10-Q/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
10-Q/A
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File No. 0-13660
Seacoast Banking Corporation of Florida
(Exact Name of Registrant as Specified in its Charter)
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Florida
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59-2260678 |
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(State or Other Jurisdiction of Incorporation or
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(I.R.S. Employer Identification No.) |
Organization |
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815 Colorado Avenue |
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Stuart, Florida
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34994 |
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(Address of Principal Executive Offices)
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(Zip Code) |
(772) 287-4000
(Registrants Telephone Number, Including Area Code)
(Former name, Former Address and Former Fiscal Year, If Changed Since Last Report)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
Common
Stock, $.10 Par Value 19,170,788 outstanding shares as of June 30, 2009
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A (the Form 10-Q/A) amends the Seacoast Banking Corporation of
Florida (Seacoast) Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 that was
filed with the Securities and Exchange Commission on August 3, 2009 (the Original Form 10-Q).
This Form 10-Q/A is being filed to add a new Note J to Item 1, Financial Statements, relating to
securities held by the company.
For the convenience of the reader, this Form 10-Q/A sets forth the full text of the Quarterly
Report on Form 10-Q for the quarter ended June 30, 2009, in its entirely, as hereby amended.
Except as required to reflect the changes noted above, this Form 10-Q/A does not attempt to modify
or update any other disclosures set forth in the Original Form 10-Q.
In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the
Exchange Act), new certifications by our principal executive officer and principal financial
officer are filed as exhibits to this Form 10-Q/A under Item 6 hereof. No other new exhibits are
being filed herewith.
This Form 10-Q/A does not reflect events occurring after the filing of the Original Form 10-Q on
August 3, 2009 and no attempt has been made in this Form 10-Q/A to modify or update other
disclosures as presented in the Original Form 10-Q. Accordingly, this 10-Q/A should be read in
conjunction with our filings with the SEC subsequent to the filing of the Original Form 10-Q.
INDEX
SEACOAST BANKING CORPORATION OF FLORIDA
2
Part I. FINANCIAL INFORMATION
Item 1.
Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
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June 30, |
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December 31, |
(Dollars in thousands, except share amounts) |
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2009 |
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2008 |
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ASSETS |
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Cash and due from banks |
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$ |
32,020 |
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$ |
46,002 |
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Interest bearing deposits with other banks |
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43,632 |
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100,585 |
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Federal funds sold |
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0 |
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4,605 |
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Total cash and cash equivalents |
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75,652 |
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151,192 |
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Securities: |
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Available for sale (at fair value) |
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337,746 |
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318,030 |
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Held for investment (fair values: $21,709
at June 30, 2009 and $26,109
at December 31, 2008) |
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22,299 |
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27,871 |
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TOTAL SECURITIES |
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360,045 |
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345,901 |
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Loans held for sale |
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16,454 |
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2,165 |
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Loans |
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1,584,340 |
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1,676,728 |
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Less: Allowance for loan losses |
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(43,618 |
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(29,388 |
) |
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NET LOANS |
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1,540,722 |
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1,647,340 |
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Bank premises and equipment, net |
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42,879 |
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44,122 |
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Other real estate owned |
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23,259 |
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5,035 |
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Goodwill and
other intangible assets |
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4,751 |
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55,193 |
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Other assets |
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72,973 |
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63,488 |
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$ |
2,136,735 |
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$ |
2,314,436 |
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LIABILITIES |
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Deposits |
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$ |
1,756,422 |
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$ |
1,810,441 |
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Federal funds purchased and securities
sold under agreements to repurchase,
maturing within 30 days |
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101,849 |
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157,496 |
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Borrowed funds |
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65,172 |
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65,302 |
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Subordinated debt |
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53,610 |
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53,610 |
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Other liabilities |
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11,127 |
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11,586 |
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1,988,180 |
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2,098,435 |
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3
CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
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June 30, |
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December 31, |
(Dollars in thousands, except share amounts) |
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2009 |
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2008 |
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SHAREHOLDERS EQUITY |
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Preferred stock, par value $0.10 per share,
authorized 4,000,000 shares, issued and
outstanding 2,000 shares of Series A |
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44,412 |
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43,787 |
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Warrant for purchase of shares of common
stock at $6.36 per share |
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5,588 |
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6,245 |
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Common stock, par value $0.10 per share,
authorized 65,000,000 shares, issued
19,261,888 and outstanding 19,170,788
shares at June 30, 2009, issued 19,283,841
and outstanding 19,171,779 shares at
December 31, 2008 |
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1,917 |
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1,928 |
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Other shareholders equity |
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96,638 |
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164,041 |
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TOTAL SHAREHOLDERS EQUITY |
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148,555 |
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216,001 |
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$ |
2,136,735 |
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$ |
2,314,436 |
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See notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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(Dollars in thousands, except per share data) |
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2009 |
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2008 |
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2009 |
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2008 |
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Interest and fees on loans |
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$ |
21,638 |
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$ |
28,197 |
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$ |
44,798 |
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$ |
59,379 |
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Interest and dividends on securities |
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4,375 |
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3,621 |
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8,379 |
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7,297 |
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Interest on federal funds sold and other investments |
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109 |
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455 |
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257 |
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752 |
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TOTAL INTEREST INCOME |
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26,122 |
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32,273 |
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53,434 |
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67,428 |
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Interest on deposits |
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6,194 |
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10,634 |
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14,181 |
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23,212 |
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Interest on borrowed money |
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1,008 |
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1,477 |
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2,159 |
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3,569 |
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TOTAL INTEREST EXPENSE |
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7,202 |
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12,111 |
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16,340 |
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26,781 |
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NET INTEREST INCOME |
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18,920 |
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20,162 |
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37,094 |
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40,647 |
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Provision for loan losses |
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26,227 |
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42,237 |
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37,879 |
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47,737 |
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NET INTEREST LOSS AFTER PROVISION FOR LOAN LOSSES |
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(7,307 |
) |
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(22,075 |
) |
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(785 |
) |
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(7,090 |
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Noninterest income |
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Other income |
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3,928 |
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5,842 |
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8,684 |
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12,004 |
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Securities gains, net |
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1,786 |
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355 |
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1,786 |
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355 |
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TOTAL NONINTEREST INCOME |
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5,714 |
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6,197 |
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10,470 |
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12,359 |
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Noninterest Expenses |
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Goodwill impairment |
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49,813 |
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0 |
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49,813 |
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0 |
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Other noninterest expenses |
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20,348 |
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19,240 |
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39,457 |
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37,924 |
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TOTAL NONINTEREST EXPENSES |
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70,161 |
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19,240 |
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89,270 |
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37,924 |
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LOSS BEFORE INCOME TAXES |
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(71,754 |
) |
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(35,118 |
) |
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(79,585 |
) |
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(32,655 |
) |
Benefit for income taxes |
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(8,754 |
) |
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(13,802 |
) |
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(11,825 |
) |
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(13,102 |
) |
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NET LOSS |
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(63,000 |
) |
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(21,316 |
) |
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(67,760 |
) |
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(19,553 |
) |
Preferred stock dividends and accretion of
preferred stock discount |
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937 |
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0 |
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1,874 |
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0 |
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NET LOSS AVAILABLE TO COMMON SHAREHOLDERS |
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$ |
(63,937 |
) |
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$ |
(21,316 |
) |
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$ |
(69,634 |
) |
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$ |
(19,553 |
) |
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PER SHARE COMMON STOCK: |
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Net loss diluted |
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$ |
(3.35 |
) |
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$ |
(1.12 |
) |
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$ |
(3.65 |
) |
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$ |
(1.03 |
) |
Net loss basic |
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(3.35 |
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(1.12 |
) |
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(3.65 |
) |
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(1.03 |
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Cash dividends declared |
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0.00 |
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0.16 |
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0.01 |
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0.32 |
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Average shares outstanding diluted |
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19,088,759 |
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18,986,163 |
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19,079,151 |
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18,957,269 |
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Average shares outstanding basic |
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19,088,759 |
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18,986,163 |
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19,079,151 |
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18,957,269 |
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|
See notes to condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
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Six Months Ended |
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June 30, |
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(Dollars in thousands) |
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2009 |
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2008 |
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(Decrease) increase in cash and cash equivalents |
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Cash flows from operating activities |
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Interest received |
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$ |
53,479 |
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$ |
68,004 |
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Fees and commissions received |
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9,646 |
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|
12,254 |
|
Interest paid |
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(16,569 |
) |
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(27,407 |
) |
Cash paid to suppliers and employees |
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(36,271 |
) |
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(34,718 |
) |
Income taxes paid |
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(13 |
) |
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(3,472 |
) |
Trading securities activity |
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0 |
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14,000 |
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Origination of loans held for sale |
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(96,731 |
) |
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(130,036 |
) |
Proceeds of loans held for sale |
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82,442 |
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|
135,253 |
|
Net change in other assets |
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|
806 |
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|
503 |
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Net cash (used in) provided by operating activities |
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(3,211 |
) |
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|
34,381 |
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Cash flows from investing activities |
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Maturities of securities available for sale |
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52,509 |
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|
18,937 |
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Maturities of securities held for investment |
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5,578 |
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|
1,985 |
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Proceeds from sale of securities available for sale |
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31,376 |
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|
13,391 |
|
Purchases of securities available for sale |
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(100,170 |
) |
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(32,609 |
) |
Net new loans and principal repayments |
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43,594 |
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|
28,768 |
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Proceeds from sale of loans |
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3,763 |
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|
13,773 |
|
Proceeds from the sale of other real estate owned |
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|
2,308 |
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|
295 |
|
Proceeds from sale of Federal Home Loan Bank Stock and
Federal Reserve Bank stock |
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|
181 |
|
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|
0 |
|
Purchase of Federal Home Loan Bank and Federal Reserve Bank
stock |
|
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(821 |
) |
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|
(165 |
) |
Additions to bank premises and equipment |
|
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(531 |
) |
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(3,484 |
) |
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Net cash provided by investing activities |
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|
37,787 |
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|
40,891 |
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Cash flows from financing activities |
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Net decrease in deposits |
|
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(54,007 |
) |
|
|
(96,907 |
) |
Net decrease in federal funds purchased and repurchase agreements |
|
|
(55,647 |
) |
|
|
(1,270 |
) |
Stock based employee benefit plans |
|
|
118 |
|
|
|
817 |
|
Dividends paid |
|
|
(580 |
) |
|
|
(6,100 |
) |
|
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|
Net cash used in financing activities |
|
|
(110,116 |
) |
|
|
(103,460 |
) |
|
|
|
|
|
|
|
|
|
|
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|
Net decrease in cash and cash equivalents |
|
|
(75,540 |
) |
|
|
(28,188 |
) |
Cash and cash equivalents at beginning of period |
|
|
151,192 |
|
|
|
98,475 |
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
75,652 |
|
|
$ |
70,287 |
|
|
|
|
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
|
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|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
(Dollars in thousands) |
|
2009 |
|
2008 |
|
Reconciliation of net loss to cash (used in) provided by
operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(67,760 |
) |
|
$ |
(19,553 |
) |
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
|
Loss on write down of goodwill |
|
|
49,813 |
|
|
|
0 |
|
Depreciation |
|
|
1,768 |
|
|
|
1,659 |
|
Amortization (accretion) of premiums and discounts on
securities |
|
|
(652 |
) |
|
|
(307 |
) |
Other amortization and accretion |
|
|
518 |
|
|
|
206 |
|
Trading securities activity |
|
|
0 |
|
|
|
14,000 |
|
Change in loans held for sale, net |
|
|
(14,289 |
) |
|
|
5,217 |
|
Provision for loan losses |
|
|
37,879 |
|
|
|
47,737 |
|
Gains on sale of securities |
|
|
(1,786 |
) |
|
|
(355 |
) |
Gains on sale of loans |
|
|
(172 |
) |
|
|
(38 |
) |
Losses on sale and write-downs of other real estate
owned |
|
|
1,129 |
|
|
|
232 |
|
Losses (gains) on disposition of fixed assets |
|
|
6 |
|
|
|
(97 |
) |
Change in interest receivable |
|
|
808 |
|
|
|
1,305 |
|
Change in interest payable |
|
|
(230 |
) |
|
|
(625 |
) |
Change in prepaid expenses |
|
|
634 |
|
|
|
329 |
|
Change in accrued taxes |
|
|
(11,173 |
) |
|
|
(16,166 |
) |
Change in other assets |
|
|
806 |
|
|
|
503 |
|
Change in other liabilities |
|
|
(510 |
) |
|
|
334 |
|
|
|
|
Net cash (used in) provided by operating activities |
|
$ |
(3,211 |
) |
|
$ |
34,381 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing activities: |
|
|
|
|
|
|
|
|
Fair value adjustment to available for sale securities |
|
$ |
839 |
|
|
$ |
57 |
|
Transfer of loans to other real estate owned |
|
|
21,542 |
|
|
|
4,339 |
|
|
See notes to condensed consolidated financial statements.
7
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 U. S. 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 U. S. generally accepted accounting
principles for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six-month period ended June 30, 2009, are not necessarily
indicative of the results that may be expected for the year ending December 31, 2009 or any other
period. For further information, refer to the consolidated financial statements and footnotes
thereto included in the Companys annual report on Form 10-K for the year ended December 31, 2008.
Use of Estimates
The preparation of these condensed consolidated financial statements required the use of certain
estimates by management in determining the Companys assets, liabilities, revenues and expenses.
Actual results could differ from those estimates.
The accounting policies that are particularly sensitive to judgments and the extent to which
significant estimates are used include allowance for loan losses and the reserve for unfunded
lending commitments, fair value of certain financial instruments, goodwill impairment, realization
of deferred tax assets, and contingent liabilities.
We test goodwill for impairment on an annual basis, or more often if events or circumstances
indicate there may be impairment. We engage external valuation
specialists to assist in our goodwill assessments. The Company completed an annual test of goodwill for impairment for the year
ended December 31, 2008. Management updated the test for impairment of goodwill at March 31, 2009
due to the decline in the price of the Companys common stock and net earnings in the first quarter
of 2009. The results of these tests indicated that none of the Companys goodwill was impaired.
Due to the further decline in the price of our common stock and our net loss in the second quarter of 2009,
we again tested for impairment of goodwill as of June 30, 2009. The fair value of our enterprise
was determined using two methods, the discounted cash flow and change in control valuation methods.
These two methods provided a range of valuations of $2.43 to $7.00 per share that we used in
evaluating goodwill for possible impairment. As of June 30, 2009, we determined that the carrying
amount of the Company exceeds its fair value. Accordingly, we have determined preliminarily that
the goodwill impairment loss is equal to the full amount of our
goodwill $49,813,000. This is an
estimate and we will disclose in the third quarter any adjustments after completing the second step
analysis. This requires the Company to allocate the estimated fair value of the Company to all of
its assets and liabilities. The fair values of the assets and liabilities, primarily loans and
deposits, are determined using current market interest rates, projections of future cash flows, and
where available, quoted market prices of similar instruments. Any unallocated fair value
represents the implied fair value of goodwill, which is then compared to its corresponding carrying
value.
8
NOTE B RECENT ACCOUNTING STANDARDS
In December 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141R, Business Combinations (SFAS No. 141R). SFAS No. 141(R)
will significantly change how entities apply the acquisition method to business combinations. The
most significant changes that affect how the Company will account for business combinations under
this Statement include:
|
|
the acquisition date will be date the acquirer obtains control; |
|
|
|
all (and only) identifiable assets acquired, liabilities assumed,
and noncontrolling interests in the acquiree will be stated at
fair value on the acquisition date; |
|
|
|
assets or liabilities arising from noncontractual contingencies
will be measured at their acquisition date fair value only if it
is more likely than not that they meet the definition of an asset
or liability on the acquisition date; |
|
|
|
adjustments subsequently made to the provisional amounts recorded
on the acquisition date will be made retroactively during a
measurement period not to exceed one year; |
|
|
|
acquisition-related restructuring costs that do not meet the
criteria in SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities, will be expensed as incurred; |
|
|
|
transaction costs will be expensed as incurred; |
|
|
|
reversals of deferred income tax valuation allowances and income
tax contingencies will be recognized in earnings subsequent to the
measurement period; and |
|
|
|
the allowance for loan losses of an acquiree will not be permitted
to be recognized by the acquirer. |
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements An Amendment of ARB No. 51. SFAS No. 160 requires noncontrolling interests to be
treated as a separate component of equity, not as a liability or other item outside of equity.
Disclosure requirements include the display of net income and comprehensive income for both the
controlling and noncontrolling interests and a separate schedule that shows the effects of any
transactions with the noncontrolling interests on the equity attributable to the controlling
interest. The provisions of this statement are effective for fiscal years beginning after December
15, 2008. This statement is applied prospectively except for the presentation and disclosure
requirements, which are applied retrospectively for all periods presented. The adoption of SFAS
No. 160 did not have a material impact on the consolidated financial statements of the Company.
9
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities. SFAS No. 161, which amends SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, requires companies with derivative instruments to disclose information about
how and why a company uses derivative instruments, how derivative instruments and related hedged
items are accounted for under SFAS 133, and how derivative instruments and related hedged items
affect a companys financial position, financial performance and cash flows. The required
disclosures include the fair value of derivative instruments and their gains or losses in tabular
format, information about credit risk-related contingent features in derivative agreements,
counterparty credit risk, and the Companys strategies and objectives for using derivative
instruments. This statement expands the current disclosure framework in SFAS No. 133. SFAS No.
161 is effective prospectively for periods beginning on or after November 15, 2008. The adoption
of SRAS No. 161 has not had a material impact on the consolidated financial statements of the
Company.
In April 2008, the FASB issued FASB Staff Position (FSP) No. SFAS 142-3, Determination of the
Useful Life of Intangible Assets. This FSP amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142). This FSP
applies to all intangible assets, whether acquired in a business combination or otherwise and was
effective for financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. It is applied prospectively to intangible assets
acquired after the effective date. Early adoption is prohibited. The Company adopted the
provisions of FSP No. SFAS 142-3 in the first quarter of 2009, as required, and the adoption did
not have a material effect on the Companys financial condition or results of operations.
In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments. This FSP amends SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, and Accounting Principles Board (APB) Opinion No. 28, Interim Financial Reporting,
to require disclosures about fair values of financial instruments in all interim financial
statements. Once adopted, the disclosures required by the FSP are to be provided prospectively.
The FSPs requirements are effective as of June 30, 2009, with early adoption permitted as of March
31, 2009. The Company did not elect to early-adopt the FSP, and has provided the required
disclosures as of June 30, 2009.
In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies. This FSP amends and clarifies the
provisions of SFAS No. 141(R), Business Combinations, with respect to the initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets and liabilities
arising from contingencies associated with a business combination. The provisions of the FSP are
effective for business combinations occurring after January 1, 2009, and have been adopted by the
Company. The effects of adoption of this FSP on the Companys consolidated financial statements
will depend on the nature, terms and size of future business combinations. The Company has not
made any business combinations since January 1, 2009.
10
NOTE C COMPREHENSIVE INCOME
At June 30, 2009 and 2008, comprehensive income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net loss |
|
$ |
(63,000 |
) |
|
$ |
(21,316 |
) |
|
$ |
(67,760 |
) |
|
$ |
(19,553 |
) |
Unrealized gains (losses) on
securities available for sale
(net of tax) |
|
|
(994 |
) |
|
|
(1,258 |
) |
|
|
1,193 |
|
|
|
161 |
|
Net reclassification adjustment |
|
|
(1,325 |
) |
|
|
(138 |
) |
|
|
(686 |
) |
|
|
(138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(65,319 |
) |
|
$ |
(22,712 |
) |
|
$ |
(67,253 |
) |
|
$ |
(19,530 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE D BASIC AND DILUTED EARNINGS PER COMMON SHARE
Equivalent shares of 566,000 and 801,000 related to stock options and stock settled appreciation
rights for the periods ended June 30, 2009 and 2008, respectively, were excluded from the
computation of diluted EPS because they would have been anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
(Dollars in thousands, |
|
June 30, |
|
|
June 30, |
|
except per share data) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available
to common shareholders |
|
$ |
(63,937 |
) |
|
$ |
(21,316 |
) |
|
$ |
(69,634 |
) |
|
$ |
(19,553 |
) |
Average shares outstanding |
|
|
19,088,759 |
|
|
|
18,986,163 |
|
|
|
19,079,151 |
|
|
|
18,957,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
|
$ |
(3.35 |
) |
|
$ |
(1.12 |
) |
|
$ |
(3.65 |
) |
|
$ |
(1.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to
common shareholders |
|
$ |
(63,937 |
) |
|
$ |
(21,316 |
) |
|
$ |
(69,634 |
) |
|
$ |
(19,553 |
) |
Average shares outstanding |
|
|
19,088,759 |
|
|
|
18,986,163 |
|
|
|
19,079,151 |
|
|
|
18,957,269 |
|
Net effect of employee
restricted stock, stock
options and stock settled
appreciation rights |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
19,088,759 |
|
|
|
18,986,163 |
|
|
|
19,079,151 |
|
|
|
18,957,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
$ |
(3.35 |
) |
|
$ |
(1.12 |
) |
|
$ |
(3.65 |
) |
|
$ |
(1.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
11
NOTE E FAIR VALUE INSTRUMENTS MEASURED AT FAIR VALUE
In certain circumstances, fair value enables the Company to more accurately align its financial
performance with the market value of actively traded or hedged assets and liabilities. Fair values
enable a company to mitigate the non-economic earnings volatility caused from financial assets and
financial liabilities being carried at different bases of accounting, as well as to more accurately
portray the active and dynamic management of a companys balance sheet. The FASB issued FSP No.
157-3, Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active
on October 10, 2008 to amend and clarify SFAS 157. In April 2009, the FASB issued FSP No. FAS
157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly, (FAS 157-4) to amend
SFAS No. 157, Fair Value Measurements. FAS 157-4 provides additional guidance for estimating fair
value in accordance with SFAS 157 when the volume and level of activity for an asset or liability
has significantly decreased. In addition, FAS 157-4 includes guidance on identifying circumstances
that indicate a transaction is not orderly. Under SFAS 157, Fair Value Measurements, and SFAS 159,
The Fair Value Option for Financial Assets and Financial Liabilities, fair value measurements for
items measured at fair value at June 30, 2009 and 2008 included:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
in Active |
|
Significant |
|
Significant |
|
|
|
|
|
|
Markets for |
|
Other |
|
Unobservable |
|
|
Fair Value |
|
Identical Assets |
|
Observable Inputs |
|
Inputs |
(Dollars in thousands) |
|
Measurements |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
|
|
June 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
securities |
|
$ |
337,746 |
|
|
|
|
|
|
$ |
337,746 |
|
|
|
|
|
Loans held for sale |
|
|
16,454 |
|
|
|
|
|
|
|
16,454 |
|
|
|
|
|
Loans (1) |
|
|
52,464 |
|
|
|
|
|
|
|
4,556 |
|
|
$ |
47,908 |
|
Derivative product
assets |
|
|
201 |
|
|
|
|
|
|
|
201 |
|
|
|
|
|
Other real estate
owned (2) |
|
|
23,259 |
|
|
|
|
|
|
|
23,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
securities |
|
$ |
255,798 |
|
|
|
|
|
|
$ |
255,798 |
|
|
|
|
|
Loans held for sale |
|
|
3,643 |
|
|
|
|
|
|
$ |
3,643 |
|
|
|
|
|
Loans (1) |
|
|
44,028 |
|
|
|
|
|
|
|
2,899 |
|
|
$ |
41,129 |
|
Derivative product
assets |
|
|
85 |
|
|
|
|
|
|
|
85 |
|
|
|
|
|
Other real estate
owned (2) |
|
|
4,547 |
|
|
|
|
|
|
|
4,547 |
|
|
|
|
|
|
|
|
(1) |
|
See Note F. Nonrecurring fair value adjustments to loans identified as impaired reflect
full or partial write-downs that are based on the loans observable market price or current
appraised value of the collateral in accordance with SFAS 114, Accounting by Creditors for
Impairment of a Loan. When appraisals are used to determine fair value and the appraisals are
based on a market approach, the related loans fair value is classified as Level 2 input. The fair
value of loans based on appraisals which require significant adjustments to market-based valuation
inputs or apply an income approach based on unobservable cash flows, are classified as Level 3
inputs. |
|
(2) |
|
Fair value is measured on a nonrecurring basis in accordance with SFAS No. 144. |
For trading securities, derivative product assets and liabilities and loans held for sale, the
realized and unrealized gains and losses are included in earnings in noninterest income or net
interest
12
income, as appropriate, and were not material for the six-month periods ended June 30, 2009 and
2008.
In April 2009, the FASB issued FASB FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments, (FAS 107-1) to amend SFAS No. 107, Disclosures about Fair Value of
Financial Instruments and APB 28, Interim Financial Reporting. FAS 107-1 changed the reporting
requirements on certain fair value disclosures of financial instruments to include interim
reporting periods.
The following shows the carrying value and fair value of the Companys financial assets and
financial liabilities as of June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
Carrying |
|
|
(Dollars in thousands) |
|
Value |
|
Fair Value |
Financial Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
75,652 |
|
|
$ |
75,652 |
|
Securities |
|
|
360,045 |
|
|
|
359,455 |
|
Loans, net |
|
|
1,540,722 |
|
|
|
1,554,496 |
|
Loans held for sale |
|
|
16,454 |
|
|
|
16,454 |
|
Derivative product assets |
|
|
201 |
|
|
|
201 |
|
Financial Liabilities |
|
|
|
|
|
|
|
|
Deposit liabilities |
|
|
1,756,422 |
|
|
|
1,765,978 |
|
Borrowings |
|
|
167,021 |
|
|
|
164,038 |
|
Subordinated debt |
|
|
53,610 |
|
|
|
13,000 |
|
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 at June 30, 2009:
Cash and cash equivalents: 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 based on market quotations when available or by using a discounted cash flow
approach. 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, 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 mortgages, is calculated by discounting
scheduled cash flows through the estimated maturity using estimated market discount rates that
reflect the credit and interest rate risks 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.
Loans held for sale: Fair values are based upon estimated values to be received from independent
third party purchasers.
13
Deposit Liabilities: The fair value of demand deposits, savings accounts and money market deposits
is the amount payable 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.
Borrowings: The fair value of floating rate borrowings is the amount payable on demand at the
reporting date. The fair value of fixed rate borrowings is estimated using the rates currently
offered for borrowings of similar remaining maturities.
Subordinated debt: The fair value of the floating rate subordinated debt is estimated using a
market rate currently observed for similar securities of comparable credit quality.
Derivative product assets and liabilities: Quoted market prices or valuation models that
incorporate current market data inputs are used to estimate the fair value of derivative product
assets and liabilities.
NOTE F IMPAIRED LOANS AND ALLOWANCE FOR LOAN LOSSES
At June 30, 2009 and 2008, the Companys recorded investments in impaired loans and the related
valuation allowances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
Recorded |
|
|
Valuation |
|
|
Recorded |
|
|
Valuation |
|
(Dollars in thousands) |
|
Investment |
|
|
Allowance |
|
|
Investment |
|
|
Allowance |
|
Impaired loans without
an allowance |
|
$ |
80,828 |
|
|
$ |
0 |
|
|
$ |
27,394 |
|
|
$ |
0 |
|
Impaired loans with
an allowance |
|
|
62,103 |
|
|
|
9,639 |
|
|
|
48,676 |
|
|
|
3,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
$ |
142,931 |
|
|
$ |
9,639 |
|
|
$ |
76,070 |
|
|
$ |
3,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans also include loans that have been modified in troubled debt restructurings where
concessions to borrowers who experienced financial difficulties have been granted.
The valuation allowance is included in the allowance for loan losses. The impaired loans were
measured for impairment based primarily on the value of underlying collateral. The majority of
impaired loans are to residential real estate developers for construction and land development.
These relationships, including the impaired balances, have been and continue to be assessed and
evaluated to determine the probable loan loss. This evaluation includes obtaining current
appraisal values for the properties held as collateral and assessing the value of personal
guarantees, and requires significant management judgment. Depending on changes in circumstances
involving each exposure, future assessments of probable losses may yield materially different
results, which may result in a material increase or decrease in the allowance for loan losses
through provisions for loan losses on our income statements.
Interest payments received on impaired loans are recorded as interest income, unless the collection
of the remaining recorded investment is doubtful at that time, in which case, payments received are
recorded as reductions to principal.
Nonaccrual loans and accruing loans past due 90 days or more at June 30, 2009 and 2008 were
$126,758,000 and $1,383,000, respectively, for 2009 and $76,224,000 and $317,000, respectively for
2008.
14
NOTE G: CONTINGENCIES
The Company and its subsidiaries, because of the nature of their businesses, are at all times
subject to numerous legal actions, threatened or filed. Management presently believes that none of
the legal proceedings to which it is a party are likely to have a materially adverse effect on the
Companys consolidated financial condition, operating results or cash flows, although no assurance
can be given with respect to the ultimate outcome of any such claim or litigation.
NOTE H: REGULATORY CAPITAL
The Company is well capitalized for bank regulatory purposes. To be categorized as well
capitalized, the Company must maintain minimum total risk-based, Tier 1 risk-based and Tier 1
leverage ratios as set forth under Capital Resources in this Report. At June 30, 2008, the
Companys principal subsidiary, Seacoast National Bank, or Seacoast National, met the risk-based
capital and leverage ratio requirements for well capitalized banks under the regulatory framework
for prompt corrective action.
The Bank has agreed to maintain a Tier 1 capital (to adjusted average assets) ratio of at least
7.50% and a total risk-based capital ratio of at least 12.00% as of March 31, 2009 with its primary
regulator, the Office of the Comptroller of the Currency (OCC). The agreement with the OCC as to
minimum capital ratios does not change the Banks status as well-capitalized for bank regulatory
purposes.
NOTE I: LETTERS OF CREDIT
During the second quarter of 2009, the Companys banking subsidiary utilized $43.0 million in
letters of credit issued by the Federal Home Loan Bank (FHLB) to satisfy a portion of its
pledging requirement to transact business as a qualified public depository within the state of
Florida. The letters of credit have a term of one year with an annual fee equivalent to 5 basis
points, or $21,500, amortized over the one year term of the letters. No interest cost is
associated with the letters of credit.
NOTE J: SECURITIES
The
amortized cost and fair value of securities available for sale and
held to maturity at June 30, 2009 and December 31, 2008 are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
Gross |
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
|
|
(In thousands) |
|
SECURITIES AVAILABLE FOR SALE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. Government
Sponsored Entities |
|
$ |
1,099 |
|
|
$ |
4 |
|
|
$ |
|
|
|
$ |
1,103 |
|
Mortgage-backed securities of Government Sponsored Entities |
|
|
52,779 |
|
|
|
1,397 |
|
|
|
|
|
|
|
54,176 |
|
Collateralized mortgage obligations of Government Sponsored Entities |
|
|
204,542 |
|
|
|
6,571 |
|
|
|
(854 |
) |
|
|
210,259 |
|
Private collateralized mortgage obligations |
|
|
69,852 |
|
|
|
302 |
|
|
|
(3,252 |
) |
|
|
66,902 |
|
Obligations of state and political subdivisions |
|
|
2,021 |
|
|
|
28 |
|
|
|
(16 |
) |
|
|
2,033 |
|
Other |
|
|
3,273 |
|
|
|
|
|
|
|
|
|
|
|
3,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
333,566 |
|
|
$ |
8,302 |
|
|
$ |
(4,122 |
) |
|
$ |
337,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES HELD FOR INVESTMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations of Government Sponsored Entities |
|
$ |
1,086 |
|
|
$ |
|
|
|
$ |
(6 |
) |
|
|
1,080 |
|
Private collateralized mortgage obligations |
|
|
16,484 |
|
|
|
44 |
|
|
|
(634 |
) |
|
|
15,894 |
|
Obligations of state and political subdivisions |
|
|
4,729 |
|
|
|
23 |
|
|
|
(17 |
) |
|
|
4,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,299 |
|
|
$ |
67 |
|
|
$ |
(657 |
) |
|
$ |
21,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Gross |
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
|
|
(In thousands) |
|
SECURITIES AVAILABLE FOR SALE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. Government
Sponsored Entities |
|
$ |
22,094 |
|
|
$ |
286 |
|
|
$ |
|
|
|
$ |
22,380 |
|
Mortgage-backed securities of Government Sponsored Entities |
|
|
59,500 |
|
|
|
1,035 |
|
|
|
(6 |
) |
|
|
60,529 |
|
Collateralized mortgage obligations of Government Sponsored Entities |
|
|
200,812 |
|
|
|
4,806 |
|
|
|
(178 |
) |
|
|
205,440 |
|
Private collateralized mortgage obligations |
|
|
27,106 |
|
|
|
|
|
|
|
(2,652 |
) |
|
|
24,454 |
|
Obligations of state and political subdivisions |
|
|
2,021 |
|
|
|
51 |
|
|
|
(2 |
) |
|
|
2,070 |
|
Other |
|
|
3,157 |
|
|
|
|
|
|
|
|
|
|
|
3,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
314,690 |
|
|
$ |
6,178 |
|
|
$ |
(2,838 |
) |
|
$ |
318,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES HELD FOR INVESTMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations of Government Sponsored Entities |
|
$ |
1,960 |
|
|
$ |
|
|
|
$ |
(47 |
) |
|
$ |
1,913 |
|
Private collateralized mortgage obligations |
|
|
20,288 |
|
|
|
|
|
|
|
(1,758 |
) |
|
|
18,530 |
|
Obligations of state and political subdivisions |
|
|
5,623 |
|
|
|
49 |
|
|
|
(6 |
) |
|
|
5,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
27,871 |
|
|
$ |
49 |
|
|
$ |
(1,811 |
) |
|
$ |
26,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of securities available for sale for six month period ended June 30, 2009, were
$31,376,000 with gross gains of $1,786,000 and no losses. Proceeds
from sales of securities available for sale for the six month period
ended June 30, 2008, were $13,391,000 with gross gains of $355,000 and no losses.
Securities
with a carrying value of $255,414,000 and $273,032,000 and a fair
value of $255,413,000 and 272,993,000 at June 30, 2009 and
December 31, 2008, respectively,
were pledged as collateral for repurchase agreements, United States Treasury deposits, other public
deposits and trust deposits.
The amortized cost and fair value of securities at June 30, 2009, 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 |
|
|
Available for Sale |
|
|
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
|
|
Cost |
|
|
Value |
|
|
Cost |
|
|
Value |
|
|
|
(In thousands) |
|
Due in less than one year |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,099 |
|
|
$ |
1,103 |
|
Due after one year through five years |
|
|
497 |
|
|
|
499 |
|
|
|
|
|
|
|
|
|
Due after five years through ten years |
|
|
3,521 |
|
|
|
3,515 |
|
|
|
791 |
|
|
|
808 |
|
Due after ten years |
|
|
711 |
|
|
|
721 |
|
|
|
1,230 |
|
|
|
1,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,729 |
|
|
|
4,735 |
|
|
|
3,120 |
|
|
|
3,136 |
|
Mortgage-backed securities of Government Sponsored Entities |
|
|
|
|
|
|
|
|
|
|
52,779 |
|
|
|
54,176 |
|
Collateralized mortgage obligations of Government Sponsored Entities |
|
|
1,086 |
|
|
|
1,080 |
|
|
|
204,542 |
|
|
|
210,259 |
|
Private collateralized mortgage obligations |
|
|
16,484 |
|
|
|
15,894 |
|
|
|
69,852 |
|
|
|
66,902 |
|
No contractual maturity |
|
|
|
|
|
|
|
|
|
|
3,273 |
|
|
|
3,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,299 |
|
|
$ |
21,709 |
|
|
$ |
333,566 |
|
|
$ |
337,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All of the Companys securities at June 30, 2009 and December 31, 2008 which had unrealized losses
were obligations of the state and political subdivisions, U.S. Government agencies or AAA rated mortgage related securities. Management expects that all principal will be repaid
at a par value at the date of maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
|
(In thousands) |
|
Collateralized mortgage obligations of Government Sponsored Entities |
|
$ |
48,659 |
|
|
$ |
(854 |
) |
|
$ |
1,080 |
|
|
$ |
(6 |
) |
|
$ |
49,739 |
|
|
$ |
(860 |
) |
Private collateralized mortgage obligations |
|
|
28,281 |
|
|
|
(889 |
) |
|
|
30,828 |
|
|
|
(2,997 |
) |
|
|
59,109 |
|
|
|
(3,886 |
) |
Obligations of state and political subdivisions |
|
|
1,008 |
|
|
|
(4 |
) |
|
|
2,088 |
|
|
|
(29 |
) |
|
|
3,096 |
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities |
|
$ |
77,948 |
|
|
$ |
(1,747 |
) |
|
$ |
33,996 |
|
|
$ |
(3,032 |
) |
|
$ |
111,944 |
|
|
$ |
(4,779 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
|
Less than 12 months |
|
|
12 months or longer |
|
|
Total |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
|
(In thousands) |
|
Mortgage-backed securities of Government Sponsored Entities |
|
$ |
7,714 |
|
|
$ |
(6 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
7,714 |
|
|
$ |
(6 |
) |
Collateralized mortgage obligations of Government Sponsored Entities |
|
|
12,450 |
|
|
|
(176 |
) |
|
|
1,914 |
|
|
|
(49 |
) |
|
|
14,364 |
|
|
|
(225 |
) |
Private collateralized mortgage obligations |
|
|
|
|
|
|
|
|
|
|
42,983 |
|
|
|
(4,410 |
) |
|
|
42,983 |
|
|
|
(4,410 |
) |
Obligations of state and political subdivisions |
|
|
503 |
|
|
|
(1 |
) |
|
|
1,517 |
|
|
|
(7 |
) |
|
|
2,020 |
|
|
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities |
|
$ |
20,667 |
|
|
$ |
(183 |
) |
|
$ |
46,414 |
|
|
$ |
(4,466 |
) |
|
$ |
67,081 |
|
|
$ |
(4,649 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the
second quarter 2009, the Company adopted FSP FAS 115-2 and FAS
124-2 Recognition and Presentation of Other-Than-Temporary
Impairments.
The Company owned individual investment securities with aggregate gross
unrealized losses of $4.8 million at June 30, 2009. Based on a review of each of
the securities in the investment securities portfolio at
June 30, 2009, the
Company concluded that it expected to recover the amortized cost basis of its
investment.
Approximately $3.9 million of the unrealized losses pertain to super
senior AAA private label securities secured by collateral originated prior to
2005 with a cost basis of $86.3 million and were attributable to a combination of
factors, including relative changes in interest rates since the time of purchase
and decreased liquidity for investment securities in general. The collateral
underlying these mortgage investments are 30 and 15 year fixed and 10/1
adjustable rate mortgages loans with low loan to values, subordination and that
historically have had minimal foreclosures and losses. Based on its assessment of
these factors, management believes that the unrealized losses on these debt
security holdings are a function of changes in investment spreads and interest
rate movements and not changes in credit quality.
The
Company also had $860,000 of unrealized losses on mortgage-backed securities of
government sponsored entities having a cost basis of $205 million and were
attributable to a combination of factors, including relative changes in interest
rates since the time of purchase and decreased liquidity for investment
securities in general. The contractual cash flows for these securities are
guaranteed by U.S. government agencies and U.S. government-sponsored enterprises.
Based on its assessment of these factors, management believes that the unrealized
losses on these debt security holdings are a function of changes in investment
spreads and interest rate movements and not changes in credit quality. Management
expects to recover the entire amortized cost basis of these securities.
The unrealized losses on debt securities issued by states and political
subdivisions amounted to $33 thousand at June 30, 2009. The unrealized losses on
state and municipal holdings included in this analysis are attributable to a
combination of factors, including a general decrease in liquidity and an increase
in risk premiums for credit-sensitive securities since the time of purchase.
Based on its assessment of these factors, management believes that unrealized
losses on these debt security holdings are a function of changes in investment
spreads and liquidity and not changes in credit quality. Management expects to
recover the entire amortized cast basis of these securities.
As of June 30, 2009, the Company does not intend to sell nor is it anticipated
that it would be required to sell any of its investment securities which have
losses. Therefore, management does not consider any investment to be
other-than-temporarily impaired at June 30, 2009.
At June 30, 2009, the Company has not identified events or changes in
circumstances which may have a significant adverse effect on the fair value of
the $13.4 million of cost method investment securities.
Included in other assets is $13.4 million and $12.8 million at June 30, 2009 and June 30, 2008,
respectively, of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value.
15
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
SECOND QUARTER 2009
The following discussion and analysis is designed to provide a better understanding of the
significant factors related to the Companys results of operations and financial condition. Such
discussion and analysis should be read in conjunction with the Companys Condensed Consolidated
Financial Statements and the related notes included in this report.
NEW OFFICES / CLOSURES / RELOCATIONS
The Companys banking subsidiary has consolidated, improved and opened a number of branch offices
during 2009 and 2008. Most recently, a new branch office was opened on January 20, 2009 in the
same shopping plaza as our existing Wedgewood branch in Martin County. This new branch has better
ingress and egress on a corner of U.S. Highway One. Our office on Northlake Boulevard in northern
West Palm Beach was closed on June 2, 2009, to reduce overhead and rationalize cost with future
growth opportunities. Customers of this office are now served by our PGA Boulevard office.
During 2008, the Companys banking subsidiary consolidated three branch locations in the first
quarter:
|
|
the Ft. Pierce Wal-Mart branch office in St. Lucie County was
merged with an existing full service branch and closed on February
28, 2008; and |
|
|
|
the Mariner Square branch in Martin County and the Juno Beach
branch in Palm Beach County were consolidated with newer branches
serving the same markets and were closed on March 31, 2008. |
A new branch in western Port St. Lucie, Florida in an area with major retail development on Gatlin
Boulevard, was opened in March 2008. The Company also upgraded its Arcadia branch location in
DeSoto County, significantly increasing this locations size in April 2008. A second branch in
Brevard County on Murrell Road and a new, more accessible office replacing the Rivergate branch in
St. Lucie County were constructed and opened on April 28, 2008 and June 9, 2008, respectively. In
addition, a new, more visible Ft. Pierce branch opened on October 22, 2008, replacing our prior
location in Ft. Pierce, which was sold. Lastly, branch personnel at the Beachland office in Indian
River County, which we leased, moved in November 2008 to nearby Cardinal, which is in a separate
leased facility, which then became a branch office of Seacoast National.
Branch additions to bank premises and equipment over the past twelve months have been more than
offset by depreciation of $3.6 million over the same period, resulting in a decrease in bank
premises and equipment (net) of $9,000 at June 30, 2009, compared to June 30, 2008.
EARNINGS SUMMARY
Net loss available to common shareholders for the second quarter of 2009 totaled $(63,937,000) or
$(3.35) per average common diluted share, as a result of the
write-off of $49.8 million of all the Companys goodwill
(see Goodwill Impairment under Critical Accounting Estimates) and continued increased credit costs. This compares to $(5,697,000) or $(0.30) per average
16
common diluted share in the first quarter of 2009 and $(21,316,000) or ($1.12) per average common
diluted share in the second quarter of 2008.
As forecasted at the end of 2008, the net interest margin continued to improve, increasing by 21
basis points during the second quarter of 2009 from the first quarter of 2009. Our net interest
margin improved 12 basis points during the first quarter of 2009 from the fourth quarter of 2008.
The Company has continued to benefit from lower rates paid for interest bearing liabilities due to
the Federal Reserves reduction in interest rates by 400 basis points since September 2007, and its
continuance of historically low interest rates. The average cost of interest bearing liabilities
was 40 basis points lower for the second quarter of 2009, compared to first quarter 2009, and was
46 basis points lower for the first quarter of 2009, compared to fourth quarter 2008, a total
reduction of 86 basis points.
Our results also reflect the continued success of our retail deposit growth initiatives, signs of
improved stability and greater transaction volumes in residential real estate in our markets during
the first and second quarters of 2009.
Noninnterest expenses increased by $50.9 million versus the prior year second quarter as a result of our write-off of $49.8 million of goodwill (see Goodwill Impairment under Critical Accounting Estimates) and higher credit cost. We have reduced our overhead.
Noninterest expenses excluding our write-off of goodwill increased by $1.1 million versus the prior year
second quarter as a result of higher Federal Deposit Insurance Corporation (FDIC) insurance costs
(up $1.6 million). Excluding FDIC assessments and our write-off
of goodwill, noninterest expenses were $526,000 or 2.8 percent
lower for the second quarter of 2009 year over year, and $919,000 or 2.5 percent lower for the six
months ended June 30, 2009, compared to 2008. Most of the reduction in overhead occurred in
salaries and wages, outsourced data processing costs, furniture and equipment expenses and
marketing expenses, but these were partially offset by higher legal and professional fees and costs
to manage foreclosed and repossessed property, reflecting economic conditions.
Our provision for loan losses was substantially higher than in the first quarter of 2009, with
$26.2 million of provision for loan losses for the second quarter of 2009 compared to $11.6 million
for the first quarter of 2009. Provisions for loans losses was lower year over year for the first
six-months of 2009 as result of lower net charge-offs in 2009, and the Company has increased its
allowance for loan losses to loans outstanding ratio to 2.75 percent, or 100 basis points since
June 30, 2008.
CRITICAL ACCOUNTING ESTIMATES
Management, after consultation with the Companys Audit Committee, believes the most critical
accounting estimates and assumptions that may affect the Companys financial status and that
involve the most difficult, subjective and complex assessments are:
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the allowance and the provision for loan losses; |
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the fair value and other than temporary impairment of securities; |
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realization of deferred tax assets; |
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goodwill impairment; and |
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contingent liabilities. |
The following is a brief discussion of the critical accounting policies intended to facilitate a
readers understanding of the judgments, estimates and assumptions underlying these accounting
policies and the possible or likely events or uncertainties known to us that could have a material
effect on our reported financial information.
17
Allowance and Provision for Loan Losses
The information contained on pages 26-29 and 36-43 related to the Provision for Loan Losses,
Loan Portfolio, Allowance for Loan Losses and Nonperforming Assets is intended to describe
the known trends, events and uncertainties which could materially affect the Companys accounting
estimates related to our allowance for loan losses.
Fair Value and Other than Temporary Impairment of Securities Classified as Trading and
Available for Sale
At June 30, 2009, available for sale securities totaled $337,746,000. The fair value of the
available for sale portfolio at June 30, 2009 was more than historical amortized cost, producing
net unrealized gains of $4,180,000 that have been included in other comprehensive income as a
component of shareholders equity. The Company made no change to the valuation techniques used to
determine the fair values of securities during the first or second quarters of 2009. The fair
value of each security available for sale or trading was obtained from independent pricing sources
utilized by many financial institutions. 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. Generally the Company obtains one price for each security.
However, actual values can only be determined in an arms-length transaction between a willing
buyer and seller that can, and often do, vary from these reported values. Furthermore, significant
changes in recorded values due to changes in actual and perceived economic conditions can occur
rapidly, producing greater unrealized losses or gains in the available for sale portfolio.
The credit quality of the Companys securities holdings is investment grade and higher. These
securities, except for approximately $2.0 million of states and their political subdivisions
securities, as of June 30, 2008, generally are traded in highly liquid markets. Obligations of
U.S. Treasury and U.S. Government agencies total $271 million, or 80.1 percent of the total
portfolio. The remainder of the portfolio consists of super senior AAA private label
securities secured by collateral originated prior to 2005, and obligations of state and political subdivisions. The
collateral underlying these mortgage investments are 30- and 15-year fixed rate and 10/1 adjustable
rate mortgage loans. Historically, these mortgage loans have had minimal foreclosures and losses.
These investments are reviewed quarterly for other than temporary impairment, or OTTI, by
considering the following primary factors: percent decline in fair value, rating downgrades,
subordination, duration, amortized loan-to-value, and the ability of the issuers to pay all amounts
due in accordance with the contractual terms. Prices obtained from pricing services are usually
not adjusted; however, for two securities (both super-senior AAA private label securities) we noted
that the pricing provided by the pricing services was not consistent with other observed prices in
the market for similar securities. Using observable market inputs, which included interest rate
and yield curves, volatilities, prepayment speeds, loss severities and default rates, we validated
the observed prices using a discounted cash flow model and used the observed prices for similar
securities to determine the fair value of these two securities.
Changes in the fair values, as a result of deteriorating economic conditions and credit spread
changes, should only be temporary. Further, management believes that the Companys other sources
of liquidity, as well as the cash flow from principal and interest payments from the securities
portfolio, reduces the risk that losses would be realized as a result of a need to sell securities
to obtain liquidity.
18
The Company also holds stock in the Federal Home Loan Bank of Atlanta (FHLB) totaling $7.1
million as of June 30, 2009, slightly less than at year-end 2008. The FHLB eliminated its dividend
for the first quarter of 2009, and instituted quarterly rather than daily repurchases of FHLB
activity-based stock in February 2009. The Company accounts for the stock based on the industry
guidance in SOP 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables)
That Lend to or Finance the Activities of Others, which requires the investment to be carried at
cost and evaluated for impairment based on the ultimate recoverability of the par value. We
evaluated our holdings in FHLB stock at June 30, 2009 totaling $7.1 million and believe our
holdings in the stock are ultimately recoverable at par. We do not have operational or liquidity
needs that would require redemption of the FHLB stock in the foreseeable future and, therefore,
have determined that the stock is not other-than-temporarily impaired.
Realization of Deferred Tax Assets
Our wholly-owned subsidiary, Seacoast National, had a state deferred tax asset (DTA) of $5.5
million at December 31, 2008 reflecting the benefit of $101.3 million in net operating loss (NOL)
carry-forwards, which will expire between 2027 and 2028. This deferred state tax asset resulted
from a large provision for loan losses in 2008 related to Seacoast Nationals residential
construction and land development loan portfolio. Early recognition of and aggressive responses to
unprecedented economic conditions have resulted in substantially higher loan loss provisions and
losses for Seacoast National during 2008 and 2009. Our recognition of market conditions allowed
for realignment of resources early in 2008 and significant reductions in residential construction
and land development loan exposures which at June 30, 2009 continue to decline, totaling 6.1
percent of total loans compared to 7.8 percent at December 31, 2008 and 20.2 percent at their peak
during 2007. Management believes that loan loss provisions will likely be much lower in the future
over the 20-year carry-forward period for state NOLs. Seacoast National has been through other
similar economic cycles in the past where provisioning for loan losses has been elevated followed
by periods of lower risk and where little to no loan loss provisions were needed. It is
managements opinion that Seacoast Nationals future taxable income will allow the recovery of the
NOL, and the utilization of its deferred tax assets.
As a result of the losses incurred in 2008, the Company was in a three-year cumulative pretax loss
position at December 31, 2008. A cumulative loss position is considered significant negative
evidence in assessing the prospective realization of a DTA. The use of the Companys forecast of
future taxable income was not considered positive evidence which could be used to offset the
negative evidence at this time given the uncertain economic conditions. Therefore, a valuation
allowance of $5.5 million was recorded related to the Companys state deferred tax asset at
December 31, 2008. There was no change to the valuation allowance recorded at June 30, 2009.
Goodwill Impairment
As disclosed in Note A to our audited consolidated financial statements, the Company is a single
segment bank holding company with one operating subsidiary bank. With the assistance of an
external valuation firm, our management reviews the results and assumptions utilized in the
valuation firms analysis, including the use of discounted cash flows and change in control
valuation methods. Determining the fair value using discounted cash flow analysis requires
assumptions regarding our short- and long-term net cash flow growth rates, as well as discount
rates. As part of the analysis, the external valuation firm considers the makeup of assets and
19
liabilities (including both loan and deposit compositions), scarcity value, capital ratios, market
share, credit quality (asset quality), control premiums, the type of financial institution, our
overall size and the various markets we serve, as well as profitability ratios.
Growth Assumptions
Multi-year financial forecasts were developed considering key business drivers such as new business
initiatives, market share, anticipated loan and deposit growth, interest rates, historical
performance, and industry and economic trends, among other considerations.
Discount Rate Assumptions
Discount rates are estimated based on the capital asset pricing model, which considers the
risk-free interest rate, market risk premium, and beta. For the
June 30, 2009 goodwill impairment
evaluation, the discount rate used to develop the estimated fair value was 17%.
Change in Control Assumptions
A total of 16 bank acquisition transactions since November 2005 were used. Comparable target
financial performance measures were considered in selecting the deals to be examined. The
transactions multiples were examined as announced and then adjusted using the price performance of
the KBW Regional Banking Index (KRX) since announcement of the transaction.
Market Capitalization
The market capitalization is analyzed in relation to numerous market and historical factors,
including current economic and market conditions, recent, historical, and implied stock price
volatility, marketplace dynamics such as the level of short selling, company-specific growth
opportunities, and an implied control premium. In the current unprecedented market environment,
the size of the implied control premium can vary significantly based on the economic and market
conditions which may cause increased volatility in a companys stock price, resulting in a
temporary decline in market capitalization; therefore, current market capitalization may not be an
accurate indication of a market participants estimate of entity-specific value measured over a
more reasonable period of time.
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Fair Value Results (per share) June 30, 2009 |
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|
Discounted Cash Flow: |
|
$ |
6.44 |
|
Comparable Transactions Analysis: |
|
$ |
7.00 |
|
Market Capitalization: |
|
$ |
2.43 |
|
We have determined that the carrying amount of the Company exceeds its fair value as of June 30,
2009; however, we were unable to complete a second step analysis to estimate the implied fair value
of the Companys goodwill. The results of a second step analysis is required to support the
carrying amount of goodwill; therefore, we have preliminarily determined that the goodwill
impairment loss is the full amount of goodwill $49,813,000. This is an estimate and we will
disclose in the third quarter any adjustments after completing the second step analysis. This
requires the Company to allocate the estimated fair value of the Company to all of its assets and
liabilities. The fair values of the assets and liabilities, primarily loans and deposits, are
determined using current market interest rates, projections of future cash flows, and where
20
available, quoted market prices of similar instruments. Any unallocated fair value represents the
implied fair value of goodwill, which is then compared to its corresponding carrying value.
Contingent Liabilities
The Company is subject to contingent liabilities, including judicial, regulatory and arbitration
proceedings, and tax and other claims arising from the conduct of our business activities. These
proceedings include actions brought against the Company and/or our subsidiaries with respect to
transactions in which the Company and/or our subsidiaries acted as a lender, a financial advisor, a
broker or acted in a related activity. Accruals are established for legal and other claims when it
becomes probable the Company will incur an expense and the amount can be reasonably estimated.
Company management, together with attorneys, consultants and other professionals, assesses the
probability and estimated amounts involved in a contingency. Throughout the life of a contingency,
the Company or our advisors may learn of additional information that can affect our assessments
about probability or about the estimates of amounts involved. Changes in these assessments can
lead to changes in recorded reserves. In addition, the actual costs of resolving these claims may
be substantially higher or lower than the amounts reserved for those claims.
During the first quarter of 2008, the Company reversed $130,000 of a $275,000 charge it had
recorded as of year-end 2007 for its portion of Visa® credit card litigation and settlement costs.
Visas initial public offering was successfully completed during the first quarter of 2008,
eliminating the need for this accrual.
Management is not aware of any other probable losses.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income (on a fully taxable equivalent basis) for the first quarter of 2009 totaled
$18,987,000, increasing from 2009s first quarter by $746,000 or 4.1 percent, but lower than second
quarter 2008s result by $1,247,000 or 6.2 percent. The following table details net interest
income and margin results (on a tax equivalent basis) for the past five quarters:
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Net Interest Income |
|
Net Interest Margin |
(Dollars in thousands) |
|
(tax equivalent) |
|
(tax equivalent) |
Second quarter 2008
|
|
$ |
20,234 |
|
|
|
3.69 |
% |
Third quarter 2008
|
|
|
19,186 |
|
|
|
3.57 |
|
Fourth quarter 2008
|
|
|
17,535 |
|
|
|
3.32 |
|
First quarter 2009
|
|
|
18,241 |
|
|
|
3.44 |
|
Second quarter 2009
|
|
|
18,987 |
|
|
|
3.65 |
|
Fully taxable equivalent net interest income is a common term and measure used in the banking
industry but is not a term used under U.S. generally accepted accounting principles (GAAP). We
believe that these presentations of tax-equivalent net interest income tax equivalent net interest
margin aid in the comparability of net interest income arising from both taxable and tax-exempt
sources over the periods presented. We further believe these non-GAAP measures enhance investors
understanding of the Companys business and performance, and facilitate an understanding of
performance trends and comparisons with the performance of other financial institutions. The
limitations associated with these measures are the risk that persons might disagree
21
as to the appropriateness of items comprising these measures and that different companies might
calculate these measures differently, including as a result of using different assumed tax rates.
These disclosures should not be considered an alternative to GAAP. The following information is
provided to reconcile GAAP measures and tax equivalent net interest income and net interest margin
on a tax equivalent basis.
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Second |
|
First |
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Fourth |
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Third |
|
Second |
|
|
|
Quarter 2009 |
|
Quarter 2009 |
|
Quarter 2008 |
|
Quarter 2008 |
|
Quarter 2008 |
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|
|
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|
(Dollars in thousands) |
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|
Non-taxable interest income |
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$ |
|
135 |
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$ |
|
139 |
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$ |
|
141 |
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$ |
|
145 |
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$ |
|
151 |
|
Tax Rate |
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|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
Net interest
income (TE) |
|
$ |
|
18,987 |
|
$ |
|
18,241 |
|
$ |
|
17,535 |
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$ |
|
19,186 |
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$ |
|
20,234 |
|
Total net interest income (not TE) |
|
|
|
18,920 |
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|
|
18,174 |
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|
|
17,467 |
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|
|
19,117 |
|
|
|
20,162 |
|
Net interest margin (TE) |
|
|
|
3.65 |
% |
|
|
3.44 |
% |
|
|
3.32 |
% |
|
|
3.57 |
% |
|
|
3.69 |
% |
Net interest margin (not TE) |
|
|
|
3.64 |
|
|
|
3.43 |
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|
|
3.31 |
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|
|
3.56 |
|
|
|
3.67 |
|
Net interest margin on a tax equivalent basis improved 21 basis points to 3.65 percent for the
second quarter of 2009 compared to the first quarter of 2009, but was lower by 4 basis points year
over year. Net interest income and net interest margin have improved quarter over quarter during
2009, despite the challenging lending environment and the reduction of interest due to nonaccrual
loans. Nonaccrual loans have been the primary forces adversely affecting our net interest income
and net interest margin when comparing these returns for 2009 to the same periods in 2008.
The earning asset mix changed year over year. For the second quarter of 2009, average loans (the
highest yielding component of earning assets) as a percentage of average earning assets totaled
78.2 percent, compared to 84.0 percent a year ago. Average securities as a percent of average
earning assets increased from 13.1 percent a year ago to 17.4 percent during second quarter 2009
and federal funds sold and other investments increased to 4.4 percent from 2.9 percent over the
same period in 2008. In addition to decreasing average total loans as a percentage of earning
assets, the mix of loans changed, with commercial and commercial real estate volumes representing
57.3 percent of total loans at June 30, 2009 (compared to 61.0 percent a year ago at June 30,
2008). This reflects our reduced exposure to commercial construction and land development loans on
residential properties, which declined by $149.4 million from June 30, 2008 to June 30, 2009. Lower
yielding residential loan balances with individuals (including home equity loans and lines, and
personal construction loans) represented 38.3 percent of total loans at June 30, 2009 (versus 34.8
percent a year ago) (see Loan Portfolio).
The yield on earning assets for the second quarter 2009 was 5.03 percent, 86 basis points lower than
for second quarter 2008, a reflection of the lower interest rate environment, as well as higher
nonperforming loans. The following table details the yield on earning assets (on a tax equivalent
basis) for the past five quarters:
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2nd Quarter |
|
1st Quarter |
|
4th Quarter |
|
3rd Quarter |
|
2nd Quarter |
|
|
2009 |
|
2009 |
|
2008 |
|
2008 |
|
2008 |
|
|
|
Yield |
|
|
5.03 |
% |
|
|
5.16 |
% |
|
|
5.45 |
% |
|
|
5.78 |
% |
|
|
5.89 |
% |
The yield on loans declined 79 basis points to 5.33 percent over the last twelve months.
Nonaccrual loans totaling $126.8 million or 8.0 percent of total loans at June 30, 2009, versus
$76.2 million or 4.2 percent of total loans a year ago, reduced our yield on our loan portfolio.
The yield on investment securities was lower as well, decreasing 22 basis points year over year to
4.86 percent, due primarily to purchases of securities at lower yields available in current
markets, which diluted
22
the overall portfolio yield year over year. The decline in yield on investment securities was less
severe than the decline of 64 basis points reported year over year for first quarter 2009,
reflecting recent securities purchases at higher yields that improved the overall yield for the
second quarter by 35 basis points from first quarter 2009. Federal funds sold and other
investments yielded 0.47 percent for the second quarter 2009, lower when compared to 2.83 percent a
year ago for the same period. The dramatic reduction in interest rates during 2008, with the
Federal Reserve lowering the target federal funds rate to 0 to 25 basis points and the Treasury
yield curve shifting lower, is expected to continue to limit opportunities to invest at higher
interest rates prospectively.
Average earning assets for the second quarter of 2009 decreased $63.4 million or 2.9 percent
compared to the first quarter of 2009. While average loan balances decreased $38.6 million or 2.3
percent to $1,631.7 million and average federal funds sold and other investments decreased $29.5
million or 24.2 percent to $92.2 million, average investment securities were $4.7 million or 1.3
percent higher, totaling $363.6 million. These declines are consistent with reduced funding as a
result of seasonal declines and the planned runoff of $36 million of brokered deposits we sold in
July and August, 2008 as a test of this source of liquidity.
Commercial and commercial real estate loan production for the first six months of 2009 totaled $9
million. In comparison, commercial and commercial real estate loan production for 2008 totaled
$117 million, with $8 million in the fourth quarter, $33 million in the third quarter, $19 million
in the second quarter and $57 million for the first quarter a year ago. Although we continue to
make loans generally, economic conditions in the markets the Company serves are expected to result
in negative loan growth in 2009. At June 30, 2009 the Companys total commercial and commercial
real estate loan pipeline was $72 million, versus $290 million at June 30, 2008.
Closed residential mortgage loan production for the second quarter of 2009 totaled $43 million, of
which $24 million was sold servicing-released. In comparison, $38 million in residential loans
were produced in the first quarter of 2009, with $20 million sold servicing-released, and $30
million was produced in the second quarter of 2008, with $18 million sold servicing released.
Applications for residential mortgages totaled $71 million during the second quarter of 2009
compared to $92 million for the first quarter of 2009. Fourth quarter 2008s residential mortgage
loan applications totaled $38 million. Existing home sales and home mortgage loan refinancing
activity in the Companys markets have increased in 2009. Demand for new home construction is
expected to remain soft in 2009.
During the second quarter of 2009, the sale of two mortgage backed securities totaling $29.5
million resulted in securities gains of $1,786,000. Management believed these securities had
minimal opportunity to further increase in value. During the second quarter of 2009 maturities
(principally pay-downs and one large maturity of $20 million) totaled $47.4 million and securities
portfolio purchases totaled $64.2 million. In comparison, during the first quarter of 2009,
maturities (principally pay-downs) of securities totaled $10.5 million and securities portfolio
purchases totaled $36.0 million. Purchases were conducted principally to reinvest funds from loan
principal repaid, for pledging requirements, and to reinvest proceeds from the sales of the
mortgage backed securities. For 2008, a single security sale transacted during the second quarter
provided a $355,000 gain. No losses on securities sales were incurred in the first six months of 2009 or 2008.
The cost of average interest-bearing liabilities in the second quarter of 2009 decreased 40 basis
points to 1.65 percent from first quarter 2009 and was 103 basis points lower than for the second
quarter of 2008, reflecting the lower interest rate environment. The following table details the
cost of average interest bearing liabilities for the past five quarters:
23
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|
2nd Quarter |
|
1st Quarter |
|
4th Quarter |
|
3rd Quarter |
|
2nd Quarter |
|
|
2009 |
|
2009 |
|
2008 |
|
2008 |
|
2008 |
|
|
|
Rate |
|
|
1.65 |
% |
|
|
2.05 |
% |
|
|
2.52 |
% |
|
|
2.64 |
% |
|
|
2.68 |
% |
The Companys retail core deposit focus has produced strong growth in core deposit customer
relationships when compared to the prior years results, and resulted in increased balances which
offset planned certificate of deposit runoff during the first and second quarter of 2009. We have
gained customers. A total of 7,072 new households have added 8,928 new checking accounts over the
past twelve months. The improved deposit mix and lower rates paid on interest bearing deposits
during the second quarter of 2009 reduced the overall cost of interest bearing deposits to 1.67
percent, 44 basis points lower than in the first quarter of 2009 and 99 basis points lower than in
the second quarter a year ago. Still a significant component favorably affecting the Companys net
interest margin, the average balances of lower cost interest bearing deposits (NOW, savings and
money market) increased from 53.3 percent in the first quarter of 2009 to 54.2 percent of average
total interest bearing deposits during the second quarter of 2009, although this was lower than the
average of 60.1 percent a year ago. The average rate for lower cost interest bearing deposits for
the second quarter of 2009 was 0.71 percent, down by 39 basis points from the first quarter of 2009
and down 107 basis points from the second quarter of 2008. Certificate of deposit (CD) rates
paid were also lower compared to the first quarter of 2009 and second quarter of 2008, lower by 45
basis points and 119 basis points, respectively, and averaged 2.80 percent for the second quarter
of 2009. Average CDs (the highest cost component of interest bearing deposits) decreased to 45.8
percent of interest bearing deposits from 46.7 percent for first quarter 2009, but remained a
higher percentage than a year ago.
Average deposits totaled $1,773.1 million during the second quarter of 2009, and were $37.3 million
lower compared to first quarter 2009, due primarily to lower average customer balances as a the
result of normal seasonal declines and a planned reduction of brokered deposits of $36 million.
Total average sweep repurchase agreements for the second quarter were $17.4 million lower as a
result of normal seasonal funding trends for public fund customers. Total average deposits plus
sweep repurchase agreements totaled $1,909.9 million during the second quarter of 2009, down $54.6
million or 2.8 percent from first quarter 2009. Average total deposits declined $149.4 million or
7.8 percent compared to the same period in 2008, principally as a result of deposit declines in the
Companys central Florida region (resulting from slower economic growth affecting the second half
of 2008. The average aggregate amounts of NOW, savings and money market balances decreased
$156.4 million or 16.2 percent to $808.4 million for second quarter 2009 compared to second quarter
2008, noninterest bearing deposits decreased $34.9 million or 11.0 percent to $281.7 million, and
average CDs increased by $41.9 million or 6.5 percent to $683.0 million. As a result of the low
interest rate environment, customers have deposited more funds into CDs, while maintaining lower
average balances in savings and other liquid deposit products that pay no interest or a lower
interest rate. In addition, Seacoast National joined the Certificate of Deposit Registry program
(CDARs) on July 1, 2008, which permits our customers to have CDs safely insured beyond the FDIC
deposit insurance limits. This benefited our deposit retention efforts during the recent financial
market disruption and provided a new product offering to homeowners associations concerned with
FDIC insurance coverage.
FDIC deposit insurance has been temporarily increased from $100,000 to $250,000 per depositor from
October 14, 2008 through December 31, 2013. Under the FDICs Temporary Liquidity Guarantee, or
TLG, program, the entire amount in any eligible noninterest bearing transaction
24
deposit account is guaranteed by the FDIC to the extent such balances are not covered by FDIC
insurance. Seacoast National is participating in the TLG program to offer the best possible FDIC
coverage to its customers. The TLG noninterest bearing transaction account guarantee is backed by
the full faith and credit of the United States, and unless extended, will expire December 31, 2009.
The FDIC has proposed extending the TLG for qualifying noninterest bearing transaction accounts to
June 30, 2010, subject to banks that elect to participate in this extended TLG paying a higher fee
for the FDIC guarantee.
Average federal funds purchased have been nominal with none outstanding during 2009, compared to an
average of $4.0 million for all of 2008. Average short-term borrowings have been principally
comprised of sweep repurchase agreements with customers of the Companys bank subsidiary, which
decreased $17.4 million or 11.3 percent from the first quarter of 2009 but increased $46.7 million
or 51.8 percent from the second quarter of 2008. Most of the increase in average sweep repurchase
agreement balances was due to efforts to reduce FDIC insurance costs by migrating public fund
deposits beginning late in the fourth quarter of 2008. Other borrowings are comprised of
subordinated debt of $53.6 million related to trust preferred securities issued by trusts organized
by the Company, and advances from the FHLB of $65.2 million that have not changed since year-end
2007.
Company management believes its market expansion, branding efforts and retail deposit growth
strategies have produced new relationships and core deposits. Reductions in nonperforming assets
also are expected to favorably affect future net interest margin.
PROVISION FOR LOAN LOSSES
Management determines the provision for loan losses charged to operations by continually 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 Companys policies and procedures used to estimate the provision for loan
losses charged to operations are considered adequate by management, factors beyond the control of
the Company, such as general economic conditions, both locally and nationally, make managements
judgment as to the adequacy of the provision and allowance for loan losses necessarily approximate
and imprecise (see Nonperforming Assets and Allowance for Loan Losses).
The provision for loan losses is the result of a detailed analysis estimating an appropriate and
adequate allowance for loan losses. The analysis includes the evaluation of impaired loans as
prescribed under SFAS No. 114 Accounting by Creditors for Impairment of a Loan, and SFAS No. 118
Accounting by Creditors for Impairment of a Loan Income Recognition and Disclosures, as well as,
an analysis of homogeneous loan pools not individually evaluated as prescribed under SFAS No. 5,
Accounting for Contingencies. For the second quarter ended June 30, 2009, the provision for loan
losses was $26.2 million, lower than 2008s second quarter provision for loan losses of $42.2
million but higher than the $11.7 million provision for first quarter of 2009.
The provision for loan losses was $11.1 million more than net charge-offs of $15.1 million or 3.71
percent of average total loans in the second quarter of 2009. In the first quarter of 2009,
provisions for loan losses were $3.1 million more than net charge-offs of $8.5 million, or 2.07
percent of average total loans. In comparison, net charge-offs for 2008 were $4.4 million and
$33.5 million in the first and second quarters of 2008, respectively, and $81.1 million for the
entire year. Net charge-offs during 2008 and 2009 were primarily due to higher net charge-offs
25
of commercial construction and land development loans financing residential development, which
reflected housing market declines. A downturn in residential real estate prices and sales has
negatively affected the entire industry since mid-2006 and the Company began a comprehensive effort
to reduce its exposure in early 2007. With timely and more aggressive collection efforts, loan
sales, and charge-offs, residential construction and land development loans declined $149 million
from June 30, 2008 and now represent 6.1 percent of total loans at June 30, 2009. The performing
loans in this portfolio total approximately $33 million and are represented by 41 customer
relationships and an average loan size of approximately $0.8 million. We continue to monitor and
update regularly our credit evaluations of these borrowers, and the collateral values as sales
volumes and prices change in our markets. The reduction in the Companys exposure should reduce
earnings volatility from this portfolio in the future.
The following table details the Companys exposure to large residential construction and land
development loans over the past six quarters, as evidenced by loans in this portfolio with balances
of $4 million or more declining by almost 68 percent from $136.7 million, or 66 percent of
risk-based capital at June 30, 2008, to $44.0 million, or approximately 20 percent of risk-based
capital, at June 30, 2009. Of the remaining $44.0 million in loans greater than $4 million, $37.5
million or 85.2 percent are classified as nonperforming, and of the $52.7 million in loans less
than $4 million, $26.1 million or 49.5 percent are nonperforming:
26
QUARTERLY TRENDS LOANS AT END OF PERIOD
(Dollars in Millions)
|
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|
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|
|
2009 |
|
|
|
|
2008 |
|
2009 |
|
Nonperforming |
|
|
|
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
|
1st Qtr |
|
2nd Qtr |
|
2nd Qtr |
|
No. |
Residential Construction and Land
Development |
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|
|
Condominiums |
|
>$4 mil |
|
$ |
30.6 |
|
|
$ |
26.3 |
|
|
$ |
19.6 |
|
|
$ |
8.6 |
|
|
$ |
8.4 |
|
|
$ |
7.9 |
|
|
$ |
7.9 |
|
|
|
1 |
|
|
|
<$4 mil |
|
|
26.6 |
|
|
|
21.1 |
|
|
|
13.0 |
|
|
|
8.8 |
|
|
|
7.9 |
|
|
|
8.8 |
|
|
|
5.2 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Town homes |
|
>$4 mil |
|
|
19.4 |
|
|
|
17.1 |
|
|
|
17.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<$4 mil |
|
|
4.4 |
|
|
|
2.9 |
|
|
|
4.6 |
|
|
|
6.1 |
|
|
|
4.2 |
|
|
|
2.3 |
|
|
|
2.3 |
|
|
|
1 |
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single Family
Residences |
|
>$4 mil |
|
|
20.8 |
|
|
|
21.2 |
|
|
|
13.5 |
|
|
|
11.9 |
|
|
|
6.6 |
|
|
|
6.5 |
|
|
|
|
|
|
|
|
|
|
|
<$4 mil |
|
|
35.9 |
|
|
|
28.3 |
|
|
|
23.7 |
|
|
|
14.9 |
|
|
|
13.9 |
|
|
|
10.3 |
|
|
|
5.0 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single Family
Land & Lots |
|
>$4 mil |
|
|
85.1 |
|
|
|
64.3 |
|
|
|
40.3 |
|
|
|
22.1 |
|
|
|
21.8 |
|
|
|
21.8 |
|
|
|
21.8 |
|
|
|
3 |
|
|
|
<$4 mil |
|
|
27.0 |
|
|
|
30.8 |
|
|
|
29.9 |
|
|
|
30.7 |
|
|
|
29.6 |
|
|
|
21.5 |
|
|
|
9.2 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily |
|
>$4 mil |
|
|
7.8 |
|
|
|
7.8 |
|
|
|
7.8 |
|
|
|
7.8 |
|
|
|
7.8 |
|
|
|
7.8 |
|
|
|
7.8 |
|
|
|
1 |
|
|
|
<$4 mil |
|
|
24.8 |
|
|
|
26.2 |
|
|
|
22.9 |
|
|
|
19.0 |
|
|
|
17.0 |
|
|
|
9.8 |
|
|
|
4.4 |
|
|
|
5 |
|
|
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|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
>$4 mil |
|
|
163.7 |
|
|
|
136.7 |
|
|
|
98.3 |
|
|
|
50.4 |
|
|
|
44.6 |
|
|
|
44.0 |
|
|
|
37.5 |
|
|
|
5 |
|
TOTAL |
|
<$4 mil |
|
|
118.7 |
|
|
|
109.3 |
|
|
|
94.1 |
|
|
|
79.5 |
|
|
|
72.6 |
|
|
|
52.7 |
|
|
|
26.1 |
|
|
|
38 |
|
|
|
|
|
|
GRAND TOTAL |
|
|
|
$ |
282.4 |
|
|
$ |
246.0 |
|
|
$ |
192.4 |
|
|
$ |
129.9 |
|
|
$ |
117.2 |
|
|
$ |
96.7 |
|
|
$ |
63.6 |
|
|
|
43 |
|
|
|
|
|
|
The Companys other loan portfolios related to residential real estate are amortizing loans.
The Company has never offered sub-prime, Alt A, Option ARM or any negative amortizing residential
loans, programs or products, although we have originated and hold residential mortgage loans from
borrowers with original or current FICO credit scores that are less than prime FICO credit
scores. Substantially all residential originations have been underwritten to conventional loan
agency standards, including loans having balances that exceed agency value limitations. The
Company selectively adds residential mortgage loans to its portfolio, primarily loans with
adjustable rates.
Past due residential loans totaled 5.86 percent at June 30, 2009 compared to 15.50% for Florida as
of March 31, 2009, the latest available figure. In addition, the commercial real estate mortgage
portfolio not related to residential construction and development has not had significant credit
quality deterioration.
27
Since year-end 2008, nonaccrual loans increased by $39.8 million to $126.8 million at June 30,
2009, and were $50.5 million higher than at June 30, 2008. See Nonperforming Assets. Loans
declined $221.7 million or 11.7 percent during 2008 and have declined an additional $92.4 million
or 5.5 percent since year-end 2008. See Loan Portfolio. For 2009, the Companys loan portfolio
is expected to experience further declines, however the Companys loan loss provisions should be
less volatile as problem loans related to the residential real estate market and valuations are
expected to be more limited than realized during 2008.
The Congress and bank regulators are encouraging recipients of TARP capital to use such capital to
make loans and the Company has successfully increased its residential mortgage production.
Congressional demands for additional lending by TARP capital recipients and regulatory demands for
demonstrating and reporting such lending are increasing. On November 12, 2008, the bank regulatory
agencies issued a statement encouraging banks to, among other things, lend prudently and
responsibly to creditworthy borrowers and to work with borrowers to preserve homeownership and
avoid preventable foreclosures. A total of 320 applications were accepted in the second quarter
of 2009 for total residential mortgage loans of $71 million, and 721 applications were taken in the
first six months for $165 million. Closed residential mortgage loans totaled $43 million for the
quarter, up $5 million from the first quarter of 2009. In addition, a total of 102 applications
were received seeking restructured mortgages, compared to 93 in the first quarter of 2009. The
Company continues to lend, and we have expanded our mortgage loan originations. However, as
consumers and businesses seek to reduce their borrowings, and the economy remains weak,
opportunities to lend prudently to creditworthy borrowers are expected to be limited.
NONINTEREST INCOME
Noninterest income, excluding gains or losses from securities, totaled $3,928,000 for the second
quarter of 2009, $828,000 or 17.4 percent lower than the first quarter of 2009 and $1,914,000 or
32.8 percent lower than the second quarter of 2008. Noninterest income accounted for 17.2 percent
of total revenue (net interest income plus noninterest income, excluding securities gains or
losses) in the second quarter of 2009 compared to 22.5 percent a year ago. Noninterest income for
the second quarter of 2009, the first quarter of 2009, and second quarter of 2008 is detailed as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2nd Qtr |
|
1st Qtr |
|
2nd Qtr |
|
|
2009 |
|
2009 |
|
2008 |
Service charges on deposits |
|
$ |
1,562 |
|
|
$ |
1,585 |
|
|
$ |
1,812 |
|
Trust income |
|
|
480 |
|
|
|
558 |
|
|
|
591 |
|
Mortgage banking fees |
|
|
488 |
|
|
|
499 |
|
|
|
350 |
|
Brokerage commissions and fees |
|
|
388 |
|
|
|
381 |
|
|
|
515 |
|
Marine finance fees |
|
|
331 |
|
|
|
345 |
|
|
|
930 |
|
Debit card income |
|
|
673 |
|
|
|
608 |
|
|
|
648 |
|
Other deposit-based EFT fees |
|
|
85 |
|
|
|
94 |
|
|
|
86 |
|
Merchant income |
|
|
448 |
|
|
|
536 |
|
|
|
667 |
|
Other income (expense) |
|
|
(527 |
) |
|
|
150 |
|
|
|
243 |
|
|
|
|
Total |
|
$ |
3,928 |
|
|
$ |
4,756 |
|
|
$ |
5,842 |
|
|
|
|
For 2009, second quarter revenues from the Companys wealth management services businesses (trust
and brokerage) decreased year over year, by $238,000 or 21.5 percent, and were $71,000 or 7.6
percent below first quarter 2009s result. Of the $238,000 decrease, trust revenue was lower by
$111,000 or 18.8 percent and brokerage commissions and fees were lower by $127,000 or 24.7
28
percent. Included in the $127,000 decline in brokerage commissions and fees was a decline of
$39,000 in revenue from insurance annuity sales year over year reflecting the lower interest rate
environment, and a $90,000 reduction in mutual fund commissions. Lower inter vivos trust and
agency fees were the primary cause for the decline in trust income, as these decreased $22,000 and
$82,000, respectively, from 2008, as well as lower testamentary fee income, which decreased $8,000.
Economic uncertainty and declines in asset values were the primary issue affecting clients of the
Companys wealth management services during 2008 and has continued to affect these services in
2009. For the six months ended June 30, 2009, income from the Companys wealth management services
was $564,000 or 23.8 percent lower compared to 2008.
Service charges on deposits for second quarter 2009 are $250,000 or 13.8 percent lower year over
year versus second quarter 2008, and $23,000 or 1.5 percent below first quarter 2009s service
charges. Decreased overdraft income was the primary cause, as this declined $222,000 compared to
the second quarter of 2008. Overdraft fees represented approximately 75 percent of total service
charges on deposits for the second quarter and year-to-date 2009, compared to 78 percent for all of
2008. Growth rates for remaining service charge fees on deposits have been nominal or declining,
as the trend over the past few years is for customers to prefer deposit products which have no fees
or where fees can be avoided by maintaining higher deposit balances. Year-to-date service charges
on deposits for 2009 decreased $515,000 year over year to $3,147,000.
For the second quarter of 2009, fees from the non-recourse sale of marine loans originated by our
Seacoast Marine Division of Seacoast National decreased $599,000, or 64.4 percent, compared to the
second quarter of 2008, but were slightly lower (by $14,000) compared to first quarter 2009. Year
to date marine finance fees are $939,000 or 58.1 percent lower when compared to results for the
first six months of 2008. The Seacoast Marine Division originated $20 million in loans during the
first and second quarters of 2009 (a total of $40 million year-to-date), compared to $44 million
and $55 million in each of the first and second quarters of 2008, respectively, and $99 million for
the first six months of 2009. As economic conditions deteriorated significantly during 2008,
attendance at boat shows by consumers, manufacturers, and marine retailers was lower than in prior
years, and as a result marine sales and loan volumes were lower and are predicted to continue to be
lower in 2009. The boating industry is contracting, with a number of manufacturers consolidating
or predicted to consolidate. The Seacoast Marine Division is headquartered in Ft. Lauderdale,
Florida with lending professionals in Florida and California. The California office serves
California, Washington and Oregon.
Greater usage of check or debit cards over the past several years by core deposit customers and an
increased cardholder base has increased our interchange income. For second quarter 2009, debit
card income increased $25,000 or 3.9 percent from second quarter a year ago, and was $65,000 or
10.7 percent higher than first quarter 2009s income. Other deposit-based electronic funds
transfer (EFT) income decreased $1,000 or 1.2 percent in 2009, compared to second quarter 2008,
and decreased $9,000 or 9.6 percent from first quarter 2009s revenue. Debit card and other
deposit-based EFT revenue is dependent upon business volumes transacted, as well as the fees
permitted by VISA® and MasterCard®. During 2009, our other deposit-based EFT
income was adversely affected by lower fees from non-customers utilizing Seacoast Nationals
automatic teller machines (ATMs) which likely reflected the economic recession and tourist and
vacation activity.
Merchant income was $219,000 or 32.8 percent lower for the second quarter of 2009, compared to one
year earlier, and $88,000 or 16.4 percent lower than for the first quarter of 2009. Merchant
income as a source of revenue is dependent upon the volume of credit card transactions that occur
with merchants who have business demand deposits with Seacoast National. Over the past few
29
years, expansion into new markets favorably impacted our merchant income, but continued economic
weakness and related effects on consumer spending have more than offset our geographic expansion.
Merchant income historically has been highest in the first quarter each year, reflecting seasonal
sales activity. For the first six months of 2009, merchant income was $418,000 or 29.8 percent
lower than a year ago.
The Company originates residential mortgage loans in its markets, with loans processed by
commissioned employees of Seacoast National. Many of these mortgage loans are referred by the
Companys branch personnel. Mortgage banking fees in the second quarter of 2009 increased $138,000
or 39.4 percent from the second quarter of 2008, and were $11,000 less than in the first quarter of
2009. Mortgage banking fees year-to-date were $269,000 or 37.5 percent higher than for the first
six months of 2008. Mortgage banking revenue as a component of overall noninterest income was
diminished during 2008. We are beginning to see some signs of stability for residential real
estate sales and activity in our markets, with transactions increasing, prices firming and
affordability improving. The Company may have opportunities in markets it serves in 2009 as
tighter credit and reduced capital have limited the ability of some of our competitors. The
Company also recently began offering FHA loans, a product previously not offered.
Other income for the second quarter of 2009 included losses of $946,000 on the sale of OREO,
compared to $98,000 of these losses a year ago for the second quarter and $183,000 in losses for
the first quarter of 2009. Losses on OREO for the first quarter of 2008 totaled $134,000.
Partially offsetting these losses, rental income of $80,000 was recognized on OREO for the first
time during the second quarter of 2009. For the first six months of 2009, other income declined
$1,160,000 from 2008, including the second quarters losses of $946,000 on OREO. The comparison of
other income between the first six months of 2009 and the same period
of 2008, was also
affected by the $305,000 of additional income we realized upon the redemption of Visa®, Inc.
shares, in the first quarter of 2008 as part of Visas initial public offering.
NONINTEREST EXPENSES
When compared to the second quarter of 2008 excluding the impairment write-down of goodwill of $49,813,000,
total noninterest expenses increased by $1,108,000 or 5.8 percent to $20,348,000, and were
$1,239,000 or 6.5 percent higher than first quarter 2009s expenses. For the six months ended June
30, 2009 excluding the impairment write-down of goodwill of $49,813,000, noninterest expenses were $1,533,000
or 4.0 percent higher versus a year ago, totaling $39,457,000. Noninterest expenses during the
second quarter of 2009 included a special assessment imposed by the Federal Deposit Insurance
Corporation (FDIC) totaling $996,000, and deposit
insurance premiums that were $673,000 higher due to the
FDICs deposit insurance premium rates more than doubling. Noninterest expenses in 2009 have been in line with our
expectations and have included $5.0 million of annual expenses reductions implemented and effective
as of January 1, 2009. Salaries, wages and benefits (excluding one-time severance payments)
declined $765,000 or 8.4 percent from a year ago for the second quarter, and were $2.3 million
lower for the first six months compared to the same period in 2008, a result of consolidating
branches and centralization of management by combining markets. Cost reductions were also achieved
in data processing, communications, occupancy, and furniture and equipment expenses, all of which
declined compared to the prior year.
Salaries and wages for the second quarter of 2009 decreased by $667,000 or 9.0 percent to
$6,761,000 compared to the prior year same period, and for the six month period ended June 30,
2009, were $1,714,000 or 11.2 percent lower. Reduced headcount (including the branch
30
consolidations in 2008), and limited accruals for incentive payments due to lower revenues
generated from wealth management and weak lending production were the primary causes of these
decreases in 2009 compared to 2008. As noted in prior management discussions, the Company has
eliminated incentive payouts for senior officers and limited 401K contributions by the Company,
cost savings that will remain in effect until the Company produces meaningful earnings
improvements. Severance payments during the second quarter of 2009 totaled $152,000, which were
$121,000 more than the same period of 2008. Base salaries were $666,000 lower year over year, and
9.7 percent lower than in the second quarter of 2008. Full-time equivalent employees (FTEs)
totaled 420 at June 30, 2009, 12.7 percent less than the 481 FTEs at June 30, 2008.
Employee benefit costs increased $23,000 or 1.3 percent to $1,737,000 from the second quarter of
2008, but were $220,000 or 5.9 percent lower for the six months ended June 30, 2009. The Company
recognized higher claims experience in the second quarter 2009 for its self-funded health care plan
compared to the second quarter of 2008; however, the Company expects employee benefit costs to be
lower in future periods due to lower FTEs resulting in fewer participants in the plan for 2009 and
larger discounts on services under a more comprehensive network of doctors, hospitals, etc. Higher
claims experience resulted in an increase of $285,000 year over year for the second quarter in
group health insurance. Partially offsetting these benefit cost increases, we achieved a $30,000
reduction in payroll taxes year over year and profit sharing accruals for the Companys 401K plan
were reduced by $232,000.
Outsourced data processing costs totaled $1,806,000 for the second quarter of 2009, a decrease of
$177,000 or 8.9 percent from a year ago. For the latest six months, outsourced data processing
costs were 7.5 percent lower year over year. Seacoast National utilizes third parties for its core
data processing systems and merchant services processing. Outsourced data processing costs are
directly related to the number of transactions processed. Merchant income and merchant services
processing costs were lower year over year, with fewer transactions occurring at local businesses
reflecting the poorer economy. See Noninterest Income. Merchant services processing expenses
were $171,000 lower than a year ago for the first quarter and second quarters of 2009, an aggregate
decline of $342,000. Outsourced data processing costs can be expected to increase as the Companys
business volumes grow and new products such as bill pay, internet banking, etc. become more
popular.
Total occupancy, furniture and equipment expenses decreased $93,000 or 3.3 percent to $2,735,000
versus second quarter results last year, and were $181,000 or 3.4 percent lower for the six months
ended June 30, 2009 than in the same period of 2008. This comparison is affected by the sale of
certain assets (including leasehold improvements) at closed WalMart locations, which netted the
Company approximately $90,000 more than the carrying value of the
assets sold in 2008. For the second
quarter of 2009, lease payments for bank premises decreased $111,000 year over year and repair and
maintenance costs declined $38,000, but utility costs were $24,000 higher. Also increasing for the
second quarter year over year was depreciation, which increased by $34,000 reflecting the addition
of newer offices, as well as furniture and equipment acquired over the past 12 months.
Marketing expenses, including sales promotion costs, ad agency production and printing costs,
newspaper and radio advertising, and other public relations costs associated with the Companys
efforts to market products and services, decreased by $450,000 or 51.7 percent to $421,000 when
compared to a year ago for the second quarter. Agency production and media costs (including
newspaper, radio and television) costs were $263,000 lower. In addition, public relations,
business meals, and donations, were $137,000, $36,000 and $29,000, respectively, less than the
second quarter of 2008. Partially offsetting these were direct mail advertising, which was $26,000
higher
31
than a year ago. For the six months ended June 30, 2008, marketing costs were $560,000 or 38.1
percent lower. Included in the six months was an additional $138,000 decline in agency production
costs that occurred year over year for the first quarter of 2009.
Legal and professional fees totaled $1,603,000 for the second quarter of 2009, an increase of
$671,000 or 72.0 percent from the second quarter of 2008. Legal fees were $635,000 higher year
over year and other professional fees were $51,000 higher, primarily due to problem asset
resolution. Regulatory examination fees and CPA fees on an aggregate basis were $15,000 lower for
2009, compared to the second quarter of 2008. Similar to the quarterly comparison, legal and
professional fees were $1,137,000 or 61.2 percent higher in the first six months of 2009 compared
to the same period last year, primarily because of an increase in legal fees of $1,025,000 due to
problem asset resolution.
The FDIC one-time credit for insurance premiums issued in 2007 was applied to reduce insurance
assessments during the first quarter of 2008. As a result, FDIC assessments for the first quarter
of 2008 totaled only $59,000 and for the second of 2008 totaled $392,000, whereas FDIC assessments
for the first quarter and second quarter of 2009 totaled $877,000 and $2,026,000, respectively.
The second quarter 2009 assessment includes a special assessment of $996,000, based upon 5 basis
points of total assets less Tier 1 risk-based capital. In addition, on April 1, 2009 a higher base
assessment went into effect (increasing from 17 basis points to 20 basis points) as well as the
FDICs implementation of a more complex risk-based formula to calculate assessments. FDIC
assessments were mitigated to some degree by Seacoast National working with public fund depositors
to move deposits into sweep repurchase agreements, lessening the amount of deposits subject to the
higher FDIC assessment rates recently approved for 2009. The Company anticipates that FDIC
insurance costs are likely to rise, with more special assessments due to the decline in the FDICs
Deposit Insurance Fund.
Remaining noninterest expenses increased $167,000 or 5.4 percent to $3,259,000 when comparing the
second quarter of 2009 to the same quarter a year ago, and increased $557,000 or 9.8 percent to
$6,245,000 when comparing the first six months of 2009 to the same period in 2008. Benefiting
2008s first quarter was a $130,000 reversal of an accrual for the Companys portion of Visa®
litigation and settlement costs, as a result of Visas successful IPO. Increasing year over year
for the first six months of 2009 were costs associated with managing OREO (up $499,000, principally
related to real estate taxes on OREO), telephone and data lines (up $16,000), correspondent bank
clearing charges (up $93,000, because lower analysis credits provided for compensating balances in
the current lower interest rate environment make the payment of charges more sensible),
directors fees (up $72,000, reflecting more frequent meetings than a year ago), employee placement
fees (up $29,000, principally headhunter fees), and higher losses associated with robbery and
customer fraud (up $295,000). Partially offsetting these were decreases in expenditures for
stationery, printing and supplies (down $58,000), postage and courier costs (down $15,000,
primarily overnight services), insurance costs (down $63,000, including property and casualty as
well as other liability coverage), education (down $60,000, with fewer education programs offered
internally), travel related costs (down $86,000, including mileage reimbursement, airline and hotel
costs), bank paid closing costs (down $62,000, as home equity line costs paid by Seacoast National
have been limited), and origination fees for marine loan production (down $129,000).
INCOME TAXES
Income tax benefits for 2009 were 14.9 percent of loss before taxes, compared to 32.6 percent for
all of 2008. The lower benefit for 2009 results from the no tax benefit attributable to the goodwill impairment of $49.8 million.
32
At the beginning of June 2009, Seacoast National dissolved its subsidiaries, FNB RE Services, Inc.,
which had elected to be taxed as a real estate investment trust, or REIT, and its immediate
parent, FNB Property Holdings, Inc.
FINANCIAL CONDITION
CAPITAL RESOURCES
The Companys ratio of shareholders equity to period end total assets was 6.95 percent at June 30,
2009, compared with 9.33 percent at December 31, 2008, and 8.28 percent one year earlier at June
30, 2008. Seacoasts management uses certain non-GAAP financial measures in its analysis of the Corporations
performance. Seacoasts management uses this measure to assess the quality of capital and believes that
investors may find it useful in their analysis of the Corporation. This capital measure is not
necessarily comparable to similar capital measures that may be presented by other companies.
The Company and its banking subsidiary, Seacoast National, are subject to various general
regulatory policies and requirements relating to the payment of dividends, including requirements
to maintain adequate capital above regulatory minimums. The appropriate federal bank regulatory
authority may prohibit the payment of dividends where it has determined that the payment of
dividends would be an unsafe or unsound practice. The Company is a legal entity separate and
distinct from Seacoast National and its other subsidiaries, and the Companys primary source of
cash and liquidity, other than securities offerings and borrowings, is dividends from its bank
subsidiary. Seacoast National has not paid a dividend to the Company since June 30, 2008. Prior OCC approval presently is required for any payments of
dividends from Seacoast National to the Company.
The Company reduced its dividend payment to shareholders to $0.01 per share beginning in the third
quarter of 2008 through the first quarter of 2009.
Under the National Bank Act, national banks may in any calendar year, without the approval of the
OCC, pay dividends to the extent of net profits for that year, plus retained net profits for the
preceding two years (less any required transfers to surplus). The need to maintain adequate
capital in Seacoast National also limits dividends that may be paid to us. Beginning in the third
quarter of 2008, we reduced our dividend per share of our common stock to $0.01 and, as of May 19,
2009, we have suspended the payment of dividends, as described below. As of December 31, 2008,
Seacoast National cannot pay us any dividends without prior OCC approval, and in all events must
maintain appropriate capital that meets regulatory requirements applicable to us.
The OCC and the Federal Reserve have policies that encourage banks and bank holding companies to
pay dividends from current earnings, and have the general authority to limit the dividends paid by
national banks and bank holding companies, respectively, if such payment may be deemed to
constitute an unsafe or unsound practice. If, in the particular circumstances, either of these
federal regulators determine that the payment of dividends would constitute an unsafe or unsound
banking practice, either the OCC or the Federal Reserve may, among other things, issue a cease and
desist order prohibiting the payment of dividends by Seacoast National or us, respectively. Under
a recently adopted Federal Reserve policy, the board of directors of a bank holding company must
consider different factors to ensure that its dividend level is prudent relative to the
organizations
33
financial position and is not based on overly optimistic earnings scenarios such as any potential
events that may occur before the payment date that could affect its ability to pay, while still
maintaining a strong financial position. As a general matter, the Federal Reserve has indicated
that the board of directors of a bank holding company, such as Seacoast, should consult with the
Federal Reserve and eliminate, defer, or significantly reduce the bank holding companys dividends
if: (i) its net income available to shareholders for the past four quarters, net of dividends
previously paid during that period, is not sufficient to fully fund the dividends; (ii) its
prospective rate of earnings retention is not consistent with the its capital needs and overall
current and prospective financial condition; or (iii) it will not meet, or is in danger of not
meeting, its minimum regulatory capital adequacy ratios.
As a result of our participation in the TARP CPP program, additional restrictions have been imposed
on our ability to declare or increase dividends on shares of our common stock, including a
restriction on paying quarterly dividends above $0.01 per share. Specifically, we are unable to
declare dividend payments on our common, junior preferred or pari passu preferred shares if we are
in arrears on the dividends on the Series A Preferred Stock. Further, without the Treasurys
approval, we are not permitted to increase dividends on our common stock above $0.01 per share
until December 19, 2011 unless all of the Series A Preferred Stock has been redeemed or transferred
by the Treasury. In addition, we cannot repurchase shares of common stock or use proceeds from the
Series A Preferred Stock to repurchase trust preferred securities. The consent of the Treasury
generally is required for us to make any stock repurchase until December 19, 2011 unless all of the
Series A Preferred Stock has been redeemed or transferred by the Treasury to a third party.
Further, our common, junior preferred or pari passu preferred shares may not be repurchased if we
have not declared and paid all Series A Preferred Stock dividends.
On
May 19, 2009, our board of directors decided to suspend regular quarterly cash dividends on
our outstanding common stock and Series A Preferred Stock pursuant to a request from the Federal
Reserve as a result of recently adopted Federal Reserve policies related to dividends and other
distributions. Dividends will be suspended until such time as dividends are allowed by the Federal
Reserve. The Federal Reserve has a policy that it does not want bank holding companies that have
TARP CPP capital to use TARP funds to pay dividends on common or preferred stock or to make
distributions on outstanding trust preferred securities.
In December 2008, the Company sold $50.0 million in Series A Perpetual Preferred Stock and warrants
to purchase Company common stock to the Treasury under the TARP Capital Purchase Program, which
further strengthened the Companys already well-capitalized status. As a result, the Companys
capital position remains strong with a total risk-based capital ratio of 13.41 percent at June 30,
2009, lower than December 31, 2008s ratio of 14.00 percent but higher than 11.42 percent at June
30, 2008.
34
At June 30, 2009, the capital ratios for the Company and its subsidiary, Seacoast National,
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seacoast |
|
Seacoast |
|
Minimum to be |
|
|
(Consolidated) |
|
National |
|
Well Capitalized * |
June 30, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital ratio |
|
|
11.83 |
% |
|
|
11.63 |
% |
|
|
6 |
% |
Total risk-based capital ratio |
|
|
13.41 |
% |
|
|
12.90 |
% |
|
|
10 |
% |
Tier 1 leverage ratio |
|
|
8.29 |
% |
|
|
8.16 |
% |
|
|
5 |
% |
|
|
|
* |
|
For subsidiary bank only |
The Bank has agreed to maintain a Tier 1 capital (to adjusted average assets) ratio of at
least 7.50% and a total risk-based capital ratio of at least 12.00% as of March 31, 2009 with its
primary regulator the Office of the Comptroller of the Current (the OCC). The agreement with the
OCC as to minimum capital ratios does not change the Banks status as well-capitalized for bank
regulatory purposes.
The Companys and Seacoast Nationals risk based capital and required capital may improve in the
future as risk-weighted assets, including problem assets, are reduced. We anticipate further
improvements in our capital ratios through reductions in our risk-based asset levels, and are
seeking more capital through sales of Company common stock and other securities.
We have a shelf registration statement on file with the Securities and Exchange Commission, or
SEC, covering a wide variety of securities. As a result of the suspension of dividends on our
outstanding Series A preferred stock we cannot utilize that shelf registration statement. On June
22, 2009, we filed a registration statement on SEC Form S-1 for an indeterminate amount of common
stock. We are pursuing this offering of our common stock to enhance the amount and quality of our
capital.
LOAN PORTFOLIO
Total loans (net of unearned income) were $1,584,340,000 at June 30, 2009, $224,447,000 or 12.4
percent less than at June 30, 2008, and $92,388,000 or 5.5 percent less than at December 31, 2008.
The following table details loan portfolio composition at June 30, 2009, December 31, 2008 and June
30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
Dec. 31, |
|
June 30, |
(In thousands) |
|
2009 |
|
2008 |
|
2008 |
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
96,675 |
|
|
$ |
129,899 |
|
|
$ |
246,039 |
|
Commercial |
|
|
166,818 |
|
|
|
209,297 |
|
|
|
227,165 |
|
|
|
|
|
|
|
263,493 |
|
|
|
339,196 |
|
|
|
473,204 |
|
Individuals |
|
|
44,215 |
|
|
|
56,047 |
|
|
|
67,079 |
|
|
|
|
|
|
|
307,708 |
|
|
|
395,243 |
|
|
|
540,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
328,024 |
|
|
|
328,992 |
|
|
|
318,820 |
|
Fixed rate |
|
|
90,579 |
|
|
|
95,456 |
|
|
|
90,189 |
|
Home equity mortgages |
|
|
83,788 |
|
|
|
84,810 |
|
|
|
93,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
Dec. 31, |
|
June 30, |
(In thousands) |
|
2009 |
|
2008 |
|
2008 |
|
Home equity lines |
|
|
60,148 |
|
|
|
58,502 |
|
|
|
59,430 |
|
|
|
|
|
|
|
562,539 |
|
|
|
567,760 |
|
|
|
561,549 |
|
Commercial real estate |
|
|
572,772 |
|
|
|
557,705 |
|
|
|
535,683 |
|
|
|
|
|
|
|
1,135,311 |
|
|
|
1,125,465 |
|
|
|
1,097,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and financial |
|
|
71,836 |
|
|
|
82,765 |
|
|
|
94,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to individuals |
|
|
69,165 |
|
|
|
72,908 |
|
|
|
76,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other loans |
|
|
320 |
|
|
|
347 |
|
|
|
362 |
|
|
|
|
Total |
|
$ |
1,584,340 |
|
|
$ |
1,676,728 |
|
|
$ |
1,808,787 |
|
|
Overall loan growth was negative when comparing outstanding balances at June 30, 2009 to June 30,
2008, as a result of the economic recession, including lower demand for commercial loans, and the
Companys successful divestiture of residential construction and land development loans (including
$38 million and $29 million that were sold during the third and fourth quarters of 2008,
respectively). By reducing the Companys exposure to residential construction and development
loans, the overall risk profile has been improved, we seek better earnings performance and reduced
risk in future quarters.
As shown in the table above, commercial real estate mortgage loans increased $37,089,000 or 6.9
percent from June 30, 2008 to $572,772,000 at June 30, 2009 while residential mortgage loans
combined increased $990,000 to $562,539,000. More than offsetting the net increase in real estate
mortgages were declines from June 30, 2008 in residential construction and land development loans
of $149,364,000 or 60.7 percent to $96,675,247 at June 30, 2009, commercial construction and land
development loans of $60,347,000 or 26.6 percent to $166,818,000, residential construction and lot
loans to individuals of $22,864,000 or 34.1 percent to $44,215,000, commercial and financial loans
of $22,976,000 or 24.2 percent to $71,836,000, and installment loans to individuals of $6,933,000
or 9.1 percent to $69,165,000 at June 30, 2009.
Construction and land development loans, including loans secured by commercial real estate, were
comprised of the following types of loans at June 30, 2009 and June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
2009 |
|
2008 |
(In millions) |
|
Funded |
|
Unfunded |
|
Total |
|
Funded |
|
Unfunded |
|
Total |
|
Construction and land development* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
16.8 |
|
|
$ |
0.3 |
|
|
$ |
17.1 |
|
|
$ |
47.4 |
|
|
$ |
4.7 |
|
|
$ |
52.1 |
|
Town homes |
|
|
2.3 |
|
|
|
|
|
|
|
2.3 |
|
|
|
20.0 |
|
|
|
1.8 |
|
|
|
21.8 |
|
Single family residences |
|
|
16.7 |
|
|
|
1.7 |
|
|
|
18.4 |
|
|
|
49.5 |
|
|
|
7.4 |
|
|
|
56.9 |
|
Single family land & lots |
|
|
43.3 |
|
|
|
0.1 |
|
|
|
43.4 |
|
|
|
95.1 |
|
|
|
12.1 |
|
|
|
107.2 |
|
Multifamily |
|
|
17.6 |
|
|
|
|
|
|
|
17.6 |
|
|
|
34.0 |
|
|
|
13.0 |
|
|
|
47.0 |
|
|
|
|
|
|
|
96.7 |
|
|
|
2.1 |
|
|
|
98.8 |
|
|
|
246.0 |
|
|
|
39.0 |
|
|
|
285.0 |
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
13.8 |
|
|
|
0.6 |
|
|
|
14.4 |
|
|
|
31.1 |
|
|
|
3.2 |
|
|
|
34.3 |
|
Retail trade |
|
|
55.9 |
|
|
|
2.0 |
|
|
|
57.9 |
|
|
|
63.6 |
|
|
|
10.1 |
|
|
|
73.7 |
|
Land |
|
|
51.2 |
|
|
|
0.2 |
|
|
|
51.4 |
|
|
|
75.4 |
|
|
|
14.2 |
|
|
|
89.6 |
|
Industrial |
|
|
8.5 |
|
|
|
0.3 |
|
|
|
8.8 |
|
|
|
20.8 |
|
|
|
1.8 |
|
|
|
22.6 |
|
Healthcare |
|
|
6.0 |
|
|
|
3.0 |
|
|
|
9.0 |
|
|
|
1.0 |
|
|
|
|
|
|
|
1.0 |
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
2009 |
|
2008 |
(In millions) |
|
Funded |
|
Unfunded |
|
Total |
|
Funded |
|
Unfunded |
|
Total |
|
Churches & educational
facilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
|
|
0.4 |
|
|
|
0.5 |
|
Lodging |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience stores |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marina |
|
|
30.0 |
|
|
|
2.2 |
|
|
|
32.2 |
|
|
|
28.9 |
|
|
|
5.5 |
|
|
|
34.4 |
|
Other |
|
|
1.4 |
|
|
|
|
|
|
|
1.4 |
|
|
|
6.3 |
|
|
|
2.0 |
|
|
|
8.3 |
|
|
|
|
|
|
|
166.8 |
|
|
|
8.3 |
|
|
|
175.1 |
|
|
|
227.2 |
|
|
|
37.2 |
|
|
|
264.4 |
|
|
|
|
|
|
|
263.5 |
|
|
|
10.4 |
|
|
|
273.9 |
|
|
|
473.2 |
|
|
|
76.2 |
|
|
|
549.4 |
|
Individuals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
32.4 |
|
|
|
|
|
|
|
32.4 |
|
|
|
40.0 |
|
|
|
|
|
|
|
40.0 |
|
Construction |
|
|
11.8 |
|
|
|
6.1 |
|
|
|
17.9 |
|
|
|
27.1 |
|
|
|
12.2 |
|
|
|
39.3 |
|
|
|
|
|
|
|
44.2 |
|
|
|
6.1 |
|
|
|
50.3 |
|
|
|
67.1 |
|
|
|
12.2 |
|
|
|
79.3 |
|
|
|
|
Total |
|
$ |
307.7 |
|
|
$ |
16.5 |
|
|
$ |
324.2 |
|
|
$ |
540.3 |
|
|
$ |
88.4 |
|
|
$ |
628.7 |
|
|
|
|
|
* |
|
Reassessment of collateral assigned to a particular loan over time may result in amounts
being reassigned to a more appropriate loan type representing the loans intended purpose, and for
comparison purposes prior period amounts have been restated to reflect the change. |
The following is the geographic location of the Companys construction and land development loans
(excluding loans to individuals) totaling $263,493,000 at June 30, 2009 and $473,204,000 at June
30, 2008:
|
|
|
|
|
|
|
|
|
|
|
% of Total Construction |
|
|
and Land Development |
Florida County |
|
Loans |
|
|
2009 |
|
2008 |
St. Lucie |
|
|
21.9 |
|
|
|
15.1 |
|
Palm Beach |
|
|
20.7 |
|
|
|
16.5 |
|
Indian River |
|
|
10.7 |
|
|
|
15.5 |
|
Brevard |
|
|
8.4 |
|
|
|
7.9 |
|
Orange |
|
|
7.3 |
|
|
|
6.9 |
|
Miami-Dade |
|
|
6.5 |
|
|
|
2.0 |
|
Highlands |
|
|
5.9 |
|
|
|
3.3 |
|
Martin |
|
|
5.6 |
|
|
|
12.3 |
|
Volusia |
|
|
5.3 |
|
|
|
4.3 |
|
Broward |
|
|
2.3 |
|
|
|
1.1 |
|
Okeechobee |
|
|
1.5 |
|
|
|
1.6 |
|
Collier |
|
|
1.1 |
|
|
|
0.5 |
|
Charlotte |
|
|
0.9 |
|
|
|
0.6 |
|
Marion |
|
|
0.8 |
|
|
|
0.4 |
|
Hendry |
|
|
0.6 |
|
|
|
0.3 |
|
Lake |
|
|
0.2 |
|
|
|
0.6 |
|
Bradford |
|
|
0.0 |
|
|
|
0.6 |
|
Dade |
|
|
0.0 |
|
|
|
3.2 |
|
Osceola |
|
|
0.0 |
|
|
|
3.4 |
|
Lee |
|
|
0.0 |
|
|
|
3.2 |
|
Other |
|
|
0.3 |
|
|
|
0.7 |
|
|
|
|
Total |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
37
The Companys ten largest commercial real estate funded and unfunded loan relationships at June 30,
2009 aggregated to $199.3 million (versus $237.1 million a year ago) and for the top 44 commercial
real estate relationships in excess of $5 million the aggregate funded and unfunded totaled $471.7
million (compared to 62 relationships aggregating to $688.0 million a year ago).
Commercial real estate mortgage loans, excluding construction and development loans, were comprised
of the following loan types at June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30 |
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
(In millions) |
|
Funded |
|
Unfunded |
|
Total |
|
Funded |
|
Unfunded |
|
Total |
|
Office buildings |
|
$ |
141.6 |
|
|
$ |
2.2 |
|
|
$ |
143.8 |
|
|
$ |
142.3 |
|
|
$ |
2.4 |
|
|
$ |
144.7 |
|
Retail trade |
|
|
120.0 |
|
|
|
0.8 |
|
|
|
120.8 |
|
|
|
93.5 |
|
|
|
1.1 |
|
|
|
94.6 |
|
Industrial |
|
|
93.0 |
|
|
|
2.0 |
|
|
|
95.0 |
|
|
|
93.3 |
|
|
|
1.4 |
|
|
|
94.7 |
|
Healthcare |
|
|
30.9 |
|
|
|
0.6 |
|
|
|
31.5 |
|
|
|
33.6 |
|
|
|
0.8 |
|
|
|
34.4 |
|
Churches and
educational
facilities |
|
|
34.6 |
|
|
|
0.1 |
|
|
|
34.7 |
|
|
|
36.5 |
|
|
|
0.1 |
|
|
|
36.6 |
|
Recreation |
|
|
1.4 |
|
|
|
0.4 |
|
|
|
1.8 |
|
|
|
1.8 |
|
|
|
0.4 |
|
|
|
2.2 |
|
Multifamily |
|
|
31.7 |
|
|
|
0.7 |
|
|
|
32.4 |
|
|
|
19.1 |
|
|
|
1.0 |
|
|
|
20.1 |
|
Mobile home parks |
|
|
5.6 |
|
|
|
|
|
|
|
5.6 |
|
|
|
3.1 |
|
|
|
|
|
|
|
3.1 |
|
Lodging |
|
|
26.3 |
|
|
|
0.4 |
|
|
|
26.7 |
|
|
|
28.0 |
|
|
|
|
|
|
|
28.0 |
|
Restaurant |
|
|
5.1 |
|
|
|
|
|
|
|
5.1 |
|
|
|
9.0 |
|
|
|
0.1 |
|
|
|
9.1 |
|
Agriculture |
|
|
11.8 |
|
|
|
1.0 |
|
|
|
12.8 |
|
|
|
9.0 |
|
|
|
0.5 |
|
|
|
9.5 |
|
Convenience
Stores |
|
|
23.2 |
|
|
|
|
|
|
|
23.2 |
|
|
|
24.9 |
|
|
|
|
|
|
|
24.9 |
|
Other |
|
|
47.6 |
|
|
|
0.6 |
|
|
|
48.2 |
|
|
|
41.6 |
|
|
|
1.1 |
|
|
|
42.7 |
|
|
|
|
Total |
|
$ |
572.8 |
|
|
$ |
8.8 |
|
|
$ |
581.6 |
|
|
$ |
535.7 |
|
|
$ |
8.9 |
|
|
$ |
544.6 |
|
|
Fixed rate and adjustable rate loans secured by commercial real estate, excluding construction
loans, totaled approximately $338 million and $235 million, respectively, at June 30, 2009,
compared to $303 million and $233 million, respectively, a year ago.
Residential mortgage lending is an important segment of the Companys lending activities. The
Company has never offered sub-prime, Alt A, Option ARM or any negative amortizing residential
loans, programs or products, although we have originated and hold residential mortgage loans from
borrowers with original or current FICO scores that are less than prime FICO credit scores.
Substantially all residential originations have been underwritten to conventional loan agency
standards, including loans having balances that exceed agency value limitations. The Company
selectively adds residential mortgage loans to its portfolio, primarily loans with adjustable
rates.
Exposure to market interest rate volatility with respect to long-term fixed rate mortgage loans
held for investment is managed by attempting to match maturities and re-pricing opportunities and
through loan sales of most fixed rate product. At June 30, 2009, approximately $328 million or 65
percent of the Companys residential mortgage loan balances were adjustable, compared to $319
million or 64 percent a year ago. Loans secured by residential properties having fixed rates
totaled approximately $174 million at June 30, 2009, of which 15- and 30-year mortgages totaled
approximately $33 million and $58 million, respectively. The remaining fixed rate balances were
38
comprised of home improvement loans, most with maturities of 10 years or less. The Company also
has a small home equity line portfolio totaling approximately $60 million at June 30, 2009. In
comparison, loans secured by residential properties having fixed rates totaled approximately $183
million at June 30, 2008, with 15- and 30-year fixed rate residential mortgages totaling
approximately $37 million and $51 million, respectively.
Commercial loans decreased and totaled $71,836,000 at June 30, 2009, compared to $94,812,000 a year
ago. Commercial lending activities are directed principally towards businesses whose demand for
funds are within the Companys lending limits, such as small- to medium-sized professional firms,
retail and wholesale outlets, and light industrial and manufacturing concerns. Such businesses are
smaller and subject to the risks of lending to small to medium sized businesses, including, but not
limited to, the effects of a sluggish local economy, possible business failure, and insufficient
cash flows.
The Company also provides consumer loans (including installment loans, loans for automobiles,
boats, and other personal, family and household purposes, and indirect loans through dealers to
finance automobiles) totaling $69,165,000 (versus $76,098,000 a year ago), real estate construction
loans to individuals secured by residential properties totaling $11,830,000 (versus $27,129,000 a
year ago), and residential lot loans to individuals totaling $32,385,000 (versus $39,950,000 a year
ago).
At June 30, 2009, the Company had commitments to make loans (excluding unused home equity lines of
credit) of $112,008,000, compared to $197,473,000 at June 30, 2008.
Supplemental
trend schedules with details regarding line items have been added
to show changes in the composition of loans outstanding by quarter since the end of 2006. See
Supplemental Tables.
ALLOWANCE FOR LOAN LOSSES
Management continuously monitors the quality of the loan portfolio and maintains an allowance for
loan losses it believes sufficient to absorb probable losses inherent in the loan portfolio. The
allowance for loan losses totaled $43,618,000 at June 30, 2009, $11,921,000 greater than one year
earlier and $14,230,000 more than at December 31, 2008. The allowance for loan losses framework
has three basic elements: specific allowances for loans individually evaluated for impairment, a
formula-based component for pools of homogeneous loans within the portfolio that have similar risk
characteristics, which are not individually evaluated, and qualitative elements which are
subjective and require a high degree of management judgment and are based on our views of other
inherent risk factors, models and estimates, including changes in the economy and relevant markets.
Management continually evaluates the allowance for loan losses methodology seeking to refine and
enhance this process as appropriate, and it is likely that the methodology will continue to evolve
over time.
Our analyses of the adequacy of the allowance for loan losses take into account qualitative factors
such as credit quality, loan concentrations, internal controls, audit results, staff turnover,
local market conditions and loan growth. In its continuing evaluation of the allowance and its
adequacy, management also considers quantitative factors such as, the Companys loan loss
experience, the loss experience of peer banks, the amount of past due and nonperforming loans, and
the estimated values of loan collateral. Commercial and commercial real estate loans are assigned
internal risk ratings reflecting our estimate of the probability of the borrower defaulting on any
obligation and
39
the estimated probable loss in the event of default. Retail credit risk is measured from a
portfolio view rather than by specific borrower and such credits are assigned internal risk
rankings reflecting the combined probability of default and loss. The Companys independent Credit
Administration Department assigns allowance factors to the individual internal risk ratings based
on an estimate of the risk using a variety of tools and information. Loan Review is an independent
unit that performs loan reviews and evaluates a representative sample of credit extensions after
the fact for appropriate individual internal risk ratings. Loan Review has the authority to change
internal risk ratings and is responsible for assessing the adequacy of credit underwriting. This
unit reports directly to the Directors Loan Committee of Seacoast Nationals Board of Directors.
The allowance as a percentage of loans outstanding has increased from 1.75 percent at June 30, 2008
and December 31, 2008, and to 2.75 percent at June 30, 2009. The allowance for loan losses
represents managements estimate of an amount adequate in relation to the risk of losses inherent
in the loan portfolio.
During 2009, net charge-offs totaled $8,540,000 in the first quarter and $15,109,000 in the second
quarter, a total of $23,649,000 for the six month period ended June 30, 2009. Net charge-offs over
the six-month period consisted of $10,860,000 in net charge-offs related to nonperforming
construction and land development loans, $10,733,000 in net charge-offs for residential real estate
mortgages, $618,000 in net charge-offs related to commercial real estate mortgages, $663,000 in
charge-offs for commercial and financial loans, and $775,000 in net charge-offs for installment
loans to individuals. A year ago, net charge-offs of $37,942,000 were recorded during the first
six months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009 |
|
June 30, 2008 |
|
|
|
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
|
|
|
Net |
Six Months Ended |
|
Charge- |
|
|
|
|
|
Charge- |
|
Charge- |
|
|
|
|
|
Charge- |
(In thousands) |
|
Offs |
|
Recoveries |
|
Offs |
|
Offs |
|
Recoveries |
|
Offs |
|
Construction and land
development |
|
$ |
11,252 |
|
|
$ |
(392 |
) |
|
$ |
10,860 |
|
|
$ |
36,503 |
|
|
$ |
(7 |
) |
|
$ |
36,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
mortgages |
|
|
10,797 |
|
|
|
(64 |
) |
|
|
10,733 |
|
|
|
441 |
|
|
|
|
|
|
|
441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
mortgages |
|
|
629 |
|
|
|
(11 |
) |
|
|
618 |
|
|
|
485 |
|
|
|
|
|
|
|
485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and financial |
|
|
713 |
|
|
|
(50 |
) |
|
|
663 |
|
|
|
484 |
|
|
|
(116 |
) |
|
|
368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to
individuals |
|
|
866 |
|
|
|
(91 |
) |
|
|
775 |
|
|
|
178 |
|
|
|
(26 |
) |
|
|
152 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
24,257 |
|
|
$ |
(608 |
) |
|
$ |
23,649 |
|
|
$ |
38,091 |
|
|
$ |
(149 |
) |
|
$ |
37,942 |
|
|
Concentrations of credit risk, discussed under Loan Portfolio of this discussion and analysis,
can affect the level of the allowance and may involve loans to one borrower, an affiliated group of
borrowers, borrowers engaged in or dependent upon the same industry, or a group of borrowers whose
loans are predicated on the same type of collateral. The Companys significant concentration of
credit is a portfolio of loans secured by real estate. At June 30, 2009, the Company had $1.443
billion in loans secured by real estate, representing 91.1 percent of total loans, up slightly from
90.5 percent at June 30, 2008. In addition, the Company is subject to a geographic concentration
of
40
credit because it only operates in central and southeastern Florida. The Company has a credit
exposure to commercial real estate developers and investors with total commercial real estate
construction and land development loans of $263 million or 16.6 percent of total loans at June 30,
2009, down from $473 million or 26.2 percent at June 30, 2008. The Companys exposure to these
credits is secured by project assets and personal guarantees. The exposure to this industry group,
together with an assessment of current trends and expected future financial performance, are
considered in our evaluation of the adequacy of the allowance for loan losses.
While it is the Companys policy to charge off in the current period loans in which a loss is
considered probable, there are additional risks of future losses that cannot be quantified
precisely or attributed to particular loans or classes of loans. Because these risks include the
state of the economy, borrower payment behaviors and local market conditions as well as conditions
affecting individual borrowers, managements 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 that
must be charged off and to assess the risk characteristics of the portfolio in 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. Our bank regulators have
generally agreed with our credit assessments, however the regulators could seek additional
provisions to our allowance for loan losses and additional capital in light of the risks of our
markets and credits.
Seacoast National entered into a formal agreement with the OCC on December 16, 2008 to improve its
asset quality. Under the formal agreement, Seacoast Nationals board of directors appointed a
compliance committee to monitor and coordinate Seacoast Nationals performance under the formal
agreement. The formal agreement provides for the development and implementation of written
programs to reduce Seacoast Nationals credit risk, monitor and reduce the level of criticized
assets, and manage commercial real estate loan (CRE) concentrations in light of current adverse
CRE market conditions. The Company believes it has complied with this Agreement.
NONPERFORMING ASSETS
Nonperforming assets at June 30, 2009 totaled $150,017,000 and are comprised of $126,758,000 of
nonaccrual loans and $23,259,000 of other real estate owned
(OREO), compared to $92,005,000 at December 31, 2008 (comprised
of $86,970,000 in nonaccrual loans and $5,035,000 of OREO) and $80,771,000 at June 30, 2008
(comprised of $76,224,000 of nonaccrual loans and $4,547,000 of OREO). At June 30, 2009, virtually
all nonaccrual loans were secured with real estate, including $63.6 million of nonaccrual loans
that are land and acquisition and development loans related to the residential market. At June 30,
2009, nonaccrual loans have been written down by approximately $36.2 million or 24 percent of the
original loan balance (including specific impairment reserves). OREO has
increased as problem loans have migrated to foreclosure and then liquidation.
During 2008 and 2007, loan sales totaled $119 million at an average price of approximately 64
percent of outstanding loan balance sold. Prospectively, the Company anticipates loan sales will
likely play a lesser role in connection with loss mitigation efforts as we shift our focus to other
41
strategies, including troubled debt restructurings, where appropriate. The increase in nonaccrual
loans of $39.8 million since year-end 2008 is in part due to stressed market conditions and also a
ramping up of efforts to pursue troubled debt restructurings with commercial and retail mortgage
borrowers during 2009. The Company pursues loan restructurings in selected cases where it is
expected to receive better liquidation values than may be expected through other traditional
collection activities. Also, during the first and second quarters of 2009, the Company worked with
retail mortgage customers, when possible, to achieve lower payment structures in an effort to avoid
foreclosure. A total of 102 applications were received seeking
restructured residential mortgages
during the second quarter of 2009, compared to 93 applications received during the first quarter of
2009 and 37 in the fourth quarter of 2008. Troubled debt restructurings are part of the Companys
loss mitigation activities and can include rate reductions, payment extensions and principal
deferment. Company policy requires troubled debt restructures be classified as nonaccrual loans
until (under certain circumstances) performance can be verified
(typically six months). Some troubled debt restructurings that have
never been past due continue as accruing loans. Troubled
debt restructurings included in nonperforming loans totaled $33.4 million at June 30, 2009, of
which $32.4 million were performing in accordance with their restructured terms. Accruing
restructured loans totaled $14.8 million at June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual Loans |
|
Accruing |
June 30, 2009 |
|
Non- |
|
Per- |
|
|
|
|
|
Restructured |
(In thousands) |
|
Current |
|
forming |
|
Total |
|
Loans |
|
Construction and land
development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
39,235 |
|
|
$ |
24,353 |
|
|
$ |
63,588 |
|
|
$ |
|
|
Commercial |
|
|
2,135 |
|
|
|
|
|
|
|
2,135 |
|
|
|
|
|
Individuals |
|
|
6,457 |
|
|
|
240 |
|
|
|
6,697 |
|
|
|
973 |
|
|
|
|
|
|
|
|
|
47,827 |
|
|
|
24,593 |
|
|
|
72,420 |
|
|
|
973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
mortgages |
|
|
20,190 |
|
|
|
13,169 |
|
|
|
33,359 |
|
|
|
9,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
mortgages |
|
|
13,473 |
|
|
|
6,211 |
|
|
|
19,684 |
|
|
|
3,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and financial |
|
|
223 |
|
|
|
107 |
|
|
|
330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to
individuals |
|
|
132 |
|
|
|
833 |
|
|
|
965 |
|
|
|
762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
81,845 |
|
|
$ |
44,913 |
|
|
$ |
126,758 |
|
|
$ |
14,789 |
|
|
No assurance can be given that nonperforming assets will not in fact increase or otherwise change.
Nonperforming assets are subject to changes in the economy, both nationally and locally, changes in
monetary and fiscal policies, changes in borrowers payment behaviors and changes in conditions
affecting various borrowers from the Companys subsidiary bank.
SECURITIES
At June 30, 2009 the Company had, $337,746,000 in securities available for sale, and securities
held for investment carried at $22,299,000. The Companys securities portfolio increased
$74,334,000 or 26.0 percent from June 30, 2008, and $14,144,000 or 4.1 percent from December 31,
2008.
42
The Company manages its interest rate risk by targeting an average duration for the securities
portfolio and through the acquisition of securities returning principal monthly that can be
reinvested. Mortgage backed securities and collateralized mortgage obligations comprise
$348,907,000 of total securities, almost 97 percent of the portfolio. Remaining securities are
largely comprised of U.S. Treasury, U.S. Government agency securities and tax-exempt bonds issued
by states, counties and municipalities.
Federal funds sold and interest bearing deposits (aggregated) totaled $43,632,000 and $24,792,000
at June 30, 2009 and 2008, respectively, and were lower when compared to $105,190,000 outstanding
at December 31, 2008, which reflects a normal seasonal decline.
At June 30, 2009, available for sale securities had gross losses of $4,122,000 and gross gains of
$8,302,000, compared to gross losses of $1,556,000 and gross gains of $2,113,000 at June 30, 2008.
All of the securities with unrealized losses are reviewed for other-than-temporary impairment at
least quarterly. As a result of these reviews in the first and second quarters of 2009, it was
determined that no impairment charges related to securities owned with unrealized losses were
deemed other than temporarily impaired since the Company has the present intent and ability to
retain these securities until recovery. (See additional discussion on pages 19 and 20 concerning
Fair Value and Other than Temporary Impairment of Securities.)
Company management considers the overall quality of the securities portfolio to be high. The
Company has no exposure to securities with subprime collateral and had no Fannie Mae or Freddie Mac
preferred stock when these entities were placed in conservatorship. The Company holds no interests
in trust preferred securities.
DEPOSITS AND BORROWINGS
Total deposits decreased $133,979,000 or 7.1 percent to $1,756,422,000 at June 30, 2009 compared to
one year earlier, reflecting declines in deposits of $144 million in the Companys central Florida
region during 2008 as a result of reduced construction and development activities during 2008. In
addition, approximately $100 million of public fund deposits
from local municipalities converted
to sweep repurchase agreements purposefully, to mitigate higher FDIC insurance costs. Since June
30, 2008, interest bearing deposits (NOW, savings and money markets deposits) decreased
$158,259,000 or 16.9 percent to $780,386,000 and noninterest bearing demand deposits decreased
$29,251,000 or 9.3 percent to $284,326,000. Certificates of deposit, or CDs, increased
$53,531,000 or 8.4 percent to $691,710,000 over the past twelve months, including the addition of
brokered time deposits totaling $64,244,000 at June 30, 2009, of
which $15,259,000 are
attributable to CDARs. The Company joined the CDARs program effective July 1, 2008, to provide
large balance depositors access to full insurance coverage for their funds via CDs exchanged
between participating FDIC-insured financial institutions. Funds deposited under the CDARs program
are required to be classified as brokered deposits on the Companys balance sheet. With interest
rates higher on CDs, shifts from lower cost (or no cost) deposit products to CDs occurred during
2008 as local competitors with higher loan to deposit ratios aggressively increased rates seeking
needed funding for their institutions. During this period of time, Seacoast was more cautious with
regards to the pricing of CDs and has continued to follow this strategy.
Although total deposits decreased since year-end 2008 (by $54.0 million), the mix of deposits has
improved, with CDs declining by $41.3 million and lower cost NOW and Savings interest-bearing
deposits decreasing modestly, and noninterest bearing demand deposits increasing $9.1 million.
43
The decline in CDs was principally in brokered CDs, which declined $36.2 million since year-end
2008 to $64.2 million at June 30, 2009. Also declining were higher rate money market accounts.
The Company continues to utilize a focused retail deposit growth strategy that has successfully
generated core deposit relationships and increased services per household. A total of 7,072 new
households have added 8,928 new personal checking accounts over the last twelve months. In
addition, the new relationships have increased their balances at account opening during the first
six months by 36 percent to an average of $24,850.
Some of the declines in deposits, other than seasonal changes, were due to our increases in
repurchase agreements. Repurchase agreement balances increased over the past twelve months by
$15,019,000 or 17.3 percent to $101,849,000 at June 30, 2009. Repurchase agreements are offered by
Seacoast National to select customers who wish to sweep excess balances on a daily basis for
investment purposes. Public fund depositors that switched from deposits to sweep repurchase
agreements were the primary cause for the increase year over year. At June 30, 2009, the number of
sweep repurchase accounts was 222, compared to 243 a year ago. While the Company utilizes federal
funds purchased from time to time during temporary gaps between funding and payments, and during
seasonal months in the summer when deposits tend to decrease, no federal funds purchased were
outstanding at June 30, 2009 and 2008.
OFF-BALANCE SHEET TRANSACTIONS
In the normal course of business, we engage in a variety of financial transactions that, under
generally accepted accounting principles, either are not recorded on the balance sheet or are
recorded on the balance sheet in amounts that differ from the full contract or notional amounts.
These transactions involve varying elements of market, credit and liquidity risk.
The two primary off-balance sheet transactions the Company has engaged in are:
|
|
|
to manage exposure to interest rate risk (derivatives); and |
|
|
|
|
to facilitate customers funding needs or risk management objectives
(commitments to extend credit and standby letters of credit). |
Derivative transactions are often measured in terms of a notional amount, but this amount is not
recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the
risk profile of the instruments. The notional amount is not usually exchanged, but is used only as
the basis upon which interest or other payments are calculated.
The derivatives the Company uses to manage exposure to interest rate risk are interest rate swaps.
All interest rate swaps are recorded on the balance sheet at fair value with realized and
unrealized gains and losses included either in the results of operations or in other comprehensive
income, depending on the nature and purpose of the derivative transaction.
The credit risk of these transactions is managed by establishing a credit limit for counterparties
and through collateral agreements. The fair value of interest rate swaps recorded in the balance
sheet at June 30, 2009 included derivative product assets of $172,000. In comparison, at June 30,
2008 derivative product assets of $85,000 were outstanding.
Lending commitments include unfunded loan commitments and standby and commercial letters of credit.
A large majority of loan commitments and standby letters of credit expire without
44
being funded, and accordingly, total contractual amounts are not representative of our actual
future credit exposure or liquidity requirements. Loan commitments and letters of credit expose
the Company to credit risk in the event that the customer draws on the commitment and subsequently
fails to perform under the terms of the lending agreement.
Loan commitments to customers are made in the normal course of our commercial and retail lending
businesses. For commercial customers, loan commitments generally take the form of revolving credit
arrangements. For retail customers, loan commitments generally are lines of credit secured by
residential property. These instruments are not recorded on the balance sheet until funds are
advanced under the commitment. For loan commitments, the contractual amount of a commitment
represents the maximum potential credit risk that could result if the entire commitment had been
funded, the borrower had not performed according to the terms of the contract, and no collateral
had been provided. Loan commitments were $165 million at June 30, 2009 and $258 million at June
30, 2008.
INTEREST RATE SENSITIVITY
Fluctuations in interest rates may result in changes in the fair value of the Companys financial
instruments, cash flows and net interest income. This risk is managed using simulation modeling to
calculate the most likely interest rate risk utilizing estimated loan and deposit growth. The
objective is to optimize the Companys financial position, liquidity, and net interest income while
limiting their volatility.
Senior management regularly reviews the overall interest rate risk position and evaluates
strategies to manage the risk. The Company has determined that an acceptable level of interest
rate risk would be for net interest income to fluctuate no more than 6 percent given a parallel
change in interest rates (up or down) of 200 basis points. The Companys most recent Asset and
Liability Management Committee (ALCO) model simulation indicates net interest income would
decrease 3.5 percent if interest rates gradually rise 200 basis points over the next 12 months and
1.7 percent if interest rates gradually rise 100 basis points.
The Company had a negative gap position based on contractual and prepayment assumptions for the
next 12 months, with a negative cumulative interest rate sensitivity gap as a percentage of total
earning assets of 19 percent at December 31, 2008. For 2009, our most recent gap analysis
indicates the gap is more negative at 31 percent.
The computations of interest rate risk do not necessarily include certain actions management may
undertake to manage this risk in response to changes in interest rates. Derivative financial
instruments, such as interest rate swaps, options, caps, floors, futures and forward contracts may
be utilized as components of the Companys risk management profile.
LIQUIDITY MANAGEMENT
Liquidity planning and management are necessary to ensure the ability to fund operation costs
effectively and to meet current and future potential obligations such as loan commitments and
unexpected deposit outflows. The Company has the ability to purchase funds
from correspondent banks and routinely use securities and loans as collateral for secured
borrowings. In the event of severe market disruptions, we have access to secured borrowings
through the FHLB and the Federal Reserve Bank of Atlanta.
45
Contractual maturities for assets and liabilities are reviewed to meet 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 held for sale and federal funds sold. The Company also has access to borrowed funds
such as federal funds and FHLB lines of credit and during 2008 pledged collateral to the Federal
Reserve Bank of Atlanta under its borrower-in-custody program to establish a line of credit through
the discount window. The Company is also able to provide short term financing of its activities by
selling, under an agreement to repurchase, United States Treasury and Government agency securities
not pledged to secure public deposits or trust funds. At June 30, 2009, Seacoast National had
available lines of credit of $379 million. Seacoast National had $29 million of United States
Treasury and Government agency securities and mortgage backed securities not pledged and available
for use under repurchase agreements, and had an additional $203 million in residential and
commercial real estate loans available as collateral.
Liquidity, as measured in the form of cash and cash equivalents (including federal funds sold and
interest bearing deposits), totaled $75,652,000 on a consolidated basis at June 30, 2009 as
compared to $70,287,000 at June 30, 2008. The composition of cash and cash equivalents has changed
from a year ago. Over the past twelve months, cash and due from banks declined $13,475,000 or 29.6
percent while federal funds sold and interest bearing deposits increased $18,840,000 to
$43,632,000. 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 Seacoast Nationals securities portfolio and loan portfolio.
The Company is a legal entity separate and distinct from Seacoast National and its other
subsidiaries. Various legal limitations, including Section 23A of the Federal Reserve Act and
Federal Reserve Regulation W, restrict Seacoast National from lending or otherwise supplying funds
to the Company or its non-bank subsidiaries. The Company has traditionally relied upon dividends
from Seacoast National and securities offerings to provide funds to
pay the Companys expenses, to
service the Companys debt and to pay dividends upon Company common stock. Seacoast National
cannot currently pay dividends to the Company without prior OCC approval. At June 30, 2009, the
Company had cash and cash equivalents at the parent of approximately
$8 million, and had
suspended all dividends upon its Series A preferred stock and its common stock, and had deferred
distributions on its subordinated debt related to trust preferred securities issued through
affiliated trusts. See Financial Condition Capital Resources on page 34.
EFFECTS OF INFLATION AND CHANGING PRICES
The condensed consolidated financial statements and related financial data presented herein have
been prepared in accordance with U. S. 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 institutions performance than the general level of inflation. However, inflation
affects financial institutions by increasing their cost of goods and services purchased, as well as
the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related
increases in interest rates generally decrease the market value of investments and loans held and
may adversely affect liquidity, earnings, and shareholders equity. Mortgage originations and
re-financings tend to slow
46
as interest rates increase, and higher interest rates likely will reduce the Companys earnings
from such activities and the income from the sale of residential mortgage loans in the secondary
market.
47
SUPPLEMENTAL TABLES
Tables on the next several pages provide detail on loan portfolio composition and changes by
quarter since December 31, 2006:
QUARTERLY TRENDS LOANS AT END OF PERIOD (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2007 |
|
|
|
4th Qtr |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
94.8 |
|
|
$ |
84.4 |
|
|
$ |
74.2 |
|
|
$ |
72.5 |
|
|
$ |
60.2 |
|
Townhomes |
|
|
10.4 |
|
|
|
9.9 |
|
|
|
11.3 |
|
|
|
25.0 |
|
|
|
25.0 |
|
Single family residences |
|
|
80.3 |
|
|
|
100.9 |
|
|
|
66.6 |
|
|
|
63.9 |
|
|
|
59.0 |
|
Single family land and lots |
|
|
106.3 |
|
|
|
107.7 |
|
|
|
129.0 |
|
|
|
128.4 |
|
|
|
116.4 |
|
Multifamily |
|
|
48.2 |
|
|
|
48.7 |
|
|
|
46.6 |
|
|
|
33.8 |
|
|
|
34.5 |
|
|
|
|
|
|
|
|
|
|
340.0 |
|
|
|
351.6 |
|
|
|
327.7 |
|
|
|
323.6 |
|
|
|
295.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
14.1 |
|
|
|
17.6 |
|
|
|
19.2 |
|
|
|
22.4 |
|
|
|
30.9 |
|
Retail trade |
|
|
16.1 |
|
|
|
12.5 |
|
|
|
26.4 |
|
|
|
50.2 |
|
|
|
69.0 |
|
Land |
|
|
93.5 |
|
|
|
93.4 |
|
|
|
99.4 |
|
|
|
86.2 |
|
|
|
82.6 |
|
Industrial |
|
|
6.3 |
|
|
|
8.9 |
|
|
|
13.1 |
|
|
|
16.9 |
|
|
|
13.0 |
|
Healthcare |
|
|
2.0 |
|
|
|
2.5 |
|
|
|
3.0 |
|
|
|
1.0 |
|
|
|
1.0 |
|
Churches and educational
facilities |
|
|
2.1 |
|
|
|
1.8 |
|
|
|
1.9 |
|
|
|
1.9 |
|
|
|
|
|
Lodging |
|
|
2.1 |
|
|
|
4.8 |
|
|
|
11.2 |
|
|
|
11.2 |
|
|
|
11.2 |
|
Convenience stores |
|
|
0.5 |
|
|
|
0.5 |
|
|
|
1.0 |
|
|
|
1.4 |
|
|
|
1.7 |
|
Marina |
|
|
2.2 |
|
|
|
2.2 |
|
|
|
2.2 |
|
|
|
21.9 |
|
|
|
23.1 |
|
Other |
|
|
0.9 |
|
|
|
2.8 |
|
|
|
12.8 |
|
|
|
8.6 |
|
|
|
9.9 |
|
|
|
|
|
|
|
|
|
|
139.8 |
|
|
|
147.0 |
|
|
|
190.2 |
|
|
|
221.7 |
|
|
|
242.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
40.6 |
|
|
|
40.5 |
|
|
|
40.0 |
|
|
|
40.7 |
|
|
|
39.4 |
|
Construction |
|
|
50.7 |
|
|
|
41.7 |
|
|
|
43.6 |
|
|
|
41.0 |
|
|
|
32.7 |
|
|
|
|
|
|
|
|
|
|
91.3 |
|
|
|
82.2 |
|
|
|
83.6 |
|
|
|
81.7 |
|
|
|
72.1 |
|
|
|
|
|
|
|
Total construction and land
development |
|
|
571.1 |
|
|
|
580.8 |
|
|
|
601.5 |
|
|
|
627.0 |
|
|
|
609.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
277.7 |
|
|
|
285.4 |
|
|
|
298.4 |
|
|
|
313.0 |
|
|
|
319.5 |
|
Fixed rate |
|
|
87.9 |
|
|
|
87.9 |
|
|
|
87.6 |
|
|
|
88.1 |
|
|
|
87.5 |
|
Home equity mortgages |
|
|
95.9 |
|
|
|
97.3 |
|
|
|
90.0 |
|
|
|
90.8 |
|
|
|
91.4 |
|
Home equity lines |
|
|
50.9 |
|
|
|
51.4 |
|
|
|
56.6 |
|
|
|
55.1 |
|
|
|
59.1 |
|
|
|
|
|
|
|
|
|
|
512.4 |
|
|
|
522.0 |
|
|
|
532.6 |
|
|
|
547.0 |
|
|
|
557.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
109.2 |
|
|
|
113.4 |
|
|
|
116.1 |
|
|
|
125.6 |
|
|
|
131.7 |
|
Retail trade |
|
|
50.9 |
|
|
|
62.0 |
|
|
|
62.8 |
|
|
|
74.9 |
|
|
|
76.2 |
|
Land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.6 |
|
|
|
5.3 |
|
Industrial |
|
|
64.3 |
|
|
|
66.3 |
|
|
|
84.7 |
|
|
|
100.2 |
|
|
|
105.5 |
|
Healthcare |
|
|
40.7 |
|
|
|
40.5 |
|
|
|
39.7 |
|
|
|
33.2 |
|
|
|
32.4 |
|
48
QUARTERLY TRENDS LOANS AT END OF PERIOD (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2007 |
|
|
|
4th Qtr |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
Churches and educational
facilities |
|
|
32.3 |
|
|
|
32.9 |
|
|
|
32.7 |
|
|
|
36.0 |
|
|
|
40.2 |
|
Recreation |
|
|
4.4 |
|
|
|
4.4 |
|
|
|
4.5 |
|
|
|
4.7 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily |
|
|
9.9 |
|
|
|
8.4 |
|
|
|
10.4 |
|
|
|
11.3 |
|
|
|
13.8 |
|
Mobile home parks |
|
|
6.0 |
|
|
|
3.0 |
|
|
|
4.0 |
|
|
|
4.0 |
|
|
|
3.9 |
|
Lodging |
|
|
19.1 |
|
|
|
16.9 |
|
|
|
16.8 |
|
|
|
22.3 |
|
|
|
22.7 |
|
Restaurant |
|
|
11.7 |
|
|
|
11.2 |
|
|
|
9.6 |
|
|
|
7.2 |
|
|
|
8.2 |
|
Agricultural |
|
|
26.1 |
|
|
|
24.5 |
|
|
|
23.4 |
|
|
|
19.6 |
|
|
|
12.9 |
|
Convenience stores |
|
|
22.0 |
|
|
|
22.2 |
|
|
|
23.6 |
|
|
|
23.5 |
|
|
|
23.2 |
|
Other |
|
|
40.8 |
|
|
|
38.8 |
|
|
|
30.5 |
|
|
|
39.7 |
|
|
|
38.3 |
|
|
|
|
|
|
|
|
|
|
437.4 |
|
|
|
444.5 |
|
|
|
458.8 |
|
|
|
504.8 |
|
|
|
517.3 |
|
|
|
|
|
|
|
Total real estate mortgages |
|
|
949.8 |
|
|
|
966.5 |
|
|
|
991.4 |
|
|
|
1,051.8 |
|
|
|
1,074.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & financial |
|
|
128.1 |
|
|
|
112.1 |
|
|
|
139.0 |
|
|
|
135.1 |
|
|
|
126.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and trucks |
|
|
22.3 |
|
|
|
23.3 |
|
|
|
23.6 |
|
|
|
24.8 |
|
|
|
25.0 |
|
Marine loans |
|
|
32.5 |
|
|
|
30.1 |
|
|
|
26.6 |
|
|
|
24.8 |
|
|
|
33.2 |
|
Other |
|
|
28.6 |
|
|
|
29.8 |
|
|
|
29.4 |
|
|
|
29.0 |
|
|
|
28.2 |
|
|
|
|
|
|
|
|
|
|
83.4 |
|
|
|
83.2 |
|
|
|
79.6 |
|
|
|
78.6 |
|
|
|
86.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
0.7 |
|
|
|
0.7 |
|
|
|
1.6 |
|
|
|
0.6 |
|
|
|
0.9 |
|
|
|
|
|
|
|
|
|
$ |
1,733.1 |
|
|
$ |
1,743.3 |
|
|
$ |
1,813.1 |
|
|
$ |
1,893.1 |
|
|
$ |
1,898.4 |
|
|
|
|
|
|
|
49
QUARTERLY TRENDS LOANS AT END OF PERIOD (Continued) (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2009 |
|
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
|
1st Qtr |
|
2nd Qtr |
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
57.2 |
|
|
$ |
47.4 |
|
|
$ |
32.6 |
|
|
$ |
17.4 |
|
|
$ |
16.3 |
|
|
$ |
16.8 |
|
Townhomes |
|
|
23.8 |
|
|
|
20.0 |
|
|
|
21.7 |
|
|
|
6.1 |
|
|
|
4.2 |
|
|
|
2.3 |
|
Single family residences |
|
|
56.7 |
|
|
|
49.5 |
|
|
|
37.2 |
|
|
|
26.8 |
|
|
|
20.5 |
|
|
|
16.7 |
|
Single family land and lots |
|
|
112.1 |
|
|
|
95.1 |
|
|
|
70.2 |
|
|
|
52.8 |
|
|
|
51.4 |
|
|
|
43.3 |
|
Multifamily |
|
|
32.6 |
|
|
|
34.0 |
|
|
|
30.7 |
|
|
|
26.8 |
|
|
|
24.8 |
|
|
|
17.6 |
|
|
|
|
|
|
|
|
|
282.4 |
|
|
|
246.0 |
|
|
|
192.4 |
|
|
|
129.9 |
|
|
|
117.2 |
|
|
|
96.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
29.1 |
|
|
|
31.1 |
|
|
|
27.8 |
|
|
|
17.3 |
|
|
|
17.4 |
|
|
|
13.8 |
|
Retail trade |
|
|
60.4 |
|
|
|
63.6 |
|
|
|
68.5 |
|
|
|
68.7 |
|
|
|
70.0 |
|
|
|
55.9 |
|
Land |
|
|
92.5 |
|
|
|
75.4 |
|
|
|
73.9 |
|
|
|
73.3 |
|
|
|
60.9 |
|
|
|
51.2 |
|
Industrial |
|
|
16.9 |
|
|
|
20.8 |
|
|
|
20.7 |
|
|
|
13.3 |
|
|
|
9.0 |
|
|
|
8.5 |
|
Healthcare |
|
|
1.0 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
5.7 |
|
|
|
6.0 |
|
Churches and educational
facilities |
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lodging |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
Convenience stores |
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marina |
|
|
26.8 |
|
|
|
28.9 |
|
|
|
30.5 |
|
|
|
30.7 |
|
|
|
31.6 |
|
|
|
30.0 |
|
Other |
|
|
11.3 |
|
|
|
6.3 |
|
|
|
5.4 |
|
|
|
6.0 |
|
|
|
6.2 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
239.8 |
|
|
|
227.2 |
|
|
|
226.8 |
|
|
|
209.3 |
|
|
|
201.4 |
|
|
|
166.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
39.4 |
|
|
|
40.0 |
|
|
|
38.4 |
|
|
|
35.7 |
|
|
|
34.0 |
|
|
|
32.4 |
|
Construction |
|
|
32.4 |
|
|
|
27.1 |
|
|
|
27.4 |
|
|
|
20.3 |
|
|
|
16.2 |
|
|
|
11.8 |
|
|
|
|
|
|
|
|
|
71.8 |
|
|
|
67.1 |
|
|
|
65.8 |
|
|
|
56.0 |
|
|
|
50.2 |
|
|
|
44.2 |
|
|
|
|
|
|
Total construction and land
development |
|
|
594.0 |
|
|
|
540.3 |
|
|
|
485.0 |
|
|
|
395.2 |
|
|
|
368.8 |
|
|
|
307.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
317.6 |
|
|
|
318.8 |
|
|
|
316.5 |
|
|
|
329.0 |
|
|
|
333.1 |
|
|
|
328.0 |
|
Fixed rate |
|
|
89.1 |
|
|
|
90.2 |
|
|
|
93.4 |
|
|
|
95.5 |
|
|
|
90.8 |
|
|
|
90.6 |
|
Home equity mortgages |
|
|
91.7 |
|
|
|
93.1 |
|
|
|
84.3 |
|
|
|
84.8 |
|
|
|
85.5 |
|
|
|
83.8 |
|
Home equity lines |
|
|
56.3 |
|
|
|
59.4 |
|
|
|
59.7 |
|
|
|
58.5 |
|
|
|
60.3 |
|
|
|
60.1 |
|
|
|
|
|
|
|
|
|
554.7 |
|
|
|
561.5 |
|
|
|
553.9 |
|
|
|
567.8 |
|
|
|
569.7 |
|
|
|
562.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
144.3 |
|
|
|
142.3 |
|
|
|
143.6 |
|
|
|
146.4 |
|
|
|
140.6 |
|
|
|
141.6 |
|
Retail trade |
|
|
83.8 |
|
|
|
93.5 |
|
|
|
101.6 |
|
|
|
111.9 |
|
|
|
109.1 |
|
|
|
120.0 |
|
Land |
|
|
|
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
104.3 |
|
|
|
93.3 |
|
|
|
92.2 |
|
|
|
94.7 |
|
|
|
95.3 |
|
|
|
93.0 |
|
Healthcare |
|
|
39.9 |
|
|
|
33.6 |
|
|
|
31.6 |
|
|
|
29.2 |
|
|
|
28.3 |
|
|
|
30.9 |
|
Churches and educational
facilities |
|
|
40.2 |
|
|
|
36.5 |
|
|
|
35.6 |
|
|
|
35.2 |
|
|
|
34.8 |
|
|
|
34.6 |
|
Recreation |
|
|
2.8 |
|
|
|
1.8 |
|
|
|
1.8 |
|
|
|
1.7 |
|
|
|
1.7 |
|
|
|
1.4 |
|
Multifamily |
|
|
20.0 |
|
|
|
19.1 |
|
|
|
19.2 |
|
|
|
27.2 |
|
|
|
27.2 |
|
|
|
31.7 |
|
50
QUARTERLY TRENDS LOANS AT END OF PERIOD (Continued) (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2009 |
|
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
|
1st Qtr |
|
2nd Qtr |
Mobile home parks |
|
|
3.2 |
|
|
|
3.1 |
|
|
|
3.1 |
|
|
|
3.0 |
|
|
|
3.0 |
|
|
|
5.6 |
|
Lodging |
|
|
27.9 |
|
|
|
28.0 |
|
|
|
26.7 |
|
|
|
26.6 |
|
|
|
26.3 |
|
|
|
26.3 |
|
Restaurant |
|
|
8.0 |
|
|
|
9.0 |
|
|
|
8.6 |
|
|
|
6.2 |
|
|
|
6.1 |
|
|
|
5.1 |
|
Agricultural |
|
|
12.4 |
|
|
|
9.0 |
|
|
|
8.7 |
|
|
|
8.5 |
|
|
|
8.2 |
|
|
|
11.8 |
|
Convenience stores |
|
|
23.1 |
|
|
|
24.9 |
|
|
|
23.6 |
|
|
|
23.5 |
|
|
|
23.3 |
|
|
|
23.2 |
|
Other |
|
|
40.1 |
|
|
|
41.6 |
|
|
|
42.5 |
|
|
|
43.6 |
|
|
|
43.0 |
|
|
|
47.6 |
|
|
|
|
|
|
|
|
|
550.0 |
|
|
|
535.7 |
|
|
|
539.4 |
|
|
|
557.7 |
|
|
|
546.9 |
|
|
|
572.8 |
|
|
|
|
|
|
Total real estate mortgages |
|
|
1,104.7 |
|
|
|
1,097.2 |
|
|
|
1,093.3 |
|
|
|
1,125.5 |
|
|
|
1,116.6 |
|
|
|
1,135.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & financial |
|
|
93.9 |
|
|
|
94.8 |
|
|
|
88.5 |
|
|
|
82.8 |
|
|
|
75.5 |
|
|
|
71.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and trucks |
|
|
24.1 |
|
|
|
23.0 |
|
|
|
21.9 |
|
|
|
20.8 |
|
|
|
19.4 |
|
|
|
18.0 |
|
Marine loans |
|
|
33.3 |
|
|
|
25.2 |
|
|
|
26.0 |
|
|
|
26.0 |
|
|
|
26.3 |
|
|
|
26.9 |
|
Other |
|
|
27.5 |
|
|
|
27.9 |
|
|
|
27.4 |
|
|
|
26.1 |
|
|
|
25.7 |
|
|
|
24.3 |
|
|
|
|
|
|
|
|
|
84.9 |
|
|
|
76.1 |
|
|
|
75.3 |
|
|
|
72.9 |
|
|
|
71.4 |
|
|
|
69.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
0.5 |
|
|
|
0.4 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
$ |
1,878.0 |
|
|
$ |
1,808.8 |
|
|
$ |
1,742.6 |
|
|
$ |
1,676.7 |
|
|
$ |
1,632.6 |
|
|
$ |
1,584.3 |
|
|
|
|
|
|
51
QUARTERLY TRENDS INCREASE (DECREASE) IN LOANS BY QUARTER (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
(10.4 |
) |
|
$ |
(10.2 |
) |
|
$ |
(1.7 |
) |
|
$ |
(12.3 |
) |
Townhomes |
|
|
(0.5 |
) |
|
|
1.4 |
|
|
|
13.7 |
|
|
|
|
|
Single family residences |
|
|
20.6 |
|
|
|
(34.3 |
) |
|
|
(2.7 |
) |
|
|
(4.9 |
) |
Single family land and lots |
|
|
1.4 |
|
|
|
21.3 |
|
|
|
(0.6 |
) |
|
|
(12.0 |
) |
Multifamily |
|
|
0.5 |
|
|
|
(2.1 |
) |
|
|
(12.8 |
) |
|
|
0.7 |
|
|
|
|
|
|
|
11.6 |
|
|
|
(23.9 |
) |
|
|
(4.1 |
) |
|
|
(28.5 |
) |
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
3.5 |
|
|
|
1.6 |
|
|
|
3.2 |
|
|
|
8.5 |
|
Retail trade |
|
|
(3.6 |
) |
|
|
13.9 |
|
|
|
23.8 |
|
|
|
18.8 |
|
Land |
|
|
(0.1 |
) |
|
|
6.0 |
|
|
|
(13.2 |
) |
|
|
(3.6 |
) |
Industrial |
|
|
2.6 |
|
|
|
4.2 |
|
|
|
3.8 |
|
|
|
(3.9 |
) |
Healthcare |
|
|
0.5 |
|
|
|
0.5 |
|
|
|
(2.0 |
) |
|
|
|
|
Churches and educational
facilities |
|
|
(0.3 |
) |
|
|
0.1 |
|
|
|
|
|
|
|
(1.9 |
) |
Lodging |
|
|
2.7 |
|
|
|
6.4 |
|
|
|
|
|
|
|
|
|
Convenience stores |
|
|
|
|
|
|
0.5 |
|
|
|
0.4 |
|
|
|
0.3 |
|
Marina |
|
|
|
|
|
|
|
|
|
|
19.7 |
|
|
|
1.2 |
|
Other |
|
|
1.9 |
|
|
|
10.0 |
|
|
|
(4.2 |
) |
|
|
1.3 |
|
|
|
|
|
|
|
7.2 |
|
|
|
43.2 |
|
|
|
31.5 |
|
|
|
20.7 |
|
Individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
(0.1 |
) |
|
|
(0.5 |
) |
|
|
0.7 |
|
|
|
(1.3 |
) |
Construction |
|
|
(9.0 |
) |
|
|
1.9 |
|
|
|
(2.6 |
) |
|
|
(8.3 |
) |
|
|
|
|
|
|
(9.1 |
) |
|
|
1.4 |
|
|
|
(1.9 |
) |
|
|
(9.6 |
) |
|
|
|
Total construction and land development |
|
|
9.7 |
|
|
|
20.7 |
|
|
|
25.5 |
|
|
|
(17.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
7.7 |
|
|
|
13.0 |
|
|
|
14.6 |
|
|
|
6.5 |
|
Fixed rate |
|
|
|
|
|
|
(0.3 |
) |
|
|
0.5 |
|
|
|
(0.6 |
) |
Home equity mortgages |
|
|
1.4 |
|
|
|
(7.3 |
) |
|
|
0.8 |
|
|
|
0.6 |
|
Home equity lines |
|
|
0.5 |
|
|
|
5.2 |
|
|
|
(1.5 |
) |
|
|
4.0 |
|
|
|
|
|
|
|
9.6 |
|
|
|
10.6 |
|
|
|
14.4 |
|
|
|
10.5 |
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
4.2 |
|
|
|
2.7 |
|
|
|
9.5 |
|
|
|
6.1 |
|
Retail trade |
|
|
11.1 |
|
|
|
0.8 |
|
|
|
12.1 |
|
|
|
1.3 |
|
Land |
|
|
|
|
|
|
|
|
|
|
2.6 |
|
|
|
2.7 |
|
Industrial |
|
|
2.0 |
|
|
|
18.4 |
|
|
|
15.5 |
|
|
|
5.3 |
|
Healthcare |
|
|
(0.2 |
) |
|
|
(0.8 |
) |
|
|
(6.5 |
) |
|
|
(0.8 |
) |
Churches and educational facilities |
|
|
0.6 |
|
|
|
(0.2 |
) |
|
|
3.3 |
|
|
|
4.2 |
|
Recreation |
|
|
|
|
|
|
0.1 |
|
|
|
0.2 |
|
|
|
(1.7 |
) |
Multifamily |
|
|
(1.5 |
) |
|
|
2.0 |
|
|
|
0.9 |
|
|
|
2.5 |
|
Mobile home parks |
|
|
(3.0 |
) |
|
|
1.0 |
|
|
|
|
|
|
|
(0.1 |
) |
Lodging |
|
|
(2.2 |
) |
|
|
(0.1 |
) |
|
|
5.5 |
|
|
|
0.4 |
|
Restaurant |
|
|
(0.5 |
) |
|
|
(1.6 |
) |
|
|
(2.4 |
) |
|
|
1.0 |
|
Agricultural |
|
|
(1.6 |
) |
|
|
(1.1 |
) |
|
|
(3.8 |
) |
|
|
(6.7 |
) |
52
QUARTERLY TRENDS INCREASE (DECREASE) IN LOANS BY QUARTER
(Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
Convenience stores |
|
|
0.2 |
|
|
|
1.4 |
|
|
|
(0.1 |
) |
|
|
(0.3 |
) |
Other |
|
|
(2.0 |
) |
|
|
(8.3 |
) |
|
|
9.2 |
|
|
|
(1.4 |
) |
|
|
|
|
|
|
7.1 |
|
|
|
14.3 |
|
|
|
46.0 |
|
|
|
12.5 |
|
|
|
|
Total real estate mortgages |
|
|
16.7 |
|
|
|
24.9 |
|
|
|
60.4 |
|
|
|
23.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & financial |
|
|
(16.0 |
) |
|
|
26.9 |
|
|
|
(3.9 |
) |
|
|
(8.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and trucks |
|
|
1.0 |
|
|
|
0.3 |
|
|
|
1.2 |
|
|
|
0.2 |
|
Marine loans |
|
|
(2.4 |
) |
|
|
(3.5 |
) |
|
|
(1.8 |
) |
|
|
8.4 |
|
Other |
|
|
1.2 |
|
|
|
(0.4 |
) |
|
|
(0.4 |
) |
|
|
(0.8 |
) |
|
|
|
|
|
|
(0.2 |
) |
|
|
(3.6 |
) |
|
|
(1.0 |
) |
|
|
7.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
0.9 |
|
|
|
(1.0 |
) |
|
|
0.3 |
|
|
|
|
|
|
$ |
10.2 |
|
|
$ |
69.8 |
|
|
$ |
80.0 |
|
|
$ |
5.3 |
|
|
|
|
53
QUARTERLY TRENDS INCREASE (DECREASE) IN LOANS BY QUARTER (Continued)
(Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2009 |
|
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
|
1st Qtr |
|
2nd Qtr |
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
(3.0 |
) |
|
$ |
(9.8 |
) |
|
$ |
(14.8 |
) |
|
$ |
(15.2 |
) |
|
$ |
(1.1 |
) |
|
$ |
0.5 |
|
Townhomes |
|
|
(1.2 |
) |
|
|
(3.8 |
) |
|
|
1.7 |
|
|
|
(15.6 |
) |
|
|
(1.9 |
) |
|
|
(1.9 |
) |
Single family residences |
|
|
(2.3 |
) |
|
|
(7.2 |
) |
|
|
(12.3 |
) |
|
|
(10.4 |
) |
|
|
(6.3 |
) |
|
|
(3.8 |
) |
Single family land and lots |
|
|
(4.3 |
) |
|
|
(17.0 |
) |
|
|
(24.9 |
) |
|
|
(17.4 |
) |
|
|
(1.4 |
) |
|
|
(8.1 |
) |
Multifamily |
|
|
(1.9 |
) |
|
|
1.4 |
|
|
|
(3.3 |
) |
|
|
(3.9 |
) |
|
|
(2.0 |
) |
|
|
(7.2 |
) |
|
|
|
|
|
|
|
|
(12.7 |
) |
|
|
(36.4 |
) |
|
|
(53.6 |
) |
|
|
(62.5 |
) |
|
|
(12.7 |
) |
|
|
(20.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
(1.8 |
) |
|
|
2.0 |
|
|
|
(3.3 |
) |
|
|
(10.5 |
) |
|
|
0.1 |
|
|
|
(3.6 |
) |
Retail trade |
|
|
(8.6 |
) |
|
|
3.2 |
|
|
|
4.9 |
|
|
|
0.2 |
|
|
|
1.3 |
|
|
|
(14.1 |
) |
Land |
|
|
9.9 |
|
|
|
(17.1 |
) |
|
|
(1.5 |
) |
|
|
(0.6 |
) |
|
|
(12.4 |
) |
|
|
(9.7 |
) |
Industrial |
|
|
3.9 |
|
|
|
3.9 |
|
|
|
(0.1 |
) |
|
|
(7.4 |
) |
|
|
(4.3 |
) |
|
|
(0.5 |
) |
Healthcare |
|
|
|
|
|
|
|
|
|
|
(1.0 |
) |
|
|
|
|
|
|
5.7 |
|
|
|
0.3 |
|
Churches and educational
facilities |
|
|
|
|
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Lodging |
|
|
(11.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6 |
|
|
|
(0.6 |
) |
Convenience stores |
|
|
0.1 |
|
|
|
(1.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marina |
|
|
3.7 |
|
|
|
2.1 |
|
|
|
1.6 |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
(1.6 |
) |
Other |
|
|
1.4 |
|
|
|
(5.0 |
) |
|
|
(0.9 |
) |
|
|
0.6 |
|
|
|
0.2 |
|
|
|
(4.8 |
) |
|
|
|
|
|
|
|
|
(2.6 |
) |
|
|
(12.6 |
) |
|
|
(0.4 |
) |
|
|
(17.5 |
) |
|
|
(7.9 |
) |
|
|
(34.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
|
|
|
|
0.6 |
|
|
|
(1.6 |
) |
|
|
(2.7 |
) |
|
|
(1.7 |
) |
|
|
(1.6 |
) |
Construction |
|
|
(0.3 |
) |
|
|
(5.3 |
) |
|
|
0.3 |
|
|
|
(7.1 |
) |
|
|
(4.1 |
) |
|
|
(4.4 |
) |
|
|
|
|
|
|
|
|
(0.3 |
) |
|
|
(4.7 |
) |
|
|
(1.3 |
) |
|
|
(9.8 |
) |
|
|
(5.8 |
) |
|
|
(6.0 |
) |
|
|
|
|
|
Total construction and land
development |
|
|
(15.6 |
) |
|
|
(53.7 |
) |
|
|
(55.3 |
) |
|
|
(89.8 |
) |
|
|
(26.4 |
) |
|
|
(61.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
(1.9 |
) |
|
|
1.2 |
|
|
|
(2.3 |
) |
|
|
12.5 |
|
|
|
4.1 |
|
|
|
(5.1 |
) |
Fixed rate |
|
|
1.6 |
|
|
|
1.1 |
|
|
|
3.2 |
|
|
|
2.1 |
|
|
|
(4.7 |
) |
|
|
(0.2 |
) |
Home equity mortgages |
|
|
0.3 |
|
|
|
1.4 |
|
|
|
(8.8 |
) |
|
|
0.5 |
|
|
|
0.7 |
|
|
|
(1.7 |
) |
Home equity lines |
|
|
(2.8 |
) |
|
|
3.1 |
|
|
|
0.3 |
|
|
|
(1.2 |
) |
|
|
1.8 |
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
(2.8 |
) |
|
|
6.8 |
|
|
|
(7.6 |
) |
|
|
13.9 |
|
|
|
1.9 |
|
|
|
(7.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
12.6 |
|
|
|
(2.0 |
) |
|
|
1.3 |
|
|
|
2.8 |
|
|
|
(5.8 |
) |
|
|
1.0 |
|
Retail trade |
|
|
7.6 |
|
|
|
9.7 |
|
|
|
8.1 |
|
|
|
10.3 |
|
|
|
(2.8 |
) |
|
|
10.9 |
|
Land |
|
|
(5.3 |
) |
|
|
|
|
|
|
0.6 |
|
|
|
(0.6 |
) |
|
|
|
|
|
|
|
|
Industrial |
|
|
(1.2 |
) |
|
|
(11.0 |
) |
|
|
(1.1 |
) |
|
|
2.5 |
|
|
|
0.6 |
|
|
|
(2.3 |
) |
Healthcare |
|
|
7.5 |
|
|
|
(6.3 |
) |
|
|
(2.0 |
) |
|
|
(2.4 |
) |
|
|
(0.9 |
) |
|
|
2.6 |
|
Churches and educational
facilities |
|
|
|
|
|
|
(3.7 |
) |
|
|
(0.9 |
) |
|
|
(0.4 |
) |
|
|
(0.4 |
) |
|
|
(0.2 |
) |
Recreation |
|
|
(0.2 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
QUARTERLY TRENDS INCREASE (DECREASE) IN LOANS BY QUARTER (Continued)
(Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2009 |
|
|
1st Qtr |
|
2nd Qtr |
|
3rd Qtr |
|
4th Qtr |
|
1st Qtr |
|
2nd Qtr |
Multifamily |
|
|
6.2 |
|
|
|
(0.9 |
) |
|
|
0.1 |
|
|
|
8.0 |
|
|
|
|
|
|
|
4.5 |
|
Mobile home parks |
|
|
(0.7 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
2.6 |
|
Lodging |
|
|
5.2 |
|
|
|
0.1 |
|
|
|
(1.3 |
) |
|
|
(0.1 |
) |
|
|
(0.3 |
) |
|
|
|
|
Restaurant |
|
|
(0.2 |
) |
|
|
1.0 |
|
|
|
(0.4 |
) |
|
|
(2.4 |
) |
|
|
(0.1 |
) |
|
|
(1.0 |
) |
Agricultural |
|
|
(0.5 |
) |
|
|
(3.4 |
) |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
|
|
(0.3 |
) |
|
|
3.6 |
|
Convenience stores |
|
|
(0.1 |
) |
|
|
1.8 |
|
|
|
(1.3 |
) |
|
|
(0.1 |
) |
|
|
(0.2 |
) |
|
|
(0.1 |
) |
Other |
|
|
1.8 |
|
|
|
1.5 |
|
|
|
0.9 |
|
|
|
1.1 |
|
|
|
(0.6 |
) |
|
|
4.6 |
|
|
|
|
|
|
|
|
|
32.7 |
|
|
|
(14.3 |
) |
|
|
3.7 |
|
|
|
18.3 |
|
|
|
(10.8 |
) |
|
|
25.9 |
|
|
|
|
|
|
Total real estate mortgages |
|
|
29.9 |
|
|
|
(7.5 |
) |
|
|
(3.9 |
) |
|
|
32.2 |
|
|
|
(8.9 |
) |
|
|
18.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & financial |
|
|
(32.8 |
) |
|
|
0.9 |
|
|
|
(6.3 |
) |
|
|
(5.7 |
) |
|
|
(7.3 |
) |
|
|
(3.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and trucks |
|
|
(0.9 |
) |
|
|
(1.1 |
) |
|
|
(1.1 |
) |
|
|
(1.1 |
) |
|
|
(1.4 |
) |
|
|
(1.4 |
) |
Marine loans |
|
|
0.1 |
|
|
|
(8.1 |
) |
|
|
0.8 |
|
|
|
|
|
|
|
0.3 |
|
|
|
0.6 |
|
Other |
|
|
(0.7 |
) |
|
|
0.4 |
|
|
|
(0.5 |
) |
|
|
(1.3 |
) |
|
|
(0.4 |
) |
|
|
(1.4 |
) |
|
|
|
|
|
|
|
|
(1.5 |
) |
|
|
(8.8 |
) |
|
|
(0.8 |
) |
|
|
(2.4 |
) |
|
|
(1.5 |
) |
|
|
(2.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
(0.4 |
) |
|
|
(0.1 |
) |
|
|
0.1 |
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(20.4 |
) |
|
$ |
(69.2 |
) |
|
$ |
(66.2 |
) |
|
$ |
(65.9 |
) |
|
$ |
(44.1 |
) |
|
$ |
(48.3 |
) |
|
|
|
|
|
55
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
Various of the statements made herein under the captions Managements Discussion and Analysis of
Financial Condition and Results of Operations, Quantitative and Qualitative Disclosures about
Market Risk, Risk Factors and elsewhere, are forward-looking statements within the meaning and
protections of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, as amended (the Exchange Act).
Forward-looking statements include statements with respect to our beliefs, plans, objectives,
goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and
involve known and unknown risks, uncertainties and other factors, which may be beyond our control,
and which may cause the actual results, performance or achievements of Seacoast to be materially
different from future results, performance or achievements expressed or implied by such
forward-looking statements. You should not expect us to update any forward-looking statements.
All statements other than statements of historical fact are statements that could be
forward-looking statements. You can identify these forward-looking statements through our use of
words such as may, will, anticipate, assume, should, indicate, would, believe,
contemplate, expect, estimate, continue, further, plan, point to, project, could,
intend, target and other similar words and expressions of the future. These forward-looking
statements may not be realized due to a variety of factors, including, without limitation:
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the effects of future economic, business and market conditions and changes, domestic and foreign, including seasonality; |
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governmental monetary and fiscal policies; |
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legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their
application by our regulators, and changes in the scope and cost of FDIC insurance and other coverages; |
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changes in accounting policies, rules and practices; |
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the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values
and liquidity of loan collateral, securities, and interest sensitive assets and liabilities; |
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changes in borrower credit risks and payment behaviors; |
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changes in the availability and cost of credit and capital in the financial markets; |
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changes in the prices, values and sales volumes of residential and commercial real estate; |
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the effects of competition from a wide variety of local, regional, national and other providers of financial,
investment and insurance services; |
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the failure of assumptions and estimates underlying the establishment of reserves for possible loan losses and other
estimates; |
56
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the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of
implementing such transactions, integrating operations as part of these transactions and possible failures to achieve
expected gains, revenue growth and/or expense savings from such transactions; |
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changes in technology or products that may be more difficult, costly, or less effective than anticipated; |
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the effects of war or other conflicts, acts of terrorism or other catastrophic events that may affect general economic
conditions; |
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the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit
conditions, including changes in borrowers credit risks and payment behaviors from those used in our loan portfolio
stress test; |
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the risks that our deferred tax assets could be reduced if estimates of future taxable income from our operations and
tax planning strategies are less than currently estimated, and sales of our capital stock could trigger a reduction in
the amount of net operating losses carryforwards that we may be able to utilize for income tax purposes; and |
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other risks and uncertainties described herein and in our annual report on Form 10-K for the year ended December 31,
2008 and otherwise in our Securities and Exchange Commission, or SEC, reports and filings. |
All written or oral forward-looking statements that are made by us or are attributable to us are
expressly qualified in their entirety by this cautionary notice. We have no obligation and do not
undertake to update, revise or correct any of the forward-looking statements after the date of this
report, or after the respective dates on which such statements otherwise are made.
57
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Managements discussion and analysis Interest Rate Sensitivity.
Market risk refers to potential losses arising from changes in interest rates, and other relevant
market rates or prices.
Interest rate risk, defined as the exposure of net interest income and Economic Value of Equity, or
EVE, to adverse movements in interest rates, is the Companys primary market risk, and mainly
arises from the structure of the balance sheet (non-trading activities). The Company is also
exposed to market risk in its investing activities. The Companys Asset/Liability Committee, or
ALCO, meets regularly and is responsible for reviewing the interest rate sensitivity position of
the Company and establishing policies to monitor and limit exposure to interest rate risk. The
policies established by the ALCO are reviewed and approved by the Companys Board of Directors.
The primary goal of interest rate risk management is to control exposure to interest rate risk,
within policy limits approved by the Board. These limits reflect the Companys tolerance for
interest rate risk over short-term and long-term horizons.
The Company also performs valuation analyses, which are used for evaluating levels of risk present
in the balance sheet that might not be taken into account in the net interest income simulation
analyses. Whereas net interest income simulation highlights exposures over a relatively short time
horizon, valuation analysis incorporates all cash flows over the estimated remaining life of all
balance sheet positions. The valuation of the balance sheet, at a point in time, is defined as the
discounted present value of asset cash flows minus the discounted value of liability cash flows,
the net result of which is the EVE. The sensitivity of EVE to changes in the level of interest
rates is a measure of the longer-term re-pricing risks and options risks embedded in the balance
sheet. In contrast to the net interest income simulation, which assumes interest rates will change
over a period of time, EVE uses instantaneous changes in rates. EVE values only the current
balance sheet, and does not incorporate the growth assumptions that are used in the net interest
income simulation model. As with the net interest income simulation model, assumptions about the
timing and variability of balance sheet cash flows are critical in the EVE analysis. Particularly
important are the assumptions driving prepayments and the expected changes in balances and pricing
of the indeterminate life deposit portfolios. Based on our most recent modeling, an instantaneous
100 basis point increase in rates is estimated to increase the EVE 1.3 percent versus the EVE in a
stable rate environment.
While an instantaneous and severe shift in interest rates is used in this analysis to provide an
estimate of exposure under an extremely adverse scenario, a gradual shift in interest rates would
have a much more modest impact. Since EVE measures the discounted present value of cash flows over
the estimated lives of instruments, the change in EVE does not directly correlate to the degree
that earnings would be impacted over a shorter time horizon, i.e., the next fiscal year. Further,
EVE does not take into account factors such as future balance sheet growth, changes in product mix,
change in yield curve relationships, and changing product spreads that could mitigate the adverse
impact of changes in interest rates.
58
Item 4. CONTROLS AND PROCEDURES
The
Companys management, with the participation of its chief executive officer and chief financial officer
has evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the
Exchange Act) as of June 30, 2009 and concluded that those disclosure controls and procedures are
effective. There have been no changes to the Companys internal
control over financial reporting that occurred since the beginning of the Companys first quarter
of 2009 that have materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting.
While the Company believes that its existing disclosure controls and procedures have been effective
to accomplish these objectives, the Company intends to continue to examine, refine and formalize
its disclosure controls and procedures and to monitor ongoing developments in this area.
59
Part II OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are subject, in the ordinary course, to litigation incident to the
business in which they are engaged. Management presently believes that none of the legal
proceedings to which the Company or any of its subsidiaries is a
party or of which any of their property is the subject are materially likely to have a material adverse effect on the Companys
consolidated financial position, or operating results or cash flows, although no assurance can be
given with respect to the ultimate outcome of any such claim or litigation.
Item 1A. Risk Factors
Any of the following risks could harm our business, results of operations and financial condition
and an investment in our stock. The risks discussed below also include forward-looking statements,
and our actual results may differ substantially from those discussed in these forward-looking
statements.
Risks Related to Our Business
There can be no assurance that recent legislation and administrative actions authorizing the U.S.
government to take direct actions within the financial services industry will help stabilize the
U.S. financial system.
The Emergency Economic Stabilization Act of 2008, or EESA, was enacted on October 3, 2008. Under
EESA, the Treasury has the authority to, among other things, invest in financial institutions and
purchase up to $700 billion of troubled assets and mortgages from financial institutions for the
purpose of stabilizing and providing liquidity to the U.S. financial markets. Under the Treasurys
Capital Purchase Program, or CPP, it committed to purchase up to $250 billion of preferred stock
and warrants in eligible institutions. The EESA also temporarily increased FDIC deposit insurance
coverage to $250,000 per depositor through December 31, 2009, which was recently extended to
December 31, 2013 under the Helping Families Save Their Homes Act of 2009.
On February 10, 2009, the Treasury announced the Financial Stability Plan which, among other
things, provides a forward-looking supervisory capital assessment program, or SCAP, that is
mandatory for banking institutions with over $100 billion of assets and makes capital available to
financial institutions qualifying under a process and criteria similar to the CPP. In addition, the
American Recovery and Reinvestment Act of 2009, or ARRA, was signed into law on February 17, 2009,
and includes, among other things, extensive new restrictions on the compensation and governance
arrangements of financial institutions.
Numerous actions have been taken by the U.S. Congress, the Federal Reserve, the Treasury, the FDIC,
the SEC and others to address the current liquidity and credit crisis that has followed the
sub-prime mortgage crisis that commenced in 2007, including the Financial Stability Program adopted
by the Treasury. These measures include fiscal and monetary policy actions described under
BusinessFiscal and Monetary Policy and BusinessRecent Legislative and Regulatory Changes in
our Annual Report on Form 10-K/A for the year ended December 31, 2008, which is incorporated by
reference herein. In addition, the Secretary of the Treasury proposed fundamental changes to the
regulation of financial institutions, markets and products on June 17, 2009.
60
We cannot predict the actual effects of EESA, the ARRA, the proposed regulatory reform measures and
various governmental, regulatory, monetary and fiscal initiatives which have been and may be
enacted on the economy, the financial markets, on us and on Seacoast National Bank. The terms and
costs of these activities, or the failure of these actions to help stabilize the financial markets,
asset prices, market liquidity and a continuation or worsening of current financial market and
economic conditions could materially and adversely affect our business, financial condition,
results of operations, and the trading prices of our securities.
Difficult market conditions have adversely affected our industry and us.
We are exposed to downturns in the U.S. economy, and particularly the local markets in which we
operate in Florida. Declines in the housing markets over the past year and a half, including
falling home prices and sales volumes, and increasing foreclosures, have negatively affected the
credit performance of mortgage loans and resulted in significant write-downs of asset values by
financial institutions, including government-sponsored entities and major commercial and investment
banks, as well as Seacoast National Bank. These write-downs have caused many financial institutions
to seek additional capital, to merge with larger and stronger institutions and, in some cases, to
fail. Many lenders and institutional investors have reduced or ceased providing funding to
borrowers, including other financial institutions. This market turmoil and the tightening of credit
have led to increased levels of commercial and consumer delinquencies, lack of consumer confidence,
increased market volatility and reductions in business activity generally. The resulting economic
pressure on consumers and lack of confidence in the financial markets has adversely affected our
business, financial condition and results of operations. We do not expect that the difficult
conditions in the financial markets are likely to improve in the near future. A worsening of these
conditions would likely exacerbate the adverse effects of these difficult market conditions on us
and other financial institutions.
In particular:
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We expect to face increased regulation of our industry, including
as a result of EESA, the ARRA and related initiatives by the U.S.
government. Compliance with such regulations may increase our
costs and limit our ability to pursue business opportunities. |
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Market developments and government programs may continue to
adversely affect consumer confidence levels and may cause adverse
changes in borrower behaviors and payment rates, resulting in
further increases in delinquencies and default rates, which could
affect our loan charge-offs and our provisions for credit losses. |
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Our ability to assess the creditworthiness of our customers or to
estimate the values of our assets and collateral for loans will be
reduced if the models and approaches we use become less predictive
of future behaviors, valuations, assumptions or estimates. We
estimate losses inherent in our credit exposure, the adequacy of
our allowance for loan losses and the values of certain assets by
using estimates based on difficult, subjective, and complex
judgments, including estimates as to the effects of economic
conditions and how these economic conditions might affect the
ability of our borrowers to repay their loans or the value of
assets. |
61
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Our ability to borrow from other financial institutions on
favorable terms or at all, or to raise capital, could be adversely
affected by further disruptions in the capital markets or other
events, including, among other things, deteriorating investor
expectations. |
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Failures of other depository institutions in our markets and
increasing consolidation of financial services companies as a
result of current market conditions could increase our deposits
and assets, necessitating additional capital, and may have
unexpected adverse effects upon our ability to compete
effectively. |
We are not paying dividends on our preferred stock or common stock and are deferring distributions
on our trust preferred securities, and we are restricted in otherwise paying cash dividends on our
common stock. The failure to resume paying dividends on our preferred stock and trust preferred
securities may adversely affect us.
We historically paid cash dividends before we suspended dividend payments on our preferred and
common stock and distributions on our trust preferred securities on May 19, 2009 pursuant to the
request of the Federal Reserve. The Federal Reserve, as a matter of policy, has indicated that bank
holding companies should not pay dividends or make distributions on trust preferred securities
using funds from the TARP CPP. There is no assurance that we will receive approval to resume paying
cash dividends. Even if we are allowed to resume paying dividends again by the Federal Reserve,
future payment of cash dividends on our common stock, if any, will be subject to the prior payment
of all unpaid dividends and deferred distributions on our Series A Preferred Stock and trust
preferred securities. Further, we need prior Treasury approval to increase our quarterly cash
dividends above $0.01 per common share through the earliest of December 23, 2011, the date we
redeem all shares of Series A Preferred Stock or the Treasury has transferred all shares of
Series A Preferred Stock to third parties. All dividends are declared and paid at the discretion of
our board of directors and are dependent upon our liquidity, financial condition, results of
operations, capital requirements and such other factors as our board of directors may deem
relevant.
Further, dividend payments on our Series A Preferred Stock and distributions on our trust preferred
securities are cumulative and therefore unpaid dividends and distributions will accrue and compound
on each subsequent dividend payment date. In the event of any liquidation, dissolution or winding
up of the affairs of our company, holders of the Series A Preferred Stock shall be entitled to
receive for each share of Series A Preferred Stock the liquidation amount plus the amount of any
accrued and unpaid dividends. If we miss six quarterly dividend payments, whether or not
consecutive, the Treasury will have the right to appoint two directors to our board of directors
until all accrued but unpaid dividends have been paid. We cannot pay dividends on our outstanding
shares of Series A Preferred Stock or our common stock until we have paid in full all deferred
distributions on our trust preferred securities, which will require prior approval of the Federal
Reserve.
Nonperforming assets take significant time to resolve and adversely affect our results of
operations and financial condition, and could result in further losses in the future.
At December 31, 2008 and June 30, 2009, our nonperforming loans (which consist of non-accrual
loans) totaled $86.9 million and $126.8 million, or 5.18%
and 8.00% of the loan portfolio,
respectively. At December 31, 2008 and June 30, 2009, our nonperforming assets (which include
foreclosed real estate) were $92.0 million and
$150.0 million, or 3.97% and 7.02% of assets,
respectively. In addition, we had approximately $13.9 million and $10.1 million in accruing
62
loans that were 30-89 days delinquent at December 31, 2008 and June 30, 2009, respectively. Our
non-performing assets adversely affect our net income in various ways. Until economic and market
conditions improve, we expect to continue to incur additional losses relating to an increase in
non-performing loans. We do not record interest income on non-accrual loans or other real estate
owned, thereby adversely affecting our income, and increasing our loan administration costs. When
we take collateral in foreclosures and similar proceedings, we are required to mark the related
loan to the then fair market value of the collateral, which may result in a loss. These loans and
other real estate owned also increase our risk profile and the capital our regulators believe is
appropriate in light of such risks. While we have reduced our problem assets through loan sales,
workouts, restructurings and otherwise, decreases in the value of these assets, or the underlying
collateral, or in these borrowers performance or financial conditions, whether or not due to
economic and market conditions beyond our control, could adversely affect our business, results of
operations and financial condition. In addition, the resolution of nonperforming assets requires
significant commitments of time from management and our directors, which can be detrimental to the
performance of their other responsibilities. There can be no assurance that we will not experience
further increases in nonperforming loans in the future, or that nonperforming assets will not
result in further losses in the future.
Our allowance for loan losses may prove inadequate or we may be adversely affected by credit risk
exposures.
Our business depends on the creditworthiness of our customers. We periodically review our allowance
for loan losses for adequacy considering economic conditions and trends, collateral values and
credit quality indicators, including past charge-off experience and levels of past due loans and
nonperforming assets. We cannot be certain that our allowance for loan losses will be adequate over
time to cover credit losses in our portfolio because of unanticipated adverse changes in the
economy, market conditions or events adversely affecting specific customers, industries or markets,
or borrower behaviors towards repaying their loans. The credit quality of our borrowers has
deteriorated as a result of the economic downturn in our markets. If the credit quality of our
customer base or their debt service behavior materially decreases further, if the risk profile of a
market, industry or group of customers declines further or weaknesses in the real estate markets
and other economics persist or worsen, or if our allowance for loan losses is not adequate, our
business, financial condition, including our liquidity and capital, and results of operations could
be materially adversely affected.
During 2009, our commercial and residential real estate and real estate-related portfolios have
continued to be affected by adverse market conditions, including reduced real estate prices and
sales levels and, more generally, all of our loan portfolios have been affected by the sustained
economic weakness of our markets and the impact of higher
unemployment rates.
Our commercial and residential real estate and real estate-related loans have continued to be
affected adversely by the on-going correction in real estate prices and reduced levels of sales.
More generally, all of our commercial real estate loan portfolios, especially construction and
development loans, have been affected adversely by the economic weakness of our Florida markets and
the effects of higher unemployment rates. We may have to increase our allowance for loan losses
through additional provisions for loan losses because of continued adverse changes in the economy,
market conditions, and events that adversely affect our customers or markets. Our business,
financial condition, liquidity, capital (especially tangible common equity), and results of
operations could be materially adversely affected by additional provisions for loan losses.
63
Weaknesses in the real estate markets, including the secondary market for residential mortgage
loans, have adversely affected us and may continue to adversely affect us.
The effects of ongoing mortgage market challenges, combined with the ongoing correction in
residential real estate market prices and reduced levels of home sales, could result in further
price reductions in single family home values, further adversely affecting the liquidity and value
of collateral securing commercial loans for residential land acquisition, construction and
development, as well as residential mortgage loans and residential property collateral securing
loans that we hold, mortgage loan originations and gains on sale of mortgage loans. Declining real
estate prices have caused higher delinquencies and losses on certain mortgage loans, generally,
particularly second lien mortgages and home equity lines of credit. Significant ongoing disruptions
in the secondary market for residential mortgage loans have limited the market for and liquidity of
most residential mortgage loans other than conforming Fannie Mae and Freddie Mac loans. These
trends could continue, notwithstanding various government programs to boost the residential
mortgage markets and stabilize the housing markets. Continued declines in real estate values, home
sales volumes and financial stress on borrowers as a result of job losses, interest rate resets on
adjustable rate mortgage loans or other factors could have further adverse effects on borrowers
that result in higher delinquencies and greater charge-offs in future periods, which would
adversely affect our financial condition, including capital and liquidity, or results of
operations. In the event our allowance for loan losses is insufficient to cover such losses, our
earnings, capital and liquidity could be adversely affected.
Our real estate portfolios are exposed to weakness in the Florida housing market and the overall
state of the economy.
The declines in home prices and the volume of home sales in Florida, along with the reduced
availability of certain types of mortgage credit, have resulted in increases in delinquencies and
losses in our portfolios of home equity lines and loans, and commercial loans related to
residential real estate acquisition, construction and development. Further declines in home prices
coupled with the economic recession and associated rises in unemployment levels could cause
additional losses which could adversely affect our earnings and financial condition, including our
capital and liquidity.
Our concentration of commercial real estate loans could result in increased loan losses.
CRE is cyclical and poses risks of loss to us due to concentration levels and similar risks of the
asset, especially since we had 53.5% of our portfolio in CRE loans at year-end 2008 and 52.8% as of
June 30, 2009. The banking regulators continue to give CRE lending greater scrutiny, and banks with
higher levels of CRE loans are expected to implement improved underwriting, internal controls, risk
management policies and portfolio stress testing, as well as higher levels of allowances for
possible losses and capital levels as a result of CRE lending growth and exposures. During 2008, we
added $88.6 million of provisions for loan losses compared to $12.7 million in 2007 and
$3.3 million in 2006, in part reflecting collateral evaluations in response to recent changes in
the market values of land collateralizing acquisition and development loans. An additional $37.9
million in provisions for loan losses have been taken in 2009 through June 30, 2009.
64
Our recent loan portfolio stress test is not a forecast or prediction of future results,
performance or future capital adequacy, and the results of this stress test may or may not be
realized.
The stress test we conducted recently with an outside consultant on our loan portfolio is not a
forecast and does not reflect our outlook or our expected results and should not be viewed as a
prediction of future results, performance or future capital adequacy. The test was based upon
numerous complex assumptions, estimates and judgments, which may or may not be realized.
Our goodwill impairment has adversely affected our earnings and will affect Seacoast Nationals
ability to pay dividends to the Company.
Our goodwill impairment charge of all our goodwill as of June 30, 2009 ($49.8 million) is a
non-cash charge that has reduced our earnings for the three months ended June 30, 2009, and will
reduce the earnings of Seacoast National from which Seacoast National may pay dividends to the
Company. We give no assurance that the completion of our testing of goodwill as of June 30, 2009
will result in any restoration of goodwill that would increase future earnings.
Higher FDIC deposit insurance premiums and assessments could adversely affect our financial
condition.
FDIC insurance premiums have increased substantially in 2009 already and we expect to pay
significantly higher FDIC premiums in the future. Market developments have significantly depleted
the insurance fund of the FDIC and reduced the ratio of reserves to insured deposits. The FDIC
adopted a revised risk-based deposit insurance assessment schedule on February 27, 2009, which
raised deposit insurance premiums. On May 22, 2009, the FDIC also implemented a five basis point
special assessment of each insured depository institutions assets minus Tier 1 capital as of June
30, 2009, but no more than 10 basis points times the institutions assessment base for the second
quarter of 2009, to be collected on September 30, 2009. Additional special assessments may be
imposed by the FDIC for future periods. We participate in the FDICs TLG for noninterest-bearing
transaction deposit accounts. Banks that participate in the TLGs noninterest-bearing transaction
account guarantee will pay the FDIC an annual assessment of 10 basis points on the amounts in such
accounts above the amounts covered by FDIC deposit insurance. To the extent that these TLG
assessments are insufficient to cover any loss or expenses arising from the TLG program, the FDIC
is authorized to impose an emergency special assessment on all FDIC-insured depository
institutions. The FDIC has authority to impose charges for the TLG program upon depository
institution holding companies, as well. These changes, along with the full utilization of our FDIC
insurance assessment credit in early 2009, will cause the premiums and TLG assessments charged by
the FDIC to increase. These actions could significantly increase our noninterest expense in 2009
and for the foreseeable future. The TLG is scheduled to end December 31, 2009, but the FDIC has
proposed extending TLG to June 30, 2010, but charging a higher guarantee fee to banks that elect to
participate in the extension.
Current levels of market volatility are unprecedented.
The capital and credit markets have been experiencing volatility and disruption for more than a
year. In some cases, the markets have produced downward pressure on stock prices and credit
availability for certain issuers without regard to those issuers underlying financial condition or
performance. If current levels of market disruption and volatility continue or worsen, we may
65
experience adverse effects, which may be material, on our ability to maintain or access capital and
on our business, financial condition and results of operations.
Liquidity risks could affect operations and jeopardize our financial condition.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings,
the sale of loans and other sources could have a substantial negative effect on our liquidity. Our
funding sources include federal funds purchased, securities sold under repurchase agreements,
non-core deposits, and short- and long-term debt. We are also members of the Federal Home Loan Bank
of Atlanta and the Federal Reserve Bank of Atlanta, where we can obtain advances collateralized
with eligible assets. We maintain a portfolio of securities that can be used as a secondary source
of liquidity. There are other sources of liquidity available to us or Seacoast National Bank should
they be needed, including our ability to acquire additional non-core deposits, the issuance and
sale of debt securities, and the issuance and sale of preferred or common securities in public or
private transactions. Our access to funding sources in amounts adequate to finance or capitalize
our activities or on terms which are acceptable to us could be impaired by factors that affect us
specifically or the financial services industry or economy in general. Our liquidity, on a parent
only basis, is adversely affected by our current inability to receive dividends from Seacoast
National Bank without prior regulatory approval, offset by
approximately $8.0 million of cash and
short-term investments currently held by us at June 30, 2009, largely due to the receipt of TARP
CPP proceeds. We invested $42.0 million of the TARP CPP proceeds in Seacoast National Bank to meet
the OCC capital requirements. Our ability to borrow could also be impaired by factors that are not
specific to us, such as further disruption in the financial markets or negative views and
expectations about the prospects for the financial services industry in light of the recent turmoil
faced by banking organizations and the continued deterioration in credit markets.
We could encounter difficulties as a result of our growth.
Our loans, deposits, fee businesses and employees have increased as a result of our organic growth
and acquisitions. Our failure to successfully manage and support this growth with sufficient human
resources, training and operational, financial and technology resources in challenging markets and
economic conditions could have a material adverse effect on our operating results and financial
condition. We may not be able to sustain our historical growth rates.
We are required to maintain capital to meet regulatory requirements, and if we fail to maintain
sufficient capital, whether due to losses, an inability to raise additional capital or otherwise,
our financial condition, liquidity and results of operations, as well as our regulatory
requirements, would be adversely affected.
Both we and Seacoast National Bank must meet regulatory capital requirements and maintain
sufficient liquidity. We have an informal letter agreement with the OCC to maintain a Tier 1
leverage capital ratio of 7.50% and a total risk-based capital ratio of 12.0% at Seacoast National
Bank, which are higher than the stated minimum capital ratios. We also face significant regulatory
and other governmental risk as a financial institution and a participant in the TARP CPP.
Our ability to raise additional capital, when and if needed, will depend on conditions in the
capital markets, economic conditions and a number of other factors, including investor
66
perceptions regarding the banking industry and market condition, and governmental activities, many
of which are outside our control, and on our financial condition and performance. Accordingly, we
cannot assure you that we will be able to raise additional capital if needed or on terms acceptable
to us. If we fail to meet these capital and other regulatory requirements, our financial condition,
liquidity and results of operations would be materially and adversely affected.
Our failure to remain well capitalized for bank regulatory purposes could affect customer
confidence, our ability to grow, our costs of funds and FDIC insurance costs, our ability to pay
dividends on common and preferred stock, make distributions on our trust preferred securities, our
ability to make acquisitions, and our business, results of operation and financial conditions,
generally. Under FDIC rules, if Seacoast National Bank ceases to be a well capitalized
institution for bank regulatory purposes, its ability to accept brokered deposits may be
restricted, and the interest rates that it pays may be restricted.
Sales of additional capital could dilute existing shareholders.
Issuances of our common stock or securities convertible into or exchangeable for our common stock
could dilute the interests of our existing common shareholders or require shareholders to approve
an increase in the number of shares of common stock we are authorized to issue and could increase
the number of shares of common stock we are required to issue under the warrant we issued to the
Treasury under the TARP CPP. Among the securities we may issue are shares of preferred stock which
likely will have dividend and liquidation rights senior in priority to the rights of holders of our
common stock.
Our ability to realize our deferred tax assets may be reduced in the future if our estimates of
future taxable income from our operations and tax planning strategies do not support this amount,
and the amount of net operating loss carryforwards realizable for income tax purposes may be
reduced under Section 382 of the Internal Revenue Code by sales of our capital securities.
As of
June 30, 2009, we had deferred tax assets of $17.2 million. These and future deferred tax
assets may be reduced in the future if our estimates of future taxable income from our operations
and tax planning strategies do not support the amount of the deferred tax asset. The amount of net
operating loss carryforwards realizable for income tax purposes may be reduced under Section 382 of
the Internal Revenue Code by an offering and/or other sales of our capital securities.
Our cost of funds may increase as a result of general economic conditions, FDIC insurance
assessments, interest rates and competitive pressures.
Our cost of funds may increase as a result of general economic conditions, FDIC insurance
assessments, interest rates and competitive pressures. We have traditionally obtained funds
principally through local deposits and we have a base of lower cost transaction deposits.
Generally, we believe local deposits are a cheaper and more stable source of funds than other
borrowings because interest rates paid for local deposits are typically lower than interest rates
charged for borrowings from other institutional lenders and reflect a mix of transaction and time
deposits, whereas brokered deposits typically are higher cost time deposits. Our costs of funds and
our profitability and liquidity are likely to be adversely affected, if and to the extent we have
to rely upon higher cost borrowings from other institutional lenders or brokers to fund loan
67
demand or liquidity needs, and changes in our deposit mix and growth could adversely affect our
profitability and the ability to expand our loan portfolio.
Our profitability and liquidity may be affected by changes in interest rates and economic
conditions.
Our profitability depends upon net interest income, which is the difference between interest earned
on assets, and interest expense on interest-bearing liabilities, such as deposits and borrowings.
Net interest income will be adversely affected if market interest rates change such that the
interest we pay on deposits and borrowings and our FDIC deposit insurance assessments increase
faster than the interest earned on loans and investments. Interest rates, and consequently our
results of operations, are affected by general economic conditions (domestic and foreign) and
fiscal and monetary policies may materially affect the level and direction of interest rates. From
June 2004 to mid-2006, the Federal Reserve raised the federal funds rate from 1.0% to 5.25%. Since
then, beginning in September 2007, the Federal Reserve decreased the federal funds rates by 100
basis points to 4.25% over the remainder of 2007, and has since reduced the target federal funds
rate by an additional 400 basis points to a range between zero to 25 basis points beginning in
December 2008. Decreases in interest rates generally increase the market values of fixed-rate,
interest-bearing investments and loans held, and increase the values of loan sales and mortgage
loan activities. However, the production of mortgages and other loans and the value of collateral
securing our loans, are dependent on demand within the markets we serve, as well as interest rates.
The levels of sales, as well as the values of real estate in our markets, have declined. Declining
rates reflect efforts by the Federal Reserve to stimulate the economy, but may not be effective,
and thus may negatively affect our results of operations and financial condition, liquidity and
earnings.
The TARP CPP and the ARRA impose certain executive compensation and corporate governance
requirements that may adversely affect us and our business, including our ability to recruit and
retain qualified employees.
The purchase agreement we entered into in connection with our participation in the TARP CPP
required us to adopt the Treasurys standards for executive compensation and corporate governance
while the Treasury holds the equity issued pursuant to the TARP CPP, including the common stock
which may be issued pursuant to the warrant to purchase 1,179,245 shares of common stock, or the
Warrant, which we refer to as the TARP Assistance Period. These standards generally apply to our
chief executive officer, chief financial officer and the three next most highly compensated senior
executive officers. The standards include:
|
|
ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that
threaten the value of the financial institution; |
|
|
|
required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings,
gains or other criteria that are later proven to be materially inaccurate; |
|
|
|
prohibition on making golden parachute payments to senior executives; and |
|
|
|
agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive. |
68
In particular, the change to the deductibility limit on executive compensation may increase the
overall cost of our compensation programs in future periods.
The ARRA imposed further limitations on compensation during the TARP Assistance Period including
|
|
a prohibition on making any golden parachute payment to a senior
executive officer or any of our next five most highly compensated
employees; |
|
|
|
a prohibition on any compensation plan that would encourage
manipulation of the reported earnings to enhance the compensation
of any of its employees; and |
|
|
|
a prohibition of the five highest paid executives from receiving
or accruing any bonus, retention award, or incentive compensation,
or bonus except for long-term restricted stock with a value not
greater than one-third of the total amount of annual compensation
of the employee receiving the stock. |
The prohibition may expand to other employees based on increases in the aggregate value of
financial assistance that we receive in the future. For example, if we receive at least $250
million but less than $500 million in TARP financial assistance, the senior executive officers and
at least the next 10 most highly compensated employees will be prohibited from receiving or
accruing any such bonus.
The Treasury released an interim final rule on TARP standards for compensation and corporate
governance on June 10, 2009, which implemented and further expanded the limitations and
restrictions imposed on executive compensation and corporate governance by the TARP CPP and ARRA.
The new Treasury interim final rules, which became effective on June 15, 2009, also prohibit any
tax gross-up payments to senior executive officers and the next 20 highest paid executives. The
rule further authorizes the Treasury to establish the Office of the Special Master for TARP
Executive Compensation with broad powers to review compensation plans and corporate governance
matters of TARP recipients.
These provisions and any future rules issued by the Treasury could adversely affect our ability to
attract and retain management capable and motivated sufficiently to manage and operate our business
through difficult economic and market conditions. If we are unable to attract and retain qualified
employees to manage and operate our business, we may not be able to successfully execute our
business strategy.
TARP lending goals may not be attainable.
Congress and the bank regulators have encouraged recipients of TARP capital to use such capital to
make loans and it may not be possible to safely, soundly and profitably make sufficient loans to
creditworthy persons in the current economy to satisfy such goals. Congressional demands for
additional lending by TARP capital recipients, and regulatory demands for demonstrating and
reporting such lending are increasing. On November 12, 2008, the bank regulatory agencies issued a
statement encouraging banks to, among other things, lend prudently and responsibly to creditworthy
borrowers and to work with borrowers to preserve homeownership and avoid preventable
foreclosures. We continue to lend and have expanded our mortgage loan originations, and to report
our lending to the Treasury. The future demands for additional lending are unclear and uncertain,
and we could be forced to make loans that involve risks or terms that
69
we would not otherwise find acceptable or in our shareholders best interest. Such loans could
adversely affect our results of operation and financial condition, and may be in conflict with bank
regulations and requirements as to liquidity and capital. The profitability of funding such loans
using deposits may be adversely affected by increased FDIC insurance premiums.
Changes in future rules applicable to banks generally or to TARP recipients could adversely affect
our operations, financial condition, and results of operations.
The rules and policies applicable to recipients of capital under the TARP CPP continue to evolve
and their scope, timing and effect cannot be predicted. Any redemption of the securities sold to
the Treasury to avoid these restrictions would require prior Federal Reserve and Treasury approval.
Based on recently issued Federal Reserve guidelines, institutions seeking to redeem TARP CPP
preferred stock must demonstrate an ability to access the long-term debt markets without reliance
on the FDICs TLG, successfully demonstrate access to public equity markets and meet a number of
additional requirements and considerations before we can redeem any securities sold to the
Treasury. Therefore, it is uncertain if we will be able to redeem such securities even if we have
sufficient financial resources to do so.
Our future success is dependent on our ability to compete effectively in highly competitive
markets.
We operate in the highly competitive markets of Martin, St. Lucie, Brevard, Indian River, Palm
Beach and Broward Counties in southeastern Florida, the Orlando, Florida metropolitan statistical
area, as well as in more rural competitive counties in the Lake Okeechobee, Florida region. Our
future growth and success will depend on our ability to compete effectively in these markets. We
compete for loans, deposits and other financial services in geographic markets with other local,
regional and national commercial banks, thrifts, credit unions, mortgage lenders, and securities
and insurance brokerage firms. Many of our competitors offer products and services different from
us, and have substantially greater resources, name recognition and market presence than we do,
which benefits them in attracting business. Larger competitors may be able to price loans and
deposits more aggressively than we can, and have broader customer and geographic bases to draw
upon.
The soundness of other financial institutions could adversely affect us.
Our ability to engage in routine funding and other transactions could be adversely affected by the
actions and commercial soundness of other financial institutions. Financial services institutions
are interrelated as a result of trading, clearing, counterparty or other relationships. As a
result, defaults by, or even rumors or questions about, one or more financial services
institutions, or the financial services industry generally, have led to market-wide liquidity
problems, losses of depositor, creditor and counterparty confidence and could lead to losses or
defaults by us or by other institutions. We could experience increases in deposits and assets as a
result of other banks difficulties or failure, which would increase the capital we need to support
such growth.
We operate in a heavily regulated environment.
We and our subsidiaries are regulated by several regulators, including the Federal Reserve, the
OCC, the SEC, the FDIC and FINRA, and since December 2008, the Treasury. Our success is affected by
state and federal regulations affecting banks and bank holding companies, and the securities
markets and securities and insurance regulators. Banking regulations are primarily
70
intended to protect depositors, not shareholders. The financial services industry also is subject
to frequent legislative and regulatory changes and proposed changes, the effects of which cannot be
predicted. Federal bank regulatory agencies and the Treasury, as well as the Congress and the
President, are evaluating and have proposed numerous significant changes in the regulation of
banks, other financial services providers and the financial markets. These changes, if adopted,
could require us to maintain more capital, liquidity and risk controls which could adversely affect
our growth, profitability and financial condition.
We are subject to internal control reporting requirements that increase compliance costs and
failure to comply timely could adversely affect our reputation and the value of our securities.
We are required to comply with various corporate governance and financial reporting requirements
under the Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the SEC, the
Public Company Accounting Oversight Board and Nasdaq. In particular, we are required to include
management and independent auditor reports on internal controls as part of our annual report on
Form 10-K pursuant to Section 404 of the Sarbanes-Oxley Act. We expect to continue to spend
significant amounts of time and money on compliance with these rules. The SEC also has proposed a
number of new rules or regulations requiring additional disclosure, such as lower-level employee
compensation. Our failure to track and comply with the various rules may materially adversely
affect our reputation, ability to obtain the necessary certifications to financial statements, and
the value of our securities.
Technological changes affect our business, and we may have fewer resources than many competitors to
invest in technological improvements.
The financial services industry is undergoing rapid technological changes with frequent
introductions of new technology-driven products and services. In addition to serving clients
better, the effective use of technology may increase efficiency and may enable financial
institutions to reduce costs. Our future success will depend, in part, upon our ability to use
technology to provide products and services that provide convenience to customers and to create
additional efficiencies in operations. We may need to make significant additional capital
investments in technology in the future, and we may not be able to effectively implement new
technology-driven products and services. Many competitors have substantially greater resources to
invest in technological improvements.
The anti-takeover provisions in our Articles of Incorporation and under Florida law may make it
more difficult for takeover attempts that have not been approved by our board of directors.
Florida law and our Articles of Incorporation include anti-takeover provisions, such as provisions
that encourage persons seeking to acquire control of us to consult with our board, and which enable
the board to negotiate and give consideration on behalf of us and our shareholders and other
constituencies to the merits of any offer made. Such provisions, as well as supermajority voting
and quorum requirements and a staggered board of directors, may make any takeover attempts and
other acquisitions of interests in us, by means of a tender offer, open market purchase, a proxy
fight or otherwise, that have not been approved by our board of directors more difficult and more
expensive. These provisions may discourage possible business combinations that a majority of our
shareholders may believe to be desirable and beneficial. As a result, our board of directors may
decide not to pursue transactions that would otherwise be in your best interests as a holder of our
common stock.
71
Hurricanes or other adverse weather events would negatively affect our local economies or disrupt
our operations, which would have an adverse effect on our business or results of operations.
Our market areas in Florida are susceptible to hurricanes and tropical storms and related flooding
and wind damage. Such weather events can disrupt operations, result in damage to properties and
negatively affect the local economies in the markets where they operate. We cannot predict whether
or to what extent damage that may be caused by future hurricanes will affect its operations or the
economies in our current or future market areas, but such weather events could result in a decline
in loan originations, a decline in the value or destruction of properties securing our loans and an
increase in the delinquencies, foreclosures or loan losses. Our business or results of operations
may be adversely affected by these and other negative effects of future hurricanes or tropical
storms, including flooding and wind damage. Many of our customers have incurred significantly
higher property and casualty insurance premiums on their properties located in our markets, which
may adversely affect real estate sales and values in our markets.
Future acquisitions and expansion activities may disrupt our business, dilute existing shareholders
and adversely affect our operating results.
We regularly evaluate potential acquisitions and expansion opportunities. To the extent that we
grow through acquisitions, we cannot assure you that we will be able to adequately or profitably
manage this growth. Acquiring other banks, branches or businesses, as well as other geographic and
product expansion activities, involve various risks including:
|
|
risks of unknown or contingent liabilities; |
|
|
|
unanticipated costs and delays; |
|
|
|
risks that acquired new businesses do not perform consistent with our growth and profitability expectations; |
|
|
|
risks of entering new markets or product areas where we have limited experience; |
|
|
|
risks that growth will strain our infrastructure, staff, internal controls and management, which may require additional
personnel, time and expenditures; |
|
|
|
exposure to potential asset quality issues with acquired institutions; |
|
|
|
difficulties, expenses and delays of integrating the operations and personnel of acquired institutions, and start-up
delays and costs of other expansion activities; |
|
|
|
potential disruptions to our business; |
|
|
|
possible loss of key employees and customers of acquired institutions; |
|
|
|
potential short-term decreases in profitability; and |
|
|
|
diversion of our managements time and attention from our existing operations and business. |
72
Attractive acquisition opportunities may not be available to us in the future.
While we seek continued organic growth, as our earnings and capital position improve, we may
consider the acquisition of other businesses. We expect that other banking and financial companies,
many of which have significantly greater resources, will compete with us to acquire financial
services businesses. This competition could increase prices for potential acquisitions that we
believe are attractive. Also, acquisitions are subject to various regulatory approvals. If we fail
to receive the appropriate regulatory approvals, we will not be able to consummate an acquisition
that we believe is in our best interests. Among other things, our regulators consider our capital,
liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when
considering acquisition and expansion proposals. Any acquisition could be dilutive to our earnings
and shareholders equity per share of our common stock.
Risks Related to Our Common Stock
We may issue additional shares of common or preferred stock securities, which may dilute the
interests of our shareholders and may adversely affect the market price of our common stock.
We are currently authorized to issue up to 65 million shares of common stock, of which 19,170,788
shares are currently outstanding and up to 4 million shares of preferred stock, of which 2,000
shares are outstanding. Our board of directors has authority, without action or vote of the
shareholders, to issue all or part of the authorized but unissued shares and to establish the terms
of any series of preferred stock. These authorized but unissued shares could be issued on terms or
in circumstances that could dilute the interests of other shareholders.
The Series A Preferred Stock diminishes the net income available to our common shareholders and
earnings per common share, and the Warrant we issued to Treasury may be dilutive to holders of our
common stock.
The dividends accrued and the accretion on discount on the Series A Preferred Stock reduce the net
income available to common shareholders and our earnings per common share. The Series A Preferred
Stock is cumulative, which means that any dividends not declared or paid will accumulate and will
be payable when we resume paying dividends. Shares of Series A Preferred Stock will also receive
preferential treatment in the event of liquidation, dissolution or winding up of Seacoast.
Additionally, the ownership interest of the existing holders of our common stock will be diluted to
the extent the Warrant is exercised. The shares of common stock underlying the Warrant represent
approximately 6.16% of the shares of our common stock outstanding as of June 30, 2009 (including
the shares issuable upon exercise of the Warrant in our total outstanding shares and not including
the 50% reduction in the number of shares subject to this Warrant which we currently expect would
occur if we raise at least $50.0 million in one or more qualified equity offerings prior to
December 31, 2009). Although Treasury has agreed not to vote any of the shares of common stock it
receives upon exercise of the Warrant, a transferee of any portion of the Warrant or of any shares
of common stock acquired upon exercise of the Warrant is not bound by this restriction.
73
Holders of the Series A Preferred Stock have certain voting rights that may adversely affect our
common shareholders, and the holders of shares of our Series A Preferred Stock may have different
interests from, and vote their shares in a manner deemed adverse to, our common shareholders.
In the event that we fail to pay dividends on the Series A Preferred Stock for an aggregate of at
least six quarterly dividend periods (whether or not consecutive) the Treasury will have the right
to appoint two directors to our board of directors until all accrued but unpaid dividends have been
paid; otherwise, except as required by law, holders of the Series A Preferred Stock have limited
voting rights. So long as shares of the Series A Preferred Stock are outstanding, in addition to
any other vote or consent of shareholders required by law or our amended and restated charter, the
vote or consent of holders owning at least 662/3% of the shares of Series A
Preferred Stock outstanding is required for:
|
|
any authorization or issuance of shares ranking senior to the Series A Preferred Stock; |
|
|
|
any amendment to the rights of the Series A Preferred Stock so as to adversely affect the rights, preferences,
privileges or voting power of the Series A Preferred Stock; or |
|
|
|
consummation of any merger, share exchange or similar transaction unless the shares of Series A Preferred Stock remain
outstanding, or if we are not the surviving entity in such transaction, are converted into or exchanged for preference
securities of the surviving entity and the shares of Series A Preferred Stock remaining outstanding or such preference
securities have such rights, preferences, privileges and voting power as are not materially less favorable to the
holders than the rights, preferences, privileges and voting power of the shares of Series A Preferred Stock. Holders of
Series A Preferred Stock could block the foregoing transaction, even where considered desirable by, or in the best
interests of, holders of our common stock. |
The holders of Series A Preferred Stock, including the Treasury, may have different interests from
the holders of our common stock, and could vote to disapprove transactions that are favored by, or
are in the best interests of, our common shareholders.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer purchases of equity securities during the first and second quarter of 2009 were as follows:
74
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum |
|
|
Total |
|
|
|
|
|
Total Number of |
|
Number of |
|
|
Number of |
|
|
|
|
|
Shares Purchased |
|
Shares that May |
|
|
Shares |
|
Average Price |
|
as Part of Public |
|
yet be Purchased |
Period |
|
Purchased |
|
Paid Per Share |
|
Announced Plan * |
|
Under the Plan |
|
1/1/09 to 1/31/09 |
|
|
0 |
|
|
$ |
0 |
|
|
|
666,799 |
|
|
|
158,201 |
|
2/1/09 to 2/28/09 |
|
|
126 |
|
|
|
4.80 |
|
|
|
666,925 |
|
|
|
158,075 |
|
3/1/09 to 3/31/09 |
|
|
0 |
|
|
|
0 |
|
|
|
666,925 |
|
|
|
158,075 |
|
|
Total 1st Quarter |
|
|
126 |
|
|
|
4.80 |
|
|
|
666,925 |
|
|
|
158,075 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/1/09 to 4/30/09 |
|
|
1,732 |
|
|
|
3.28 |
|
|
|
668,657 |
|
|
|
156,343 |
|
5/1/09 to 5/31/09 |
|
|
0 |
|
|
|
0 |
|
|
|
668,657 |
|
|
|
156,343 |
|
6/1/09 to 6/30/09 |
|
|
0 |
|
|
|
0 |
|
|
|
668,657 |
|
|
|
156,343 |
|
|
Total 2nd Quarter |
|
|
1,732 |
|
|
|
3.28 |
|
|
|
668,657 |
|
|
|
156,343 |
|
|
|
|
* |
|
The plan to purchase equity securities totaling 825,000 was approved on September 18, 2001, with
no expiration date. |
Item 3. Defaults upon Senior Securities
On May 19, 2009, the Companys Board of Directors voted to suspend quarterly dividends on the
Companys common and preferred stock and interest payments on subordinated debt associated with trust preferred
securities. Therefore, the Company is currently in arrear with the dividend payments on Series A
Preferred Stock and interest payments on subordinated debt. As of the date of filing this Report, the
amount of the arrearage on the dividend payments of Series A
Preferred Stock is $625,000 and the amount
of the arrearage on the payments on the subordinated debt associated with trust preferred
securities is $407,000. The total arrearage on both securities is
$1,032,000 as of June 30, 2009.
Item 4. Submission of Matters to a Vote of Security Holders
|
(a) |
|
The 2009 Annual Meeting of Shareholders was held on June 18, 2009. |
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(b) |
|
Reported to the Securities and Exchange Commission in the
Companys 2009 Proxy Statement. |
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(c) |
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The following matters were voted upon at June 18, 2009s meeting: |
|
(1) |
|
Proposal 1 The re-election of four (4) Class I directors to serve
until the 2012 Annual Meeting of Shareholders have been elected and qualified. All
of the directors were elected. |
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|
The following votes were cast with respect to the election of each director to serve on our
board for a term of one year until the 2012 annual meeting or until a successor has
been elected and qualified: |
75
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Abstentions |
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For |
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For |
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Against |
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Withheld |
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and Broker |
|
|
Number |
|
Percent |
|
Number |
|
Authority |
|
Non-votes |
Jefferey C. Bruner |
|
|
16,393,040 |
|
|
|
85.6 |
|
|
|
None |
|
|
|
1,148,118 |
|
|
|
None |
|
H. Gilbert
Culbreth, Jr. |
|
|
16,597,922 |
|
|
|
86.7 |
|
|
|
None |
|
|
|
943,236 |
|
|
|
None |
|
Christopher E. Fogal |
|
|
16,560,358 |
|
|
|
86.5 |
|
|
|
None |
|
|
|
980,800 |
|
|
|
None |
|
Dale M. Hudson |
|
|
16,271,912 |
|
|
|
85.0 |
|
|
|
None |
|
|
|
1,269,246 |
|
|
|
None |
|
|
(2) |
|
Proposal 2 Approved an amendment to the Companys Amended and
Restated Articles of Incorporation (the Articles of Incorporation) which
increased the authorized shares of Seacoasts Common Stock from 35,000,000 shares
to 65,000,000, and increased the Companys total authorized shares of Common Stock
and Preferred Stock to 69,000,000 (the number of affirmative votes cast was
15,424,616; the number of negative votes cast was 1,940,747; the number of withheld
votes cast was 0 and the number of abstentions and broker non-votes was
175,795). |
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(3) |
|
Proposal 4 Approved an amendment to the Articles of Incorporation
which deleted the requirement of affirmative votes of an independent majority of
shareholders in the case of amending certain articles of the Articles of
Incorporation (the number of affirmative votes cast was 16,265,108; the number of
negative votes cast was 1,058,897; the number of withheld votes cast was 0 and
the number of abstentions and broker non-votes was 217,153). |
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(4) |
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Proposal 5 Approved an amendment to Seacoasts Employee Stock
Purchase Plan which increased the shares of Company Common Stock reserved for
issuance under the Employee Stock Purchase Plan from 330,000 to 730,000 (the number
of affirmative votes cast was 11,877,692; the number of negative votes cast was
1,056,000; the number of withheld votes cast was 0, the number of abstentions
was 148,393; and the number of broker non-votes was 4,459,073). |
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(5) |
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Proposal 6 Endorsed, on a non-binding basis, the compensation of the
Companys named executive officers as disclosed in the
Companys 2009 Proxy Statement (the number
of affirmative votes cast was 14,429,800; the number of negative votes cast was
2,931,626; the number of withheld votes cast was 0 and the number of abstentions
and broker non-votes was 179,732). |
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(6) |
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Proposal 7 Approved a proposal which granted the proxy holders
discretionary authority to vote to adjourn the Annual Meeting for up to 120 days to
allow for the solicitation of additional shares proxies in the event that there
were insufficient shares voted at the Annual Meeting to approve certain proposals,
including Proposal 3 described below (the number of affirmative votes cast was
16,479,792; the number of negative votes cast was 815,050; the number of withheld
votes cast was 0 and the number of abstentions and broker non-votes was
246,316). |
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(7) |
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The proposal presented at the Annual Meeting to amend the Articles of
Incorporation to restate Article VII (Proposal 3) to eliminate ambiguity and to |
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reduce the scope of the definition of Business Combinations and to reduce the
scope of the requirement for supermajority shareholder approvals, including deleting
the term independent majority of shareholders, did not receive the requisite
number of affirmative votes for approval. Therefore, as provided under Proposal 7
and approved by shareholders, the Annual Meeting was adjourned solely for the
purpose of allowing the Company to seek additional favorable votes for Proposal 3. |
The 2009 Annual Meeting of Shareholders was reconvened on July 17, 2009 to report final
shareholder voting results for Proposal 3. Out of 14,023,233 votes represented and
19,153,150 votes entitled to vote, 13,068,305 votes were cast in favor of Proposal 3 and
766,478 votes were cast against. Proposal 3 was approved by a vote of 68.2 percent of the
total number of votes entitled to be cast. The number of withheld
votes cast was 0 and
the number of abstentions and broker non-votes was 188,450.
Item 5. Other Information
During the period covered by this report, there was no information required to be disclosed by us
in a Current Report on Form 8-K that was not so reported, nor were there any material changes to
the procedures by which our security holders may recommend nominees to our Board of Directors.
Item 6. Exhibits
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Exhibit 31.1 |
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Certification of the Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
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Exhibit 31.2 |
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Certification of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
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Exhibit 32.1 |
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Statement of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
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Exhibit 32.2 |
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Statement of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
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SIGNATURE
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.
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SEACOAST BANKING CORPORATION OF FLORIDA
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August 5, 2009
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/s/ Dennis S. Hudson, III |
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DENNIS S. HUDSON, III |
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Chairman &
Chief Executive Officer |
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August 5, 2009
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/s/ William R. Hahl |
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WILLIAM R. HAHL |
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Executive Vice President &
Chief Financial Officer |
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