federal funds sold grew $30,136,000 to $44,550,000. The increase in average federal funds sold is related to securities sales and maturities occurring in the fourth quarter and in the first quarter of 1995. These funds will be utilized to fund loan growth or will be reinvested. In part, the mix of deposits had an unfavorable impact on the rate paid for interest-bearing liabilities. Average certificates of deposit have increased $50,638,000 or 26.7 percent to $240,630,000, while average balances for NOW, savings and money market accounts, which are lower cost interest bearing deposits, have declined by $32,430,000 to an aggregate balance of $256,061,000. Favorably affecting deposit mix was an increase in average demand deposits of 7.6 percent from $61,284,000 to $65,919,000. If loan demand continues to improve as a result of the economy firming up, and local competition allows rates paid for core deposits to remain low, the net interest margin should continue to improve over the remainder of 1995. PROVISION FOR LOAN LOSSES No provision was recorded in the first quarter of this year, compared to a $50,000 provision in the first quarter of 1994 and no provisioning in the fourth quarter of 1994. Net charge-offs for the first quarter declined slightly from $68,000 last year to $36,000 in 1995. Net charge offs annualized as a percent of average loans totalled 0.05 percent for the first quarter of 1995, compared to 0.15 percent for all of 1994. Management determines the provision for loan losses which is charged to operations by constantly analyzing and monitoring delinquencies, nonperforming loans and the level of outstanding balances for each loan category, as well as the amount of net charge offs, and by estimating losses inherent in its portfolio. While the company's policies and procedures used to estimate the monthly provision for loan losses charged to operations are considered adequate by management and are reviewed from time to time by the Office of the Comptroller of the Currency (OCC), there exist factors beyond the control of the company, such as general economic conditions both locally and nationally, which make management's judgment as to the adequacy of the provision necessarily approximate and imprecise. NONINTEREST INCOME Noninterest income, excluding losses from securities sales, declined $165,000 or 9.4 percent to $1,599,000 compared to one year earlier. The largest decrease in noninterest income occurred in brokerage commissions and fees which decreased $83,000 or 21.7 percent compared to prior year. The financial market turmoil during 1994 carried into 1995 culminating in first quarter's results and lower volumes of business. The company intends to continue to emphasize its brokerage services to both existing and new customers, as expectations are that financial markets will be more robust during 1995. he next largest decrease was in service charges on deposits which declined $29,000 or 5.5 percent to $499,000, a result of a lower volume of service charges. Other income declined $28,000 or 19.0 percent due to gains of $40,000 on the sale of $24.2 million in fixed rate residential mortgage loans recognized during the first quarter of 1994. No such sales were recorded in 1995. NONINTEREST EXPENSES When compared to 1994, noninterest expenses for the first quarter decreased by $65,000 or 1.1 percent to $5,865,000. The results reflect management's efforts to reduce overhead expenses, without impacting marketing initiatives and service levels provided to bank clients. Salaries and wages increased $147,000 or 6.8 percent from the first quarter of 1994. A new branch opened in November 1994 in Port St. Lucie, Florida increasing salaries and wages $30,000 during the first quarter of 1995 compared to last year and wages for lending personnel grew $46,000, effected by increased loan demand. Employee benefits remained level year to year. Occupancy expenses and furniture and equipment expenses, on an aggregate basis, increased $27,000 or 2.5 percent versus first quarter results last year, entirely due to the branch addition. The premium for Federal Deposit Insurance Corporation ("FDIC") insurance was $93,000 lower, reflecting action by the FDIC to lower premium rates from $0.23 per $100 of deposits to $0.045 per $100 of deposits, effective in the second half of 1995. Costs associated with foreclosed and repossessed asset management decreased $114,000 when compared to the first quarter of 1994 and legal and professional fees recorded for the first quarter of 1995 were $51,000 lower. No other real estate owned ("OREO") remained at March 31, 1995. Offsetting the above declines was an increase in other expense of $75,000 or 6.0 percent in the first quarter compared to last year for the same period. Higher telephone, stationery, printing and supply, and courier related costs aggregated to $67,000 of the increase. INCOME TAXES Income taxes as a percentage of income before taxes were 33.2 percent for the first quarter of this year, compared to 32.4 percent in 1994. The increase in rate reflects a higher rate of provisioning for state income taxes, a result of lower state intangible taxes paid to the State of Florida that can be taken as a credit. FINANCIAL CONDITION CAPITAL RESOURCES Earnings retained by the company during the first quarter of 1995 and over the prior twelve months has provided the company with continued improvement in its capital ratios. The company's ratio of average shareholders' equity to average total assets during the first quarter of 1995 was 9.40 percent, compared to 9.15 percent during the first quarter of 1994. Regulatory agencies have implemented a risk-based capital framework with a minimum ratio of total capital to risk-weighted assets of 8 percent. At March 31, 1995, the company's ratio of total capital to risk-weighted assets under these risk-based rules was 19.48 percent and its ratio of Tier 1 capital to total adjusted assets was 9.13 percent. In comparison, these ratios were 21.09 percent and 9.11 percent, respectively, at March 31, 1994. LOAN PORTFOLIO All of the company's loan activity is with customers located within its defined market area known as the Treasure Coast of Florida. This area is located on the southeastern coast of Florida above Palm Beach County and extends north to Brevard County. Total loans (net of unearned income and excluding the allowance for loan losses) were $303,932,000 at March 31, 1995, $47,315,000 or 18.4 percent more than at March 31, 1994, and $11,142,000 or 3.8 percent more than at December 31, 1994. At March 31, 1995, the company's mortgage loan balances secured by residential properties amounted to $151,099,000 or 49.7 percent of total loans. The next largest concentration was loans secured by commercial real estate which totalled $77,820,000 or 25.6 percent. The company was also a creditor for consumer loans to individual customers (primarily secured by motor vehicles) totalling $37,773,000, commercial loans of $12,254,000, home equity lines of credit of $9,264,000, and unsecured credit cards of $6,678,000. All loans and commitments for one-to-four family residential properties and commercial real estate are generally secured with first mortgages on property with the amount loaned at inception to the fair value of the property not to exceed 80 percent. Nearly all residential real estate loans are made upon terms and conditions that would make such loans eligible for resale under Federal National Mortgage Association ("FNMA") or Federal Home Loan Mortgage Corporation ("FHLMC") guidelines. Real estate mortgage lending (particularly residential properties) is expected to remain an important segment of the company's lending activities. Exposure to market interest rate volatility with respect to mortgage loans is managed by attempting to match maturities and repricing opportunities for assets against liabilities, when possible. At March 31, 1995, approximately $101 million or 67 percent of the company's mortgage loan balances secured by residential properties were adjustable, of which $96 million were adjustable rate 15- or 30-year mortgage loans ("ARMs") that reprice based upon the one year constant maturity United States Treasury Index plus a margin. These 15- and 30-year ARMs generally consist of two types: 1) those repricing annually by up to one percent with a four percent cap over the life of the loan, of which balances of approximately $35 million were outstanding at March 31, 1995, and 2) those limited to a two percent per annum increase and a six percent cap over the life of the loan, of which approximately $61 million in balances existed at March 31, 1995. The company's historical charge off rates for residential real estate loans have been minimal, with annualized charge offs for the first quarter of 1995 of 0.07 percent and none for all of 1994. At March 31, 1995, the company had commitments to make loans (excluding unused home equity lines of credit and credit card lines) of $16,497,000, compared to $11,159,000 at March 31, 1994. The company attempts to reduce its exposure to the risk of the local real estate market by limiting the aggregate size of its commercial real estate portfolio, currently 25.6 percent of total loans, and by making commercial real estate loans primarily on owner occupied properties. The remainder of the real estate loan portfolio is residential mortgages to individuals, and home equity loans, which the company considers less susceptible to adverse effects from a downturn in the real estate market, especially given the area's large percentage of retired persons. ALLOWANCE FOR LOAN LOSSES Net losses on credit cards and residential real estate totalled $61,000 and $26,000, respectively, for the first three months of 1995, compared to net losses of $31,000 and a recovery of $2,000, respectively, in 1994. Current and historical credit losses arising from real estate lending transactions continue to compare favorably with the company's peer group. Net recoveries recorded for commercial real estate loans and installment loans of $28,000 and $20,000, respectively, in the first quarter of 1995 compared favorably with the prior year when $41,000 in commercial real estate loan charge offs and $10,000 in installment loan charge offs were reported. Net recoveries for commercial loans of $3,000 in the first quarter of 1995 compared to $22,000 in recoveries in 1994. The ratio of the allowance for loan losses to net loans outstanding was 1.10 percent at March 31, 1995. This ratio was 1.40 percent at March 31, 1994. The allowance for loan losses as a percentage of nonaccrual loans and loans 90 days or more past due was 95.2 percent at March 31, 1995, compared to 128.9 percent at the same date in 1994. NONPERFORMING ASSETS At March 31, 1995, the company's ratio of nonperforming assets to loans outstanding plus other real estate owned was 1.15 percent, compared to 2.46 percent one year earlier. No accruing loans past due 90 days or more were outstanding, compared to $12,000 at March 31, 1994, and no OREO remained at March 31, 1995, compared to an outstanding balance of $3,617,000 at the end of the first quarter in 1994. Nonaccrual loans totalled $3,506,000 at March 31, 1995, compared to a balance of $2,784,000 at March 31, 1994. All of the nonaccrual loans outstanding at March 31, 1995 were performing, except one for $68,000. These performing loans were placed on nonaccrual status because the company has determined that the collection of principal or interest in accordance with the terms of such loans is uncertain. All of the amount reported in nonaccrual loans (100 percent) at March 31, 1995 is secured with real estate. Management does not expect significant losses for which an allowance for loan losses has not been provided associated with the ultimate realization of these assets. SECURITIES Debt securities that the company has the intent and ability to hold to maturity are carried at amortized cost. All other securities are carried at market value and are available for sale. At March 31, 1995, the company had $107,810,000 or 44.3 percent of total securities available for sale and securities held to maturity were carried at an amortized cost of $135,749,000, representing 55.7 percent of total securities. The company's securities portfolio decreased $61,685,000 from March 31, 1994. The securities portfolio as a percentage of earning assets was 40.4 percent at March 31,1995, compared to 53.4 percent one year ago. This decline is directly related to growth in the loan portfolio and changes to the portfolio mix which have been transacted or pending. During 1994, management reduced the total portfolio's interest rate risk by reducing the average life of the portfolio from four years to less than three years and by increasing the percentage of adjustable and floating rate securities. During the first quarter of 1995, proceeds of $19.5 million from securities sales and maturing funds of $13.4 million were derived, of which $17.8 million was reinvested in mortgage backed securities with an average weighted life of less than two years. Remaining funds were invested in overnight federal funds sold, which at March 31, 1995 totalled $55,750,000, pending their reinvestment. Management believes a significant portion of these funds will be used to fund increases in the loan portfolio. Company management considers the overall quality of the securities portfolio to be high. The securities portfolio had an unrealized net loss of $3,003,000 or 1.2 percent of amortized cost at March 31, 1995, compared to a net loss of $8,721,000 or 3.4 percent of amortized cost at December 31, 1994, and a net gain of $2,672,000 or 0.9 percent of amortized cost at March 31, 1994. No securities are held which are not traded in liquid markets or that meet Federal Financial Institution Examination Council ("FFIEC") definition of a high risk investment. The company does have any assets which would be defined as a derivative security. DEPOSITS Total deposits increased $30,769,000 or 5.6 percent to $581,530,000 at March 31, 1995, compared to one year earlier. Certificates of deposit increased $73,030,000 or 38.3 percent to $263,782,000 over the past twelve months, while lower cost interest bearing deposits (NOW, savings and money markets deposits) declined $44,644,000 or 15.3 percent to $248,113,000. Noninterest bearing demand deposits increased $2,383,000 to $69,635,000. The increase in certificates of deposit and decline in NOW, savings and money market deposits is directly related to higher interest rates offered on certificates, reflecting the general rise in interest rates during 1994 and 1995, and resulting renewed interest by customers in investing in certificates of deposit. INTEREST RATE SENSITIVITY Interest rate movements and deregulation of interest rates have made managing the company's interest rate sensitivity increasingly important. The company's Asset/Liability Management Committee ("ALCO") is responsible for managing the company's exposure to changes in market interest rates. The committee attempts to maintain stable net interest margins by generally matching the volume of assets and liabilities maturing, or subject to repricing, and by adjusting rates to market conditions and changing interest rates. Interest rate exposure is managed by monitoring the relationship between earning assets and interest bearing liabilities, focusing primarily on those that are rate sensitive. Rate sensitive assets and liabilities are those that reprice at market interest rates within a relatively short period, defined here as one year or less. The difference between rate sensitive assets and rate sensitive liabilities represents the company's interest sensitivity gap, which may be either positive (assets exceed liabilities) or negative (liabilities exceed assets). On March 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 16.0 percent. This means that the company's assets reprice more slowly than its deposits. In a declining interest rate environment, the cost of the company's deposits and other liabilities may be expected to fall faster than the interest received on its earning assets, thus increasing the net interest spread. If interest rates generally increase, the negative gap means that the interest received on earning assets may be expected to increase more slowly than the interest paid on the company's liabilities, therefore decreasing the net interest spread. It has been the company's experience that deposit balances for NOW and savings accounts are stable and subjected to limited repricing when interest rates increase or decrease within a range of 200 basis points. Therefore, the company's ALCO uses model simulation to manage and measure its interest rate sensitivity. The company has determined that an acceptable level of interest rate risk would be for net interest income to fluctuate no more than 30 percent given an immediate change in interest rates (up or down) of 200 basis points. At December 31, 1994, net interest income would decline 9 percent if interest rates would immediately rise 200 basis points. The company does not presently use interest rate protection products in managing its interest rate sensitivity. LIQUIDITY MANAGEMENT Contractual maturities for assets and liabilities are reviewed to adequately maintain current and expected future liquidity requirements. Sources of liquidity, both anticipated and unanticipated, are maintained through a portfolio of high quality marketable assets, such as residential mortgage loans, securities available/ for sale and federal funds sold. The company has access to federal funds lines of credit and is able to provide short term financing of its activities by selling, under an agreement to repurchase, United States Treasury and Government agency securities not pledged to secure public deposits or trust funds. At March 31, 1995, the company had federal funds lines of credit available and unused of $32,500,000 and had $141,434,000 of United States Treasury and Government agency securities and mortgage backed securities not pledged and available for use under repurchase agreements. Liquidity, as measured in the form of cash and cash equivalents (including federal funds sold), totalled $80,769,000 at March 31, 1995 as compared to $33,598,000 at March 31,1994. Cash and cash equivalents vary with seasonal deposit movements and are generally higher in the winter than in the summer, and vary with the level of principal repayments and investment activity occurring in the company's securities portfolio and loan portfolio. As is typical of financial institutions, cash flows from investing activities (primarily in loans and securities) and from financial activities (primarily through deposit generation and short term borrowings) exceeded cash flows from operations. In 1995, the cash flow from operations of $2,203,000 was $318,000 higher than during the same period of 1994. Cash flows from investing and financing activities reflect the increase in loan and deposit balances experienced. IMPACT OF INFLATION AND CHANGING PRICES The financial statements presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money, over time, due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution's performance than the general levels of inflation. Since the beginning of 1994, the Federal Reserve Bank has increased interest rates 300 basis points in an effort to curb inflation through monetary policy. In addition, inflation increases financial institutions' costs for goods and services purchased, the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings, and share-holders' equity. Mortgage originations and refinancings tend to slow as interest rates increase, and likely will reduce the company's earnings from such activities and the income from the sale of residential mortgage loans in the secondary market. Interest rates do not necessarily move in the same magnitude as the prices of goods and services. In today's environment, with values of real estate falling due to increased amounts of funds available for real estate investment, and the anticipated effect of the RTC's efforts to liquidate unprecedented volume of real properties from failed thrifts, the values of real estate collateralizing the company's loans and real estate held as other owned, could be adversely affected. Part II OTHER INFORMATION Item 6 (a) RESTRICTED STOCK AGREEMENT PERSONAL AND CONFIDENTIAL SEACOAST BANKING CORPORATION OF FLORIDA RESTRICTED STOCK AGREEMENT Seacoast Banking Corporation of Florida (the "Company") hereby grants to A. Douglas Gilbert (the "Executive") 10,000 shares of the Company's common stock, in accordance with and subject to the terms and conditions set forth herein ("Restricted Stock"). Restricted Stock Grant Number of shares of Restricted Stock granted: 10,000 Date of Grant: March 31, 1995 Vesting Date(s) of Restricted Stock: Dec. 31, 1995 2,500 shares Dec. 31, 1996 2,500 shares Dec. 31, 1997 2,500 shares Dec. 31, 1998 2,500 shares Restrictions applicable to Restricted Stock: (a) The Executive must remain in the continuous employ of the Company or a subsidiary of the Company until the respective vesting dates shown above as to each group of 2,500 shares (the "Restricted Period"). For example, if on December 31, 1995 the Executive has since the grant date been in the continuous employ of the Company or a subsidiary, 2,500 shares will vest and no longer be subject to forfeiture. Similarly, if the Executive's employment were to cease between December 31, 1996 and December 31, 1997, 5,000 of the shares would have vested and 5,000 would be forfeited. (b) The shares will be issued in the name of the Executive as Restricted Stock and will be held by the Company during the Restricted Period. (c) The Executive, as beneficial owner of the Restricted Shares, shall have full voting and dividend rights with respect to the Restricted Shares during the Restricted Period. The following additional terms shall apply to this Restricted Stock Agreement: 1. Tax Withholding. Prior to delivery of any certificate or certificates for shares acquired pursuant to the vesting of Restricted Stock hereunder, the Executive must satisfy federal, state and local withholding tax obligations by either (a) delivery to the Company of shares of common stock of the Company, or (b) directing the Company to withhold certain of such shares, or (c) remitting to the Company a sufficient amount of cash to satisfy the withholding requirements. No election to satisfy withholding under (a) or (b) shall be effective unless approved by the Board of Directors of the Company, in its sole discretion. If withholding is to be satisfied under either (a) or (b), the stock used for payment shall have a fair market value (as determined by the Board) on the date of delivery or withholding, which shall be the date the withholding tax is determined, equal to the amount of the taxes to be withheld. Any election by the Executive to satisfy withholding under (a) or (b) must be made prior to the date the amount of the withholding tax is determined. Any such election must be in writing signed by the Executive and shall be irrevocable. The portion of any withholding tax represented by a fractional share must be paid in cash. 2. Payment of Withholding Obligations. Prior to the delivery of stock certificates to the Executive pursuant to vesting of the Restricted Stock, the Executive shall deliver to the Company his check and/or a stock certificate registered in the name of the Executive duly assigned to the Company (with the assignment guaranteed by a bank, trust company or member firm of the New York Stock Exchange, or by a combination of the foregoing), or directions for withholding of shares (as applicable) which the Board of Directors has permitted the Executive to transfer for satisfying federal and state withholding tax obligations. 3. Transferability. The shares of Restricted Stock granted hereby are not transferable or assignable prior to vesting. The shares of Restricted Stock have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities law ("State Securities Act"), and, even after vesting, may not be sold or transferred, nor will any assignee thereof be recognized as an owner by the Company for any purpose, unless a registration statement under the Securities Act and any applicable State Securities Act with respect to such shares shall then be in effect or unless the availability of an exemption from registration with respect to any proposed disposition or transfer of such shares shall be established to the satisfaction of counsel to the Company. 4. Delivery of Shares. Stock certificates shall be delivered as soon as practicable after vesting of the Restricted Stock, but may be postponed for such period as may be required for the Company with reasonable diligence to comply if deemed advisable by the Company, with registration requirements under the Securities Act of 1933, as amended, listing requirements under the rules of any stock exchange, and requirements under any other law or regulation applicable to the issuance or transfer of such shares. 5. Section 16 Implications. If the Executive is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the grant hereby of the Restricted Stock constitutes a non-exempt "purchase" of 10,000 shares of common stock of the Company, and the Executive must file a Form 4 with the Securities Exchange Commission reporting such acquisition before the 10th day of the month following the month in which the grant date occurred (i.e., by April 10, 1995). For short-swing profit purposes, this "purchase" will be matched with any non-exempt sale occurring within six months before or after the grant date. Consequently, the Executive should avoid sales of Company common stock for six months after the grant date. The vesting of the Restricted Stock will have no effect for purposes of Section 16, and no form need be filed with the SEC reporting such vesting. If the shares are forfeited prior to vesting, the Executive should report such forfeiture on a Form 4 or Form 5, although such forfeiture will not be deemed a "sale" for purposes of short-swing profit liability under Section 16(b). The eventual sale of the common stock after vesting will constitute a non-exempt sale for purposes of Section 16 and must be reported on Form 4 before the 10th day of the month following the month in which the sale occurred. For short-swing profit purposes, such sale will be matched with any non-exempt purchase occurring within six months before or after the sale date. 6. Successors. This Restricted Stock Agreement shall be binding upon any successor of the Company, in accordance with the terms of this Restricted Stock Agreement. SEACOAST BANKING CORPORATION OF FLORIDA By: \S\ DALE M. HUDSON Date: April 3, 1995 Attestation: \S\ WILLIAM R. HAHL I hereby accept the above Restricted Stock grant in accordance with and subject to the terms and conditions set forth above. I agree that any shares of common stock received by me hereunder will not be sold or otherwise disposed of by me except in a manner in compliance with applicable securities laws. I agree to notify the Company at lease five business days in advance of any proposed sale or other disposition of any such shares. \S\ A. DOUGLAS GILBERT Executive Item 6 (b) REPORTS ON FORM 8-K The Company filed a report on Form 8-K on January 9, 1995. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SEACOAST BANKING CORPORATION OF FLORIDA May 11, 1995 /s/ Dennis S. Hudson, III DENNIS S. HUDSON, III Executive Vice President & Chief Operating Officer May 11, 1995 /s/ William R. Hahl WILLIAM R. HAHL Senior Vice President & Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----