10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(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 September 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
Organization
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(I.R.S. Employer Identification No.) |
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815 COLORADO AVENUE, STUART FL
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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)
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 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, or a non-accelerated filer or a smaller
reporting company. See definition 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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Small Reporting Company o |
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 52,849,625 shares as of September 30, 2009
INDEX
SEACOAST BANKING CORPORATION OF FLORIDA
2
Part I. FINANCIAL INFORMATION
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Item 1. |
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FINANCIAL STATEMENTS |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
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September 30, |
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December 31, |
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(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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|
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|
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Cash and due from banks |
|
$ |
32,515 |
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$ |
46,002 |
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Interest bearing deposits with other banks |
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137,640 |
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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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170,155 |
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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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342,742 |
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318,030 |
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Held for investment (fair values: |
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$ |
18,870 |
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at September 30, 2009 and $26,109 at
December 31, 2008) |
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19,296 |
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27,871 |
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TOTAL SECURITIES |
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362,038 |
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345,901 |
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Loans held for sale |
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5,857 |
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2,165 |
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Loans |
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1,504,566 |
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1,676,728 |
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Less: Allowance for loan losses |
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(48,850 |
) |
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(29,388 |
) |
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NET LOANS |
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1,455,716 |
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1,647,340 |
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Bank premises and equipment, net |
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42,143 |
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44,122 |
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Other real estate owned |
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26,819 |
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5,035 |
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Goodwill and other intangible assets |
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4,436 |
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55,193 |
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Other assets |
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72,751 |
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63,488 |
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$ |
2,139,915 |
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$ |
2,314,436 |
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LIABILITIES |
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Deposits |
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$ |
1,761,287 |
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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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68,797 |
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157,496 |
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Borrowed funds |
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65,053 |
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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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10,844 |
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11,586 |
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1,959,591 |
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2,098,435 |
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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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44,686 |
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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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3,123 |
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6,245 |
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Common stock, par value $0.10 per share, authorized 65,000,000
shares, issued 52,923,151 and outstanding 52,849,625 shares at
September 30, 2009, issued 19,283,841 and outstanding 19,171,779
shares at December 31, 2008 |
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5,292 |
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1,928 |
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Other shareholders equity |
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127,223 |
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164,041 |
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TOTAL SHAREHOLDERS EQUITY |
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180,324 |
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216,001 |
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$ |
2,139,915 |
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$ |
2,314,436 |
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See notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 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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$ |
20,836 |
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$ |
27,146 |
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$ |
65,634 |
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$ |
86,525 |
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Interest and dividends on securities |
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4,349 |
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3,508 |
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12,728 |
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10,805 |
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Interest on federal funds sold and other investments |
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163 |
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322 |
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420 |
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1,074 |
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TOTAL INTEREST INCOME |
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25,348 |
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30,976 |
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78,782 |
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98,404 |
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Interest on deposits |
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5,416 |
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10,367 |
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19,597 |
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33,579 |
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Interest on borrowed money |
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881 |
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1,492 |
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3,040 |
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5,061 |
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TOTAL INTEREST EXPENSE |
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6,297 |
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11,859 |
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22,637 |
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38,640 |
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NET INTEREST INCOME |
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19,051 |
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|
19,117 |
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56,145 |
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59,764 |
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Provision for loan losses |
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45,374 |
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|
10,241 |
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83,253 |
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|
57,978 |
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NET INTEREST (LOSS) INCOME AFTER PROVISION FOR
LOAN LOSSES |
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(26,323 |
) |
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8,876 |
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(27,108 |
) |
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1,786 |
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Noninterest income |
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Other income |
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4,627 |
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5,160 |
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|
14,414 |
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|
17,411 |
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Securities gains, net |
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|
1,425 |
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0 |
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3,211 |
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|
355 |
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TOTAL NONINTEREST INCOME |
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6,052 |
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|
5,160 |
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17,625 |
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17,766 |
|
Noninterest Expenses |
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Goodwill impairment |
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0 |
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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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20,506 |
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19,986 |
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|
61,066 |
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58,157 |
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TOTAL NONINTEREST EXPENSES |
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|
20,506 |
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19,986 |
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|
|
110,879 |
|
|
|
58,157 |
|
LOSS BEFORE INCOME TAXES |
|
|
(40,777 |
) |
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|
(5,950 |
) |
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(120,362 |
) |
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(38,605 |
) |
Benefit for income taxes |
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0 |
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(2,502 |
) |
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(11,825 |
) |
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(15,604 |
) |
|
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NET LOSS |
|
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(40,777 |
) |
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(3,448 |
) |
|
|
(108,537 |
) |
|
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(23,001 |
) |
Preferred stock dividends and accretion of
preferred stock discount |
|
|
937 |
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0 |
|
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|
2,811 |
|
|
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0 |
|
|
|
|
|
|
|
|
|
|
|
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NET LOSS AVAILABLE TO COMMON SHAREHOLDERS |
|
$ |
(41,714 |
) |
|
$ |
(3,448 |
) |
|
$ |
(111,348 |
) |
|
$ |
(23,001 |
) |
|
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|
|
|
|
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PER SHARE COMMON STOCK: |
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|
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Net loss diluted |
|
$ |
(1.21 |
) |
|
$ |
(0.18 |
) |
|
$ |
(4.58 |
) |
|
$ |
(1.21 |
) |
Net loss basic |
|
|
(1.21 |
) |
|
|
(0.18 |
) |
|
|
(4.58 |
) |
|
|
(1.21 |
) |
Cash dividends declared |
|
|
0.00 |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
0.33 |
|
Average shares outstanding diluted |
|
|
34,571,200 |
|
|
|
19,030,758 |
|
|
|
24,299,915 |
|
|
|
18,981,944 |
|
Average shares outstanding basic |
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34,571,200 |
|
|
|
19,030,758 |
|
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|
24,299,915 |
|
|
|
18,981,944 |
|
See notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
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|
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Nine Months Ended |
|
|
|
September 30, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Interest received |
|
$ |
78,178 |
|
|
$ |
98,436 |
|
Fees and commissions received |
|
|
14,508 |
|
|
|
17,397 |
|
Interest paid |
|
|
(22,716 |
) |
|
|
(39,094 |
) |
Cash paid to suppliers and employees |
|
|
(55,110 |
) |
|
|
(53,031 |
) |
Income taxes paid |
|
|
(14 |
) |
|
|
(3,481 |
) |
Trading securities activity |
|
|
0 |
|
|
|
14,000 |
|
Origination of loans held for sale |
|
|
(129,233 |
) |
|
|
(161,231 |
) |
Proceeds of loans held for sale |
|
|
125,541 |
|
|
|
162,190 |
|
Net change in other assets |
|
|
562 |
|
|
|
470 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
11,716 |
|
|
|
35,656 |
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Maturities of securities available for sale |
|
|
74,683 |
|
|
|
23,244 |
|
Maturities of securities held for investment |
|
|
8,589 |
|
|
|
2,775 |
|
Proceeds from sale of securities available for sale |
|
|
56,663 |
|
|
|
13,391 |
|
Purchases of securities available for sale |
|
|
(147,506 |
) |
|
|
(52,593 |
) |
Net new loans and principal repayments |
|
|
70,514 |
|
|
|
57,294 |
|
Proceeds from sale of loans |
|
|
10,755 |
|
|
|
47,147 |
|
Proceeds from the sale of other real estate owned |
|
|
3,105 |
|
|
|
533 |
|
Proceeds from sale of Federal Home Loan Bank and Federal Reserve Bank stock |
|
|
181 |
|
|
|
0 |
|
Purchase of Federal Home Loan Bank and Federal Reserve Bank stock |
|
|
(1,276 |
) |
|
|
(174 |
) |
Additions to bank premises and equipment |
|
|
(666 |
) |
|
|
(4,881 |
) |
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
75,042 |
|
|
|
86,736 |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Net decrease in deposits |
|
|
(49,142 |
) |
|
|
(148,515 |
) |
Net decrease in federal funds purchased and repurchase agreements |
|
|
(88,699 |
) |
|
|
(16,775 |
) |
Issuance of common stock, net of related expense |
|
|
70,466 |
|
|
|
0 |
|
Stock based employee benefit plans |
|
|
160 |
|
|
|
897 |
|
Dividends paid |
|
|
(580 |
) |
|
|
(6,291 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(67,795 |
) |
|
|
(170,684 |
) |
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
18,963 |
|
|
|
(48,292 |
) |
Cash and cash equivalents at beginning of period |
|
|
151,192 |
|
|
|
98,475 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
170,155 |
|
|
$ |
50,183 |
|
|
|
|
|
|
|
|
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Unaudited)
Seacoast Banking Corporation of Florida and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
Reconciliation of net loss to cash provided by operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(108,537 |
) |
|
$ |
(23,001 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Loss on impairment of goodwill |
|
|
49,813 |
|
|
|
0 |
|
Depreciation |
|
|
2,637 |
|
|
|
2,553 |
|
Amortization (accretion) of premiums and discounts on securities, net |
|
|
(1,193 |
) |
|
|
(401 |
) |
Other amortization and accretion |
|
|
822 |
|
|
|
349 |
|
Trading securities activity |
|
|
0 |
|
|
|
14,000 |
|
Change in loans held for sale, net |
|
|
(3,692 |
) |
|
|
959 |
|
Provision for loan losses |
|
|
83,253 |
|
|
|
57,978 |
|
Gains on sale of securities |
|
|
(3,211 |
) |
|
|
(355 |
) |
Gains on sale of loans |
|
|
(67 |
) |
|
|
(45 |
) |
Losses on sale and write-downs of other real estate owned |
|
|
2,264 |
|
|
|
315 |
|
Losses (gains) on disposition of fixed assets |
|
|
8 |
|
|
|
(103 |
) |
Change in interest receivable |
|
|
710 |
|
|
|
1,028 |
|
Change in interest payable |
|
|
(79 |
) |
|
|
(454 |
) |
Change in prepaid expenses |
|
|
502 |
|
|
|
89 |
|
Change in accrued taxes |
|
|
(10,909 |
) |
|
|
(18,370 |
) |
Change in other assets |
|
|
562 |
|
|
|
470 |
|
Change in other liabilities |
|
|
(1,167 |
) |
|
|
644 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
11,716 |
|
|
$ |
35,656 |
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing activities: |
|
|
|
|
|
|
|
|
Fair value adjustment to available for sale securities |
|
$ |
4,004 |
|
|
$ |
(3,859 |
) |
Transfer of loans to other real estate owned |
|
|
27,278 |
|
|
|
4,664 |
|
See notes to condensed consolidated financial statements.
6
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 nine-month period ended September 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.
The Company tests goodwill for impairment on an annual basis, or more often if events or
circumstances indicate there may be impairment. The Company engages external valuation specialists
to assist in the Companys 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 the Companys common
stock and the Companys net loss in the second quarter of 2009, we again tested for impairment of
goodwill as of June 30, 2009. The fair value of the Companys 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, the Company determined that the carrying amount of the
Company exceeded its fair value and that the entire amount of goodwill was impaired based on a
preliminary step two goodwill analysis. At September 30, 2009, the Company completed its step two
analysis of goodwill impairment which supported the conclusion reached at June 30, 2009.
7
NOTE B RECENT ACCOUNTING STANDARDS
FASB Accounting Standards Update No. 2009-01, Topic 105-Generally Accepted Accounting
Principles-amendments based on Statement of Financial Accounting Standards No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a
Replacement of FASB Statement No. 162, (ASU 2009-01)
ASU 2009-01 replaces FAS 162, The Hierarchy of Generally Accepted Accounting Principles and
establishes the FASB Accounting Standards Codification (the Codification) as the source of
authoritative accounting principles recognized by the FASB to be applied by non-governmental
entities in the preparation of financial statements in conformity with generally accepted
accounting principles. Rules and interpretive releases of the SEC under authority of federal
securities laws are also sources of authoritative guidance for SEC registrants. All guidance
contained in the Codification carries an equal level of authority. All non-grandfathered, non-SEC
accounting literature not included in the Codification is superseded and deemed non-authoritative.
ASU 2009-01 was effective for the Companys financial statements for periods ending after September
15, 2009 and did not have a significant impact on the Companys consolidated financial statements.
Accounting Standards Codification 805, Business Combinations (ASC 805 and formerly Statement of
Financial Accounting Standards No. 141, Business Combinations (Revised 2007),(FAS 141R))
FAS 141R was codified by the FASB as ASC 805 as a replacement to Statement of Financial Accounting
Standards No. 141, Business Combinations, (FAS 141) and applies to all transactions and other
events in which one entity obtains control over one or more other businesses. ASC 805 requires an
acquirer, upon initially obtaining control of another entity, to recognize the assets, liabilities
and any non-controlling interest in the acquired at fair value as of the acquisition date.
Contingent consideration is required to be recognized and measured at fair value on the date of
acquisition rather than at a later date when the amount of that consideration may be determinable
beyond a reasonable doubt. This fair value approach replaces the cost-allocation process
previously required whereby the cost of an acquisition was allocated to the individual
assets acquired and liabilities assumed based on their estimated fair value. ASC 805 requires
acquirers to expense acquisition-related costs as incurred rather than allocating such costs to the
assets acquired and liabilities assumed. Under ASC 805, the requirements of FASB Accounting
Standards Codification 420, Exit or Disposal Cost Obligations, (formerly Statement of Financial
Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities)
would have to be met in order to accrue for a restructuring plan in purchase accounting.
Pre-acquisition contingencies are to be recognized at fair value, unless it is a non-contractual
contingency that is not likely to materialize, in which case, nothing should be recognized in
purchase accounting and, instead, that contingency would be subject to the probable and
estimable recognition criteria of FASB Accounting Standards Codification 450, Contingencies
(formerly Statement of Financial Accounting Standards No. 5, Accounting for Contingencies).
ASC 805 is applicable to the Companys accounting for business combinations closing on or after
January 1, 2009.
8
Statement of Financial Accounting Standards No. 160, Non-controlling Interest in Consolidated
Financial Statements An Amendment of ARB No. 51 (FAS 160)
Issued during 2007, FAS 160 was codified by FASB into Accounting Standards Codification 810,
Consolidations, to establish accounting and reporting standards for the non-controlling interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling
interest in a subsidiary, which is sometimes referred to as minority interest, is an ownership
interest in the consolidated entity that should be reported as a component of equity in the
consolidated financial statements. Among other requirements, consolidated net income is required to
be reported at amounts that included the amounts attributable to both the parent and the
non-controlling interest. It also requires disclosure, on the face of the consolidated income
statement, of the amounts of consolidated net income attributable to the parent and to the
non-controlling interest. The Company adopted this guidance as of January 1, 2009, and it did not
have a significant impact on the Companys consolidated financial statements.
Accounting Standards Codification 815-10-50 Derivatives and Hedging Disclosures (ASC
815-10-50 and formerly Statement of Financial Accounting Standards No. 161, Disclosure about
Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133, (FAS 161)
FAS 161 was codified by FASB as ASC 815-10-50 to provide greater transparency about (i) how and why
an entity uses derivative instruments, (ii) how derivative instruments and related hedge items are
accounted for under FASB Accounting Standards Codification 815, Derivatives and Hedging and (iii)
how derivative instruments and related hedged items affect an entitys financial position, results
of operations and cash flows. To meet those objectives, ASC 815-10-50 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative disclosures about
fair value amounts of gains and losses on derivative instruments and disclosures about
credit-risk-related contingent features in derivative agreements. ASC 815-10-50 was effective for
the Company as of January 1, 2009. It did not have a significant impact on the Companys financial
statements.
Financial Accounting Standards Board Staff Position 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 (FSP 157-4)
FSP 157-4 was codified by FASB into the FASB Accounting Standards Codification 820 Fair Value
Measurements. (ASC 820). It was issued April 9, 2009 to provide guidance for determining fair
value when there is no active market or where price inputs represent distressed sales. It reaffirms
the fair value measurement objective that fair value represents how much an asset would be sold for
in an orderly transaction under current market conditions. The guidance was effective for interim
and annual periods ending after June 15, 2009. Early adoption for interim and annual periods ending
after March 15, 2009 was permitted. The Company adopted this guidance as of June 30, 2009. It did
not have a significant impact on the Companys consolidated financial statements.
9
Financial Accounting Standards Board Staff Position No. FAS 115-2 and FAS 124-2 Recognition and
Presentation of Other-Than-Temporary Impairments (FSP No. 115 -2)
FSP 115-2 was codified by FASB into the FASB Accounting Standards Codification 320, Investments -
Debt and Equity Securities. It was issued April 9, 2009 to provide additional guidance and create
greater clarity and consistency in accounting for impairment losses on securities. It replaces the
assertion of intent and ability to hold an impaired debt security until fair value recovers with
assertions that the holder does not intend to sell the security prior to recovery and that it is
more likely than not that the holder will not be required to sell the impaired security prior to
recovery. The full impairment loss is recognized in earnings if the holder is unable to make these
assertions. Otherwise, a credit loss portion of the impairment is recognized in earnings and the
remaining impairment is recognized in other comprehensive income (equity). Both the full
impairment and credit loss portion are presented on the face of the income statement. The guidance
is effective for interim and annual periods ending after June 15, 2009 and requires additional
disclosures in interim periods. Early adoption for interim and annual periods ending after March
15, 2009 was permitted. The Company adopted this guidance as of June 30, 2009. It did not have a
significant impact on the Companys consolidated financial statements.
FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments (FSP 107-1)
FSP 107-1 was codified into the FASB Accounting Standards Codification 820, Fair Value
Measurements (ASC 820) and enhances consistency in financial reporting by increasing the
frequency of fair value disclosures for any financial instruments that are not currently reflected
on the balance sheet at fair value. It requires disclosures in interim financial statements that
were previously only required in annual financial statements to provide qualitative and
quantitative information about fair value estimates. The guidance included in ASC 820 was effective
for interim and annual periods ending after June 15, 2009. Early adoption for interim and annual
periods ending after March 15, 2009 was permitted. The Company adopted the guidance included in ASC
820 as of June 30, 2009. It did not have a significant impact on the Companys consolidated
financial statements.
Financial Accounting Standards Board Staff Position No. EITF 03-6-1 Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP No.
EITF 03-6-1)
FSP No. EITF 03-6-1 provides that unvested share-based payment awards that contain non-forfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities
and shall be included in the computation of earnings per share pursuant to the two-class method.
FSP No. EITF 03-6-1 became effective on January 1, 2009 and was codified by FASB into the
Accounting Standards Codification 260, Earnings Per Share. It did not have a significant impact
on the Companys consolidated financial statements.
10
Accounting Standards Codification 855 Subsequent Events (ASC 855 and formerly Statement
of Financial Accounting Standards No. 165, Subsequent
Events (FAS 165)
On May 28, 2009, the FASB issued FAS 165 to provide authoritative accounting guidance on
managements assessment of subsequent events. FAS 165 was codified by FASB into ASC 855
which incorporates existing U.S. auditing literature and clarifies that management is responsible
for evaluating, as of each reporting period, events or transactions that occur after the balance
sheet date through the date that the financial statements are issued or are available to be issued.
ASC 855 was effective for the Company as of June 30, 2009 and did not have a significant impact on
the Companys financial statements.
Statement of Financial Accounting Standards No. 166, Accounting for Transfers of Financial Assets
- an amendment to Statement No. 140, (FAS 166)
FAS 166 amends FAS 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, to enhance reporting about transfers of financial assets,
including securitizations, and where companies have continuing exposure to the risks related to
transferred financial assets. FAS 166 eliminates the concept of a qualifying special-purpose
entity and changes the requirements for derecognizing financial assets. FAS 166 also requires
additional disclosures about all continuing involvement with transferred financial assets including
information about gains and losses resulting from transfers during the period. FAS 166 will be
effective January 1, 2010 and is not expected to have a significant impact on the Companys
financial statements. The FASB has not yet codified FAS 166.
Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation No.
46(R), (FAS 167)
FAS 167 amends FIN 46 (Revised December 2003), Consolidation of Variable Interest Entities, to
change how a company determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. The determination of whether
a company is required to consolidate an entity is based on, among other things, an entitys purpose
and design and a companys ability to direct the activities of the entity that most significantly
impact the entitys economic performance. FAS 167 requires additional disclosures about the
reporting entitys involvement with variable-interest entities and any significant changes in risk
exposure due to that involvement as well as its affect on the entitys financial statements. FAS
167 will be effective January 1, 2010 and is not expected to have a significant impact on the
Companys consolidated financial statements. The FASB has not yet codified FAS 167.
Accounting Standards Update No. 2009-05, Topic 820 Fair Value Measurements and Disclosures -
Measuring Liabilities at Fair Value (ASU 2009-05)
ASU 2009-05 provides clarification that the fair value measurement of liabilities in which a quoted
price in an active market for the identical liability is not available should be developed based on
a valuation technique that uses the quoted price of the identical liability when traded as an asset
or quoted prices for similar liabilities when traded as assets or another valuation technique that
is consistent with the principles of Topic 820 Fair Value Measurements and Disclosures. ASU
2009-05 also clarifies that there is no requirement to adjust the fair value related to the
existence of a restriction that prevents the transfer of the liability and that both a quoted price
in an active market for the identical liability at the measurement date and the quoted price for
the identical liability when traded as an asset in an active market when no adjustments to the
quoted price of the asset are required are Level 1 fair value measurements. This guidance was
effective for the Company as of September 30, 2009 and did not have a significant impact
on the Companys consolidated financial statements.
11
Accounting Standards Update No. 2009-12, Topic 820 Fair Value Measurements and Disclosures -
Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU
2009-12)
ASU 2009-12 permits, as a practical expedient, fair value of an investment that is within the scope
of the ASU such as hedge funds, private equity funds, real estate funds, venture capital funds,
offshore fund vehicles and fund of funds to be measured based on the net asset value of the
investment or its equivalent as of the reporting entitys measurement date. It also requires
certain disclosures including any restrictions on the investors ability to redeem its investments
at the measurement date, any unfunded commitments and the investment strategies of the investees.
ASU 2009-12 is effective for interim and annual periods ending December 15, 2009. Early application
is permitted. The Company will adopt ASU 2009-12 as of December 31, 2009 and it is not expected to
have a significant impact on the Companys consolidated financial statements.
NOTE C COMPREHENSIVE INCOME (LOSS)
At September 30, 2009 and 2008, comprehensive income (loss) was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(Dollars in thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net loss |
|
$ |
(40,777 |
) |
|
$ |
(3,448 |
) |
|
$ |
(108,537 |
) |
|
$ |
(23,001 |
) |
Unrealized gains (losses) on
securities available for sale
(net of tax) |
|
|
2,851 |
|
|
|
(2,426 |
) |
|
|
3,497 |
|
|
|
(2,265 |
) |
Net reclassification adjustment |
|
|
(908 |
) |
|
|
0 |
|
|
|
(1,047 |
) |
|
|
(138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
$ |
(38,834 |
) |
|
$ |
(5,874 |
) |
|
$ |
(106,087 |
) |
|
$ |
(25,404 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
12
NOTE D BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE
Equivalent shares of 558,000 and 918,000 related to stock options and stock settled appreciation
rights for the periods ended September 30, 2009 and 2008, respectively, were excluded from the
computation of diluted EPS because they would have been anti-dilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(Dollars in thousands, except per share data) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders |
|
$ |
(41,714 |
) |
|
$ |
(3,448 |
) |
|
$ |
(111,348 |
) |
|
$ |
(23,001 |
) |
Average shares outstanding |
|
|
34,571,200 |
|
|
|
19,030,758 |
|
|
|
24,299,915 |
|
|
|
18,981,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS |
|
$ |
(1.21 |
) |
|
$ |
(0.18 |
) |
|
$ |
(4.58 |
) |
|
$ |
(1.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders |
|
$ |
(41,714 |
) |
|
$ |
(3,448 |
) |
|
$ |
(111,348 |
) |
|
$ |
(23,001 |
) |
Average shares outstanding |
|
|
34,571,200 |
|
|
|
19,030,758 |
|
|
|
24,299,915 |
|
|
|
18,981,944 |
|
Net effect of employee restricted stock,
stock options and stock settled
appreciation rights |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
34,571,200 |
|
|
|
19,030,758 |
|
|
|
24,299,915 |
|
|
|
18,981,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS |
|
$ |
(1.21 |
) |
|
$ |
(0.18 |
) |
|
$ |
(4.58 |
) |
|
$ |
(1.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
13
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 ASC 820,
formerly 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. In April 2009, the FASB issued ASC 820, formerly 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, and it provides additional guidance for estimating fair value
when the volume and level of activity for an asset or liability has significantly decreased. In
addition, it includes guidance on identifying circumstances that indicate a transaction is not
orderly. Under ASC 820, fair value measurements for items measured at fair value at September 30,
2009 and 2008 included:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
Markets for |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Identical |
|
|
Observable |
|
|
Unobservable |
|
|
|
Fair Value |
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
(Dollars in thousands) |
|
Measurements |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
September 30, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities |
|
$ |
342,742 |
|
|
|
|
|
|
$ |
342,742 |
|
|
|
|
|
Loans held for sale |
|
|
5,857 |
|
|
|
|
|
|
|
5,857 |
|
|
|
|
|
Loans (1) |
|
|
121,762 |
|
|
|
|
|
|
|
17,707 |
|
|
$ |
104,055 |
|
Derivative product assets, net |
|
|
77 |
|
|
|
|
|
|
|
77 |
|
|
|
|
|
Other real estate owned (2) |
|
|
26,819 |
|
|
|
|
|
|
|
26,819 |
|
|
|
|
|
September 30, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities |
|
$ |
267,661 |
|
|
|
|
|
|
$ |
267,661 |
|
|
|
|
|
Loans held for sale |
|
|
2,701 |
|
|
|
|
|
|
|
2,701 |
|
|
|
|
|
Loans (1) |
|
|
68,620 |
|
|
|
|
|
|
|
8,052 |
|
|
$ |
60,568 |
|
Derivative product assets, net |
|
|
28 |
|
|
|
|
|
|
|
28 |
|
|
|
|
|
Other real estate owned (2) |
|
|
4,551 |
|
|
|
|
|
|
|
4,551 |
|
|
|
|
|
|
|
|
(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 ASC 310, formerly 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 ASC 360, formerly SFAS No.
144. |
14
For derivative product assets and loans held for sale, the realized and unrealized gains and losses
are included in earnings in noninterest income or net interest income, as appropriate, and were not
material for the nine-month periods ended September 30, 2009 and 2008.
In April 2009, the FASB issued ASC 825 which 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 September 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
|
Carrying |
|
|
|
|
(Dollars in thousands) |
|
Value |
|
|
Fair Value |
|
Financial Assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
170,155 |
|
|
$ |
170,155 |
|
Securities |
|
|
362,038 |
|
|
|
361,612 |
|
Loans, net |
|
|
1,455,716 |
|
|
|
1,463,885 |
|
Loans held for sale |
|
|
5,857 |
|
|
|
5,857 |
|
Derivative product assets |
|
|
77 |
|
|
|
77 |
|
Financial Liabilities |
|
|
|
|
|
|
|
|
Deposit liabilities |
|
|
1,761,287 |
|
|
|
1,772,018 |
|
Borrowings |
|
|
133,850 |
|
|
|
130,305 |
|
Subordinated debt |
|
|
53,610 |
|
|
|
17,160 |
|
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 September 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. The estimated fair value is not an exit
price fair value under ASC 820 when this valuation technique is used.
Loans held for sale: Fair values are based upon estimated values to be received from independent
third party purchasers.
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 funding of similar remaining maturities.
15
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 September 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 |
|
$ |
59,755 |
|
|
$ |
0 |
|
|
$ |
38,839 |
|
|
$ |
0 |
|
Impaired loans with an allowance |
|
|
110,335 |
|
|
|
16,533 |
|
|
|
38,252 |
|
|
|
8,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
|
$ |
170,090 |
|
|
$ |
16,533 |
|
|
$ |
77,091 |
|
|
$ |
8,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans also include loans that have been modified in troubled debt restructurings
where concessions to borrowers who experienced financial difficulties have been granted and the
impairment has been measured using discounted cash flows.
The valuation allowance is included in the allowance for loan losses. Where appropriate the
impaired loans were measured for impairment based 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 September 30, 2009 and 2008 were
$153,981,000 and $48,000, respectively, for 2009 and $75,793,000 and $1,297,000, respectively for
2008.
16
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.
The Company has evaluated events from the date of the consolidated financial statements on
September 30, 2009 through the issuance of those consolidated financial statements included in this
Quarterly Report on Form 10-Q on November 9, 2009. No events were identified requiring
recognition and/or disclosure in the consolidated financial statements.
As a result of the public issuance of common stock the Company has notified Treasury to reduce the
Warrant it holds to purchase common stock by 50% to 589,625 shares.
NOTE H REGULATORY CAPITAL
A common stock offering was completed during the third quarter of 2009 and added 33.7 million in
new common shares and resulted in $70.5 million in additional Tier 1 common equity, net of issuance
costs. In addition, the Company expects to close a firm commitment from a private equity firm in
the fourth quarter of 2009 for 6 million shares and $13.5 million gross proceeds.
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 September 30, 2009, 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.
Seacoast National 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 had 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. During the third quarter, the
Companys banking subsidiary utilized an additional $33.0 million in letters of credit issued by
the FHLB with similar terms, and an annual fee of $16,500. No interest cost is associated with the
letters of credit.
17
NOTE J SECURITIES
The amortized cost and fair value of securities available for sale and held to maturity at
September 30, 2009 and December 31, 2008 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 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 |
|
$ |
1,196 |
|
|
$ |
2 |
|
|
$ |
|
|
|
$ |
1,198 |
|
Mortgage-backed securities of Government Sponsored Entities |
|
|
49,514 |
|
|
|
1,452 |
|
|
|
|
|
|
|
50,966 |
|
Collateralized mortgage obligations of Government Sponsored Entities |
|
|
210,826 |
|
|
|
7,310 |
|
|
|
(240 |
) |
|
|
217,896 |
|
Private collateralized mortgage obligations |
|
|
68,566 |
|
|
|
772 |
|
|
|
(2,032 |
) |
|
|
67,306 |
|
Obligations of state and political subdivisions |
|
|
2,021 |
|
|
|
82 |
|
|
|
(1 |
) |
|
|
2,102 |
|
Other |
|
|
3,274 |
|
|
|
|
|
|
|
|
|
|
|
3,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
335,397 |
|
|
$ |
9,618 |
|
|
$ |
(2,273 |
) |
|
$ |
342,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES HELD FOR INVESTMENT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations of Government Sponsored Entities |
|
$ |
493 |
|
|
$ |
|
|
|
$ |
|
|
|
|
493 |
|
Private collateralized mortgage obligations |
|
|
14,096 |
|
|
|
59 |
|
|
|
(564 |
) |
|
|
13,591 |
|
Obligations of state and political subdivisions |
|
|
4,707 |
|
|
|
81 |
|
|
|
(2 |
) |
|
|
4,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,296 |
|
|
$ |
140 |
|
|
$ |
(566 |
) |
|
$ |
18,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the nine-month period ended September
30, 2009, were $56,663,000 with gross gains of $3,211,000 and no losses. Proceeds from sales of
securities available for sale for the nine-month period ended September 30, 2008, were $13,391,000
with gross gains of $355,000 and no losses.
Securities with a carrying value of $269,875,000 and $273,032,000 and a fair value of $269,881,000
and $272,993,000 at September 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 September 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 |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,196 |
|
|
$ |
1,198 |
|
Due after one year through five years |
|
|
1,472 |
|
|
|
1,484 |
|
|
|
|
|
|
|
|
|
Due after five years through ten years |
|
|
2,524 |
|
|
|
2,552 |
|
|
|
791 |
|
|
|
836 |
|
Due after ten years |
|
|
711 |
|
|
|
750 |
|
|
|
1,230 |
|
|
|
1,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,707 |
|
|
|
4,786 |
|
|
|
3,217 |
|
|
|
3,300 |
|
Mortgage-backed securities of Government
Sponsored Entities |
|
|
|
|
|
|
|
|
|
|
49,514 |
|
|
|
50,966 |
|
Collateralized mortgage obligations of
Government Sponsored Entities |
|
|
493 |
|
|
|
493 |
|
|
|
210,826 |
|
|
|
217,896 |
|
Private collateralized mortgage obligations |
|
|
14,096 |
|
|
|
13,591 |
|
|
|
68,566 |
|
|
|
67,306 |
|
No contractual maturity |
|
|
|
|
|
|
|
|
|
|
3,274 |
|
|
|
3,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,296 |
|
|
$ |
18,870 |
|
|
$ |
335,397 |
|
|
$ |
342,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
All of the Companys securities at September 30, 2009 and December 31, 2008 which had unrealized
losses were obligations of the state and political subdivisions, U.S. Government agencies or
private label collateralized mortgage related securities. Management expects that all principal
will be repaid at a par value at the date of maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 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 |
|
$ |
21,439 |
|
|
$ |
(240 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
21,439 |
|
|
$ |
(240 |
) |
Private collateralized mortgage
obligations |
|
|
7,510 |
|
|
|
(164 |
) |
|
|
29,037 |
|
|
|
(2,432 |
) |
|
|
36,547 |
|
|
|
(2,596 |
) |
Obligations of state and political
subdivisions |
|
|
|
|
|
|
|
|
|
|
1,549 |
|
|
|
(3 |
) |
|
|
1,549 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities |
|
$ |
28,949 |
|
|
$ |
(404 |
) |
|
$ |
30,586 |
|
|
$ |
(2,435 |
) |
|
$ |
59,535 |
|
|
$ |
(2,839 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
During the second quarter 2009, the Company adopted ASC 320 formerly FSP FAS 115-2 and FAS
124-2 Recognition and Presentation of Other-Than-Temporary Impairments.
The Company owned individual investment securities of $59.5 million with aggregate gross unrealized
losses at September 30, 2009. Based on a review of each of the securities in the investment
securities portfolio at September 30, 2009, the Company concluded that it expected to recover the
amortized cost basis of its investment.
Approximately $2.6 million of the unrealized losses pertain to super senior private label
securities secured by collateral originated prior to 2005 with a fair value of $36.5 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 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 $240,000 of unrealized losses on mortgage-backed securities of government
sponsored entities having a fair value of $21.4 million that 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
$3,000 at September 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 cost basis of these
securities.
21
As of September 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 September 30, 2009.
Included in other assets are $13.9 million and $12.8 million at September 30, 2009 and December 31,
2008, respectively, of Federal Home Loan Bank and Federal Reserve Bank stock stated at par value.
At September 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 $13.9 million of cost method investment
securities.
NOTE K INCOME TAXES
The tax benefit for the net loss for the third quarter totaled $15.7 million. A deferred tax
valuation allowance was recorded in a like amount, and therefore there was no change in the
carrying value of net deferred tax assets which are supported by tax planning strategies. Should
the economy show signs of improvement and the Companys credit losses moderate in the future,
increased reliance on managements forecast of future taxable earnings could result in realization
of additional future tax benefits.
22
|
|
|
Item 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
THIRD 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. 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 and in the second quarter opened one new branch in Brevard County on Murrell Road.
Branch additions to bank premises and equipment over the past twelve months have been more than
offset by depreciation of $3.5 million over the same period, resulting in a decrease in bank
premises and equipment (net) of $1,254,000 at September 30, 2009, compared to September 30, 2008.
EARNINGS SUMMARY
Net loss available to common shareholders for the third quarter of 2009 totaled $(41,714,000) or
$(1.21) per average common diluted share, as a result of continued increased credit costs. This
compares to $(63,937,000) or $(3.35) per average common share in the second quarter of 2009 which
included the write-off of $49.8 million of all of the Companys goodwill (see Goodwill Impairment
under Critical Accounting Estimates) and $(5,697,000) or $(0.30) per average common diluted share
in the first quarter of 2009. In the third quarter a year ago, net loss available to common
shareholders totaled $(3,448,000) or ($0.18) per average common diluted share.
As forecasted, the net interest margin continued to improve, increasing by 9 basis points during
the third quarter of 2009 from the second quarter of 2009, and by 21 basis points during the second
quarter of 2009 from the first quarter of 2009, after improving 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 and its continuance of historically low interest rates, as well as our improved mix of
deposits. The average cost of interest bearing liabilities was 15 basis points lower for the third
quarter of 2009, compared to second quarter 2009, 40 basis points lower for the second quarter of
2009, compared to first quarter 2009, and was 47 basis points lower for the first quarter of 2009,
compared to fourth quarter 2008, a total reduction of 102 basis points.
23
The improved mix of deposits reflects the continued success of our retail deposit growth
initiatives. Signs of improved stability in home prices and greater transaction volumes increased
fee income from residential real estate production during the first, second and third quarters of
2009.
Noninterest expenses increased by $0.5 million versus the prior years third quarter result, and
were up $52.7 million for the nine-month period ended September 30, 2009, compared to 2008. The
increase for the nine-month period was primarily a result of our write-off of $49.8 million of
goodwill (see Goodwill Impairment under Critical Accounting Estimates) and a special Federal
Deposit Insurance Corporation (FDIC) assessment of $996,000. We have managed our controllable
overhead, with noninterest expenses (excluding the write-off of goodwill and the increase in FDIC
assessments) virtually unchanged versus a year ago. While reductions in overhead occurred in
salaries and wages, employee benefits, outsourced data processing costs, furniture and equipment
expenses and marketing expenses, these reductions were almost entirely offset by higher legal and
professional fees and costs to manage and liquidate foreclosed and repossessed property, reflecting
economic conditions.
Our provision for loan losses was substantially higher than in the first and second quarter of
2009, with $45.4 million of provision for loan losses for the third quarter of 2009 compared to
$26.2 million and $11.7 million for the second and first quarter of 2009, respectively. Provisions
for loans losses were higher year over year for the first nine months of 2009 as a result of higher
net charge-offs for 2009 and the Company increasing its allowance for loan losses to loans
outstanding ratio to 3.25 percent, or 138 basis points since September 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:
|
|
|
the allowance and the provision for loan losses; |
|
|
|
the fair value and other than temporary impairment of securities; |
|
|
|
realization of deferred tax assets; |
|
|
|
goodwill impairment; and |
|
|
|
contingent liabilities. |
24
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.
Allowance and Provision for Loan Losses
The information contained on pages 32-35 and 42-50 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 Available for
Sale
At September 30, 2009, securities designated as available for sale totaled $342,742,000. The fair
value of the available for sale portfolio at September 30, 2009 was more than historical amortized
cost, producing net unrealized gains of $7,345,000 that have been included in other comprehensive
income (loss) 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, second or third
quarters of 2009. The fair value of each security available for sale 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 $2.1 million of states and their political subdivisions
securities, as of September 30, 2009, generally are traded in highly liquid markets. Obligations
of U.S. Treasury and U.S. Government agencies total $270 million, or 78.8 percent of the total
portfolio. The remainder of the portfolio primarily consists of super senior private label
securities secured by collateral originated prior to 2005. 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, on occasion pricing provided by the pricing services may not be consistent
with other observed prices in the market for similar securities. Using observable market inputs,
including interest rate and yield curves, volatilities, prepayment speeds, loss severities and
default rates, the Company may at times validate the observed prices using a discounted cash flow
model and using the observed prices for similar securities to determine the fair value of its
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.
25
The Company also holds stock in the Federal Home Loan Bank of Atlanta (FHLB) totaling $7.1
million as of September 30, 2009, slightly less than at year-end 2008. The FHLB eliminated its
dividend for the first quarter of 2009 but has since reinstated dividends, 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 ASC 942 formerly 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 September
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 the 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 September 30, 2009 continue to decline, totaling 3.8
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 ultimately allow for 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 from a forecast of future taxable
income. 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. As a result of the third quarter loss a
tax benefit of $15.7 million was recorded, however the Company also increased its DTA valuation
allowance by the same amount. Should the economy show signs of improvement and our credit losses
moderate, we anticipate that we could place increased reliance on our forecast of future taxable
earnings, which would result in realization of additional future tax benefits.
26
Goodwill Impairment
After completing a second step goodwill impairment analysis during the third quarter of 2009, the
preliminary conclusion that the entire value of goodwill was impaired in the second quarter of 2009
was confirmed.
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.
RESULTS OF OPERATIONS
NET INTEREST INCOME
Net interest income (on a fully taxable equivalent basis) for the third quarter of 2009 totaled
$19,101,000, increasing from 2009s second quarter by $114,000 or 0.6 percent, but lower than third
quarter 2008s result by $85,000 or 0.4 percent. The following table details net interest income
and margin results (on a tax equivalent basis) for the past five quarters:
|
|
|
|
|
|
|
|
|
|
|
Net Interest |
|
|
Net Interest |
|
|
|
Income |
|
|
Margin |
|
(Dollars in thousands) |
|
(tax equivalent) |
|
|
(tax equivalent) |
|
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 |
|
Third quarter 2009 |
|
|
19,101 |
|
|
|
3.74 |
|
27
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 and 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 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third |
|
|
Second |
|
|
First |
|
|
Fourth |
|
|
Third |
|
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
|
2009 |
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2008 |
|
|
|
(Dollars in thousands) |
|
Non-taxable interest income |
|
$ |
105 |
|
|
$ |
135 |
|
|
$ |
139 |
|
|
$ |
141 |
|
|
$ |
145 |
|
Tax Rate |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
Net interest income (TE) |
|
$ |
19,101 |
|
|
$ |
18,987 |
|
|
$ |
18,241 |
|
|
$ |
17,535 |
|
|
$ |
19,186 |
|
Total net interest income (not TE) |
|
|
19,051 |
|
|
|
18,920 |
|
|
|
18,174 |
|
|
|
17,467 |
|
|
|
19,117 |
|
Net interest margin (TE) |
|
|
3.74 |
% |
|
|
3.65 |
% |
|
|
3.44 |
% |
|
|
3.32 |
% |
|
|
3.57 |
% |
Net interest margin (not TE) |
|
|
3.73 |
|
|
|
3.64 |
|
|
|
3.43 |
|
|
|
3.31 |
|
|
|
3.56 |
|
Net interest margin on a tax equivalent basis improved 9 basis points to 3.74 percent for the
third quarter of 2009 compared to the second quarter of 2009, and was higher by 17 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 third quarter of 2009, average loans (the
highest yielding component of earning assets) as a percentage of average earning assets totaled
77.6 percent, compared to 84.2 percent a year ago. Average securities as a percent of average
earning assets increased from 13.3 percent a year ago to 17.6 percent during third quarter 2009 and
federal funds sold and other investments increased to 4.8 percent from 2.5 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 55.6
percent of total loans at September 30, 2009 (compared to 60.1 percent a year ago at September 30,
2008). This reflects our reduced exposure to commercial construction and land development loans on
residential properties, which declined by $134.8 million from September 30, 2008 to September 30,
2009. Lower yielding residential loan balances with individuals (including home equity loans and
lines, and personal construction loans) represented 39.9 percent of total loans at September 30,
2009 (versus 35.6 percent a year ago) (see Loan Portfolio).
28
The yield on earning assets for the third quarter 2009 was 4.98 percent, 80 basis points lower than
for third 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3rd |
|
|
2nd |
|
|
1st |
|
|
4th |
|
|
3rd |
|
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
|
2009 |
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2008 |
|
Yield |
|
|
4.98 |
% |
|
|
5.03 |
% |
|
|
5.16 |
% |
|
|
5.45 |
% |
|
|
5.78 |
% |
The yield on loans declined 75 basis points to 5.26 percent over the last twelve months.
Nonaccrual loans totaling $154.0 million or 10.2 percent of total loans at September 30, 2009,
versus $75.8 million or 4.3 percent of total loans a year ago, reduced the yield on our loan
portfolio. The yield on investment securities was lower as well, decreasing 6 basis points year
over year to 4.93 percent, due primarily to purchases of securities at lower yields available in
current markets, which diluted the overall portfolio yield year over year. The decline in yield on
investment securities was less severe than the decline of 22 basis points reported year over year
for second quarter 2009 and the 64 basis points decrease reported year over year for first quarter
2009, reflecting recent securities purchases at higher yields that improved the overall yield for
the third quarter by 7 basis points from second quarter 2009, and second quarter 2009s yield by 35
basis points from first quarter 2009. Federal funds sold and other investments yielded 0.67
percent for the third quarter 2009, lower when compared to 2.41 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 third quarter of 2009 decreased $63.6 million or 3.0 percent
compared to the second quarter of 2009. Average loan balances decreased $60.5 million or 3.7
percent to $1,571.2 million and average investment securities were $8.1 million or 2.2 percent
lower, totaling $355.5 million, average federal funds sold and other investments increased $5.1
million or 5.5 percent to $97.2 million. The decline in average earning assets is consistent with
reduced funding as a result of seasonal declines during the summer in public fund sweep repurchase
agreements.
Commercial and commercial real estate loan production for the first nine months of 2009 totaled $15
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. 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 September 30, 2009 the Companys total commercial and commercial real
estate loan pipeline was $46 million, versus $108 million at September 30, 2008.
Closed residential mortgage loan production for the third quarter of 2009 totaled $28 million, all
of it was sold servicing-released. In comparison, $43 million in residential loans were produced
in the second quarter of 2009, of which $24 million was sold servicing-released, $38 million in
residential loans were produced in the first quarter of 2009, with $20 million sold
servicing-released, and $22 million was produced in the third quarter of 2008, with $8 million sold
servicing released. Applications for residential mortgages totaled $43 million during the third
quarter of 2009 compared to $71 million and $92 million, respectively, for the second and first
quarters of 2009. Third quarter is historically a seasonally weak quarter for home purchases.
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 and into
2010.
29
During the third and second quarter of 2009, the sale of mortgage backed securities totaling $25.3
million and $29.5 million, respectively, resulted in securities gains of $1,425,000 and $1,786,000,
respectively, for each quarter. Management believed these securities had minimal opportunity to
further increase in value. During the third quarter of 2009 maturities (principally pay-downs)
totaled $25.4 million and securities portfolio purchases totaled $47.3 million. In comparison,
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.
The cost of average interest-bearing liabilities in the third quarter of 2009 decreased 15 basis
points to 1.50 percent from second quarter 2009 and was 114 basis points lower than for the third
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3rd |
|
|
2nd |
|
|
1st |
|
|
4th |
|
|
3rd |
|
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
Quarter |
|
|
|
2009 |
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2008 |
|
Rate |
|
|
1.50 |
% |
|
|
1.65 |
% |
|
|
2.05 |
% |
|
|
2.52 |
% |
|
|
2.64 |
% |
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, second and third quarter of 2009.
We have gained customers. A total of 1,622 new households were added in the third quarter of 2009,
up 10.2 percent compared to the second quarter of 2009, and comparing to 1,566 new households in
the third quarter of 2008. The improved deposit mix and lower rates paid on interest bearing
deposits during the third quarter of 2009 reduced the overall cost of interest bearing deposits to
1.47 percent, 20 basis points lower than in the second quarter of 2009 and 113 basis points lower
than in the third 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) totaled 52.7 percent in the third quarter of 2009, although this was
lower than the average of 56.3 percent a year ago, as a result of customers shifting balances from
these lower rate products to certificates in this low interest rate environment. The average rate
for lower cost interest bearing deposits for the third quarter of 2009 was 0.58 percent, down by 13
basis points from the second quarter of 2009 and down 122 basis points from the third quarter of
2008. Certificate of deposit (CD) rates paid were also lower compared to the second quarter of
2009 and third quarter of 2008, lower by 35 basis points and 119 basis points, respectively, and
averaged 2.45 percent for the third quarter of 2009. Average CDs (the highest cost component of
interest bearing deposits) were 47.3 percent of interest bearing deposits for third quarter 2009, a
higher percentage than a year ago when the percentage was 43.7 percent.
30
Average deposits totaled $1,737.9 million during the third quarter of 2009, and were $35.2 million
lower compared to second quarter 2009, due primarily to lower average customer balances as a result
of normal seasonal declines and a planned reduction of brokered deposits of $9 million. Total
average sweep repurchase agreements for the third quarter were $50.5 million lower as a result of
normal seasonal funding trends for public fund customers. Total average deposits plus sweep
repurchase agreements totaled $1,824.2 million during the third quarter of 2009, down $85.7 million
or 4.5 percent from second quarter 2009. Average total deposits declined $139.9 million or 7.5
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). The average aggregate
amounts of NOW, savings and money market balances decreased $121.1 million or 13.6 percent to
$771.3 million for third quarter 2009 compared to third quarter 2008, noninterest bearing deposits
decreased $20.0 million or 6.8 percent to $274.0 million, and average CDs increased by $1.1 million
or 0.2 percent to $692.6 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 allows 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 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.
Average short-term borrowings have been principally comprised of sweep repurchase agreements with
customers of the Companys bank subsidiary, which decreased $50.5 million or 36.9 percent from the
second quarter of 2009 but increased $3.5 million or 4.3 percent from the third 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; these public funds reach their normal seasonal lows during the third quarter each year.
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 $65.1 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, which has assisted in maintaining a
stable net interest margin. Reductions in nonperforming assets also are expected to aid in
increasing the Companys future net interest margin.
31
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 ASC 310 formerly 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 ASC 450 formerly SFAS No. 5, Accounting for Contingencies. For the
third quarter ended September 30, 2009, the provision for loan losses was $45.4 million, higher
than 2008s third quarter provision for loan losses of $10.2 million, and higher than the $11.7
million and $26.2 million in provisioning for the first and second quarter of 2009, respectively.
The provision for loan losses was $5.2 million more than net charge-offs of $40.1 million. Net
charge-offs were 10.14 percent of average total loans in the third quarter of 2009. In the first
and second quarter of 2009, provisions for loan losses were $11.1 million and $3.1 million more
than net charge-offs of $15.1 million (or 3.71 percent of average total loans) and $8.5 million (or
2.07 percent of average total loans), respectively. In comparison, net charge-offs were $4.4
million, $33.5 million and $9.3 million in the first, second and third 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 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 $135 million from September 30, 2008 and now represent 3.8 percent of
total loans at September 30, 2009. The reduction in the Companys exposure should reduce earnings
volatility from this portfolio in the future.
32
The following table details the Companys reduced exposure to large residential construction and
land development loans over the past five quarters, as evidenced by loans in this portfolio with
balances of $4 million or more declining by almost 82 percent from $98.3 million at September 30,
2008 to $17.8 million, or approximately 7 percent of risk-based capital, at September 30, 2009.
All of the remaining $17.8 million in loans greater than $4 million are classified as
nonperforming, and of the $39.8 million in loans less than $4 million, $16.4 million or 41.2
percent are nonperforming:
QUARTERLY TRENDS LOANS AT END OF PERIOD
(Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
2008 |
|
|
2009 |
|
|
Nonperforming |
|
|
|
|
|
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
3rd Qtr |
|
|
No. |
|
Residential Construction and
Land Development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
>$4 mil |
|
$ |
19.6 |
|
|
$ |
8.6 |
|
|
$ |
8.4 |
|
|
$ |
7.9 |
|
|
$ |
5.3 |
|
|
$ |
5.3 |
|
|
|
1 |
|
|
|
<$4 mil |
|
|
13.0 |
|
|
|
8.8 |
|
|
|
7.9 |
|
|
|
8.8 |
|
|
|
3.7 |
|
|
|
0.9 |
|
|
|
1 |
|
Town homes |
|
>$4 mil |
|
|
17.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<$4 mil |
|
|
4.6 |
|
|
|
6.1 |
|
|
|
4.2 |
|
|
|
2.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Single Family Residences |
|
>$4 mil |
|
|
13.5 |
|
|
|
11.9 |
|
|
|
6.6 |
|
|
|
6.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
<$4 mil |
|
|
23.7 |
|
|
|
14.9 |
|
|
|
13.9 |
|
|
|
10.3 |
|
|
|
7.1 |
|
|
|
1.8 |
|
|
|
10 |
|
Single Family Land & Lots |
|
>$4 mil |
|
|
40.3 |
|
|
|
22.1 |
|
|
|
21.8 |
|
|
|
21.8 |
|
|
|
5.9 |
|
|
|
5.9 |
|
|
|
1 |
|
|
|
<$4 mil |
|
|
29.9 |
|
|
|
30.7 |
|
|
|
29.6 |
|
|
|
21.5 |
|
|
|
19.5 |
|
|
|
9.5 |
|
|
|
21 |
|
Multifamily |
|
>$4 mil |
|
|
7.8 |
|
|
|
7.8 |
|
|
|
7.8 |
|
|
|
7.8 |
|
|
|
6.6 |
|
|
|
6.6 |
|
|
|
1 |
|
|
|
<$4 mil |
|
|
22.9 |
|
|
|
19.0 |
|
|
|
17.0 |
|
|
|
9.8 |
|
|
|
9.5 |
|
|
|
4.2 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
>$4 mil |
|
|
98.3 |
|
|
|
50.4 |
|
|
|
44.6 |
|
|
|
44.0 |
|
|
|
17.8 |
|
|
|
17.8 |
|
|
|
3 |
|
TOTAL |
|
<$4 mil |
|
|
94.1 |
|
|
|
79.5 |
|
|
|
72.6 |
|
|
|
52.7 |
|
|
|
39.8 |
|
|
|
16.4 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GRAND TOTAL |
|
|
|
|
|
$ |
192.4 |
|
|
$ |
129.9 |
|
|
$ |
117.2 |
|
|
$ |
96.7 |
|
|
$ |
57.6 |
|
|
$ |
34.2 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
After completing a review of internally criticized commercial real estate exposures late in the
third quarter, a number of performing loans were identified that may not be able to continue to
perform in accordance with existing repayment terms. These loans were placed on nonaccrual status
and evaluated for impairment. This action contributed to the increase in nonperforming loans. It
is anticipated that many of these loans will be restructured in the next few months as troubled
debt restructures or sold.
During the third quarter of 2009, the commercial real estate portfolio (not related to residential
construction and land development) nonaccrual loans increased from $2.1 million at June 30, 2009 to
$21.8 million at September 30, 2009, and nonaccrual loans for commercial real estate mortgages
increased from $19.7 million at June 30, 2009 to $53.3 million at September 30, 2009. Of the $21.7
million in commercial construction and land development loans and $53.3 million in commercial real
estate mortgages on nonaccrual, $12.9 million and $28.8 million, respectively, were performing at
September 30, 2009.
33
Since year-end 2008, nonaccrual loans increased by $67.0 million to $154.0 million at September 30,
2009, and were $78.2 million higher than at September 30, 2008 (see Nonperforming Assets). Loans
declined $221.7 million or 11.7 percent during 2008 and have declined an additional $172.2 million
or 10.3 percent since year-end 2008 (see Loan Portfolio). For the remainder of 2009, the
Companys loan portfolio is expected to experience further declines.
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 236 applications were accepted in the third quarter of
2009 for total residential mortgage loans of $43 million, and 966 applications were taken in the
first nine months for $208 million. Closed residential mortgage loans totaled $28 million for the
quarter, compared to $38 million and $43 million for the first and second quarters of 2009,
respectively. In addition, a total of 73 applications were received seeking restructured
mortgages, compared to 93 and 102 in the first and second quarters of 2009, respectively. 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 $4,627,000 for the third
quarter of 2009, $178,000 or 3.7 percent lower than the second quarter of 2009 and $533,000 or 10.3
percent lower than the third quarter of 2008. Noninterest income accounted for 19.5 percent of
total revenue (net interest income plus noninterest income, excluding securities gains or losses)
in the third quarter of 2009 compared to 21.3 percent a year ago. Noninterest income for the third
quarter of 2009, the second quarter of 2009, and third quarter of 2008 is detailed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3rd Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposits |
|
$ |
1,732 |
|
|
$ |
1,562 |
|
|
$ |
1,894 |
|
Trust income |
|
|
517 |
|
|
|
480 |
|
|
|
597 |
|
Mortgage banking fees |
|
|
337 |
|
|
|
488 |
|
|
|
216 |
|
Brokerage commissions and fees |
|
|
326 |
|
|
|
388 |
|
|
|
452 |
|
Marine finance fees |
|
|
249 |
|
|
|
331 |
|
|
|
371 |
|
Debit card income |
|
|
674 |
|
|
|
673 |
|
|
|
620 |
|
Other deposit-based EFT fees |
|
|
73 |
|
|
|
85 |
|
|
|
82 |
|
Merchant income |
|
|
371 |
|
|
|
448 |
|
|
|
510 |
|
Other income |
|
|
348 |
|
|
|
350 |
|
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,627 |
|
|
$ |
4,805 |
|
|
$ |
5,160 |
|
|
|
|
|
|
|
|
|
|
|
34
For 2009, third quarter revenues from the Companys wealth management services businesses (trust
and brokerage) decreased year over year, by $206,000 or 19.6 percent, and were $25,000 or 2.9
percent below second quarter 2009s result. Of the $206,000 decrease, trust revenue was lower by
$80,000 or 13.4 percent and brokerage commissions and fees were lower by $126,000 or 27.9 percent.
Included in the $126,000 decline in brokerage commissions and fees was a decline of $102,000 in
revenue from insurance annuity sales year over year reflecting the lower interest rate environment,
and a $15,000 reduction in brokerage commissions. Lower inter vivos trust and agency fees were the
primary cause for the decline in trust income, as these decreased $11,000 and $62,000,
respectively, from 2008, as well as lower testamentary fee income, which decreased $6,000.
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 nine months ended September 30, 2009, income from the Companys wealth management
services was $770,000 or 22.5 percent lower compared to 2008.
Service charges on deposits for third quarter 2009 are $162,000 or 8.6 percent lower year over year
versus third quarter 2008, but were $170,000 or 10.9 percent above second quarter 2009s service
charges. Overdraft income was the primary cause, as this declined $148,000 compared to the third
quarter of 2008 and increased $172,000 compared to the second quarter of 2009. Overdraft fees
represented approximately 78 percent of total service charges on deposits for the third quarter
2009, comparable 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 $677,000 year over
year to $4,879,000.
For the third quarter of 2009, fees from the non-recourse sale of marine loans originated by our
Seacoast Marine Division of Seacoast National decreased $122,000, or 32.9 percent, compared to the
third quarter of 2008, and were lower by $82,000 compared to second quarter 2009. Year to date
marine finance fees are $1,061,000 or 53.4 percent lower when compared to results for the first
nine months of 2008. The Seacoast Marine Division originated $20 million in loans during the first
and second quarters of 2009, and $15 million during the third quarter of 2009 (a total of $55
million year-to-date), compared to $44 million, $55 million and $24 million in each of the first,
second and third quarters of 2008, respectively, and $123 million for the first nine months of
2008. 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 third quarter 2009, debit card
income increased $54,000 or 8.7 percent from third quarter a year ago, and was nominally higher
than second quarter 2009s income. Other deposit-based electronic funds transfer (EFT) income
decreased $9,000 or 11.0 percent in 2009, compared to third quarter 2008, and decreased $12,000 or
14.1 percent from second 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.
35
Merchant income was $139,000 or 27.3 percent lower for the third quarter of 2009, compared to one
year earlier, and $77,000 or 17.2 percent lower than for the second 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 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 nine months of 2009, merchant income was $557,000 or 29.1 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 third quarter of 2009 increased $121,000
or 56.0 percent from the third quarter of 2008, and were $151,000 less than in the second quarter
of 2009. Mortgage banking fees year-to-date were $390,000 or 41.8 percent higher than for the
first nine 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 and 2010
as tighter credit and reduced capital have limited the ability of some of
our competitors. The Company also began offering FHA loans during the second quarter of 2009, a
product previously not offered.
Other income for the third quarter of 2009 decreased $70,000 or 16.7 percent compared to third
quarter a year ago, and was nominally lower than second quarter 2009s result. Most line items in
other income were slightly lower year over year, including research fees, wire transfer fees,
letter of credit fees, foreign exchange fees, late fees, and miscellaneous other fees. For the
first nine months of 2009, other income declined $374,000 or 25.8 percent when compared to 2008.
The comparison of other income between the first nine months of 2009 and the same period of 2008,
was affected by $305,000 of additional income 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 third quarter of 2008, total noninterest expenses increased by $520,000 or 2.6
percent to $20,506,000, and were $719,000 or 3.4 percent lower than second quarter 2009s expenses,
excluding the write-off for goodwill impairment totaling $49,813,000. For the nine months ended
September 30, 2009 excluding the impairment write-down of goodwill of $49,813,000, noninterest
expenses were $2,909,000 or 5.0 percent higher versus a year ago, totaling $61,066,000.
Noninterest expenses year-to-date for 2009 include a special assessment imposed by the Federal
Deposit Insurance Corporation (FDIC) in the second quarter totaling $996,000, and deposit
insurance premiums that were $1,920,000 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 expense reductions implemented and effective as of January 1, 2009.
Salaries, wages and benefits (excluding one-time severance payments) declined $1,561,000 or 16.6
percent from a year ago for the third quarter, and were $3,818,000 or 13.4 percent lower for the
first nine 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, furniture and equipment expenses, and marketing, all of which declined compared to the
prior year.
36
Salaries and wages for the third quarter of 2009 decreased by $1,115,000 or 14.5 percent to
$6,598,000 compared to the prior year same period, and for the nine month period ended September
30, 2009, were $2,829,000 or 12.3 percent lower. Reduced headcount (including the branch
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 third quarter of 2009 totaled $142,000, which were $38,000 more than the same
period of 2008. Base salaries were $739,000 lower year over year, and 10.7 percent lower than in
the third quarter of 2008. Full-time equivalent employees (FTEs) totaled 413 at September 30,
2009, 13.6 percent less than the 478 FTEs at September 30, 2008.
Employee benefit costs decreased $408,000 or 23.1 percent to $1,362,000 from the third quarter of
2008, and were $628,000 or 11.4 percent lower for the nine months ended September 30, 2009. The
Company recognized higher claims experience in the first six months of 2009 for its
self-funded health care plan compared to 2008, with the expectation that these costs would 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. During
the third quarter of 2009, the Company in fact had improved experience, with group health care
costs declining $148,000 or 15.1 percent compared to third quarter 2008 and $316,000 or 27.6
percent from second quarter 2009s costs. In addition to these benefit cost decreases, we achieved
a $55,000 reduction in payroll taxes year over year compared to third quarter 2008 and profit
sharing accruals for the Companys 401K plan were reduced by $205,000.
Outsourced data processing costs totaled $1,705,000 for the third quarter of 2009, a decrease of
$98,000 or 5.4 percent from a year ago. For the latest nine months, outsourced data processing
costs were 6.9 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 $116,000 lower than a year ago for the third quarter, and were $171,000 lower the first and
second quarters of 2009, an aggregate decline of $458,000. 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.
37
Total occupancy, furniture and equipment expenses decreased $65,000 or 2.3 percent to $2,747,000
versus third quarter results last year, and were $116,000 or 1.4 percent lower for the nine months
ended September 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
third quarter of 2009, lease payments for bank premises decreased $53,000 year over year and
depreciation was $26,000 lower, partially offset by repair and maintenance costs increasing
$18,000.
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, increased by $94,000 or 17.2 percent to $639,000 when
compared to a year ago for the third quarter, but were $466,000 or 23.1 percent lower for the nine
months ended September 30, 2009, versus a year ago. Agency production, printing and media costs
(including newspaper, radio and television) were $115,000 higher for the third quarter 2009,
compared to 2008 for the same period. Sales promotion and public relations costs were higher as
well, by $10,000 and $25,000, respectively, reflecting branding efforts in the community.
Partially offsetting, market research, business meals and donations, were lower by $16,000, $18,000
and $22,000, respectively, than the third quarter of 2008. For the nine months ended September 30,
2008, marketing cost reductions in agency related costs, donations, market research, public
relations and business meals were $242,000, $66,000, $41,000, $68,000 and $81,000, respectively,
were realized year over year.
Legal and professional fees totaled $1,653,000 for the third quarter of 2009, a decrease of $34,000
or 2.0 percent from the third quarter of 2008. Legal fees were $147,000 higher year over year,
primarily due to problem asset resolution. Regulatory examination fees and CPA fees
on an aggregate basis were $135,000 lower for 2009, as were professional fees by $46,000, compared
to the third quarter of 2008. Legal and professional fees were $1,103,000 or 31.1 percent higher
in the first nine months of 2009 compared to the same period last year, primarily because of an
increase in legal fees of $1,172,000 due to problem asset resolution.
In addition, professional fees have been higher during this period of increased regulatory
compliance. The Company used the consulting services of a former bank regulator who is on the
Seacoast Nationals Board of Directors (non-independent director) to assist the Bank with its
compliance with the formal agreement and its recent regulatory examination. For the three months
and nine months ended September 30, 2009 the Bank paid $140,000 and $385,000 respectively, for
these services.
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 quarter and third quarter of 2008 totaled $392,000
and $543,000, respectively, whereas FDIC assessments for the first, second and third quarters of
2009 totaled $877,000, $2,026,000 and $1,007,000, respectively. The second quarter 2009 assessment
included 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 FDIC recently approved a prepayment of assessments for the next
three years plus fourth quarter 2009s assessment in December 2009. The Company anticipates that
FDIC insurance costs are likely to rise, with more special assessments possible over time due to
declines in the FDICs Deposit Insurance Fund.
38
Net losses on other real estate owned and other asset dispositions totaled $2,065,000 for the third
quarter of 2009, versus $255,000 a year ago for the third quarter. For the nine month period ended
September 30, 2009, net losses were $4,007,000, compared to $841,000 for the nine-month period
ended September 30, 2008. Other real estate owned grew during the quarter and while the pace of
growth in nonaccrual loans is expected to moderate, costs associated with the management of other
real estate owned and other repossessed assets will likely be heightened as problem assets migrate
toward liquidation.
Remaining noninterest expenses decreased $128,000 or 4.5 percent to $2,730,000 when comparing the
third quarter of 2009 to the same quarter a year ago, and decreased $71,000 or 0.9 percent to
$8,136,000 when comparing the first nine 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 nine months of 2009 were telephone and data lines (up $17,000), correspondent bank
clearing charges (up $152,000, 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 $143,000, reflecting more frequent meetings than a year ago), employee placement fees (up
$69,000, principally headhunter fees), and higher losses associated with robbery and customer fraud
(up $324,000). More than offsetting were decreases
in expenditures for stationery, printing and supplies (down $120,000), postage and courier costs
(down $52,000, primarily overnight services), insurance costs (down $131,000, including property
and casualty as well as other liability coverage), education (down $25,000, with fewer education
programs offered internally), travel related costs (down $152,000, including mileage reimbursement,
airline and hotel costs), bank paid closing costs (down $80,000, as home equity line costs paid by
Seacoast National have been limited), and origination fees for marine loan production (down
$171,000).
INCOME TAXES
Income tax benefits year to date 2009 were 10.0 percent of loss before taxes, compared to 32.6
percent for all of 2008. The lower benefit for 2009 resulted primarily from no tax benefit on the
goodwill impairment of $49.8 million and a valuation allowance that offset the tax benefit for the
third quarter of 2009.
The tax benefit for the net loss for the third quarter totaled $15.7 million. The deferred tax
valuation allowance was increased by a like amount, and therefore there was no change in the
carrying value of deferred tax assets which are supported by tax planning strategies. Should the
economy show signs of improvement and our credit losses moderate, we anticipate that we could place
increased reliance on our forecast of future taxable earnings, which would result in realization of
additional future tax benefits.
39
FINANCIAL CONDITION
CAPITAL RESOURCES
The Companys ratio of shareholders equity to period end total assets was 8.43 percent at
September 30, 2009, compared with 9.33 percent at December 31, 2008, and 8.29 percent one year
earlier at September 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.
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 determined 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 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.
40
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.
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. In addition,
during the third quarter of 2009, the Company successfully enhanced capital by selling $89 million
in Company common stock, with approximately $76 million supplementing capital during the quarter.
An additional $13 million from this sale of Company common stock is expected to settle in the
fourth quarter of 2009. As a result, the Companys capital position remains strong with a total
risk-based capital ratio of 16.21 percent at September 30, 2009, higher than December 31, 2008s
ratio of 14.00 percent and higher than 11.69 percent at September 30, 2008.
As a result of the public issuance of common stock the Company has notified Treasury to reduce the
Warrant it holds to purchase common stock by 50% to 589,625 shares.
At September 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* |
|
September 30, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 capital ratio |
|
|
14.94 |
% |
|
|
11.89 |
% |
|
|
6 |
% |
Total risk-based
capital ratio |
|
|
16.21 |
% |
|
|
13.17 |
% |
|
|
10 |
% |
Tier 1 leverage ratio |
|
|
10.38 |
% |
|
|
8.26 |
% |
|
|
5 |
% |
|
|
|
* |
|
For subsidiary bank only |
41
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.
LOAN PORTFOLIO
Total loans (net of unearned income) were $1,504,566,000 at September 30, 2009, $238,060,000 or
13.7 percent less than at September 30, 2008, and $172,162,000 or 10.3 percent less than at
December 31, 2008. The following table details loan portfolio composition at September 30, 2009,
December 31, 2008 and September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sept. 30, |
|
|
Dec. 31, |
|
|
Sept. 30, |
|
(In thousands) |
|
2009 |
|
|
2008 |
|
|
2008 |
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
57,663 |
|
|
$ |
129,899 |
|
|
$ |
192,460 |
|
Commercial |
|
|
128,636 |
|
|
|
209,297 |
|
|
|
226,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186,299 |
|
|
|
339,196 |
|
|
|
419,223 |
|
Individuals |
|
|
41,812 |
|
|
|
56,047 |
|
|
|
65,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
228,111 |
|
|
|
395,243 |
|
|
|
484,989 |
|
Real estate mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
325,912 |
|
|
|
328,992 |
|
|
|
316,484 |
|
Fixed rate |
|
|
89,456 |
|
|
|
95,456 |
|
|
|
93,385 |
|
Home equity mortgages |
|
|
83,929 |
|
|
|
84,810 |
|
|
|
84,357 |
|
Home equity lines |
|
|
59,664 |
|
|
|
58,502 |
|
|
|
59,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
558,961 |
|
|
|
567,760 |
|
|
|
553,918 |
|
Commercial real estate |
|
|
584,515 |
|
|
|
557,705 |
|
|
|
539,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,143,476 |
|
|
|
1,125,465 |
|
|
|
1,093,324 |
|
Commercial and financial |
|
|
65,954 |
|
|
|
82,765 |
|
|
|
88,549 |
|
Installment loans to individuals |
|
|
66,739 |
|
|
|
72,908 |
|
|
|
75,296 |
|
Other loans |
|
|
286 |
|
|
|
347 |
|
|
|
468 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,504,566 |
|
|
$ |
1,676,728 |
|
|
|
$1,742,626 |
|
|
|
|
|
|
|
|
|
|
|
Overall loan growth was negative when comparing outstanding balances at September 30, 2009 to
September 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 improved, and we seek better earnings performance
and reduced risk in future quarters.
42
As shown in the table above, commercial real estate mortgage loans increased $45,109,000 or 8.4
percent from September 30, 2008 to $584,515,000 at September 30, 2009 while residential mortgage
loans combined increased $5,043,000 or 0.9 percent to $558,961,000. More than offsetting the net
increase in real estate mortgages were declines from September 30, 2008 in residential construction
and land development loans of $134,797,000 or 70.0 percent to $57,663,000 at September 30, 2009,
commercial construction and land development loans of $98,127,000 or 43.3 percent to $128,636,000,
residential construction and lot loans to individuals of $23,954,000 or 36.4 percent to
$41,812,000, commercial and financial loans of $22,595,000 or 25.5 percent to $65,954,000, and
installment loans to individuals of $8,557,000 or 11.4 percent to $66,739,000 at September 30,
2009.
Construction and land development loans, including loans secured by commercial real estate, were
comprised of the following types of loans at September 30, 2009 and September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30 |
|
2009 |
|
|
2008 |
|
(In millions) |
|
Funded |
|
|
Unfunded |
|
|
Total |
|
|
Funded |
|
|
Unfunded |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
9.0 |
|
|
$ |
0.2 |
|
|
$ |
9.2 |
|
|
$ |
32.6 |
|
|
$ |
4.2 |
|
|
$ |
36.8 |
|
Town homes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21.7 |
|
|
|
|
|
|
|
21.7 |
|
Single family residences |
|
|
7.1 |
|
|
|
1.4 |
|
|
|
8.5 |
|
|
|
37.2 |
|
|
|
7.1 |
|
|
|
44.3 |
|
Single family land & lots |
|
|
25.4 |
|
|
|
0.4 |
|
|
|
25.8 |
|
|
|
70.2 |
|
|
|
0.4 |
|
|
|
70.6 |
|
Multifamily |
|
|
16.1 |
|
|
|
|
|
|
|
16.1 |
|
|
|
30.7 |
|
|
|
12.6 |
|
|
|
43.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57.6 |
|
|
|
2.0 |
|
|
|
59.6 |
|
|
|
192.4 |
|
|
|
24.3 |
|
|
|
216.7 |
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
13.8 |
|
|
|
0.6 |
|
|
|
14.4 |
|
|
|
27.8 |
|
|
|
2.1 |
|
|
|
29.9 |
|
Retail trade |
|
|
23.0 |
|
|
|
0.9 |
|
|
|
23.9 |
|
|
|
68.5 |
|
|
|
8.9 |
|
|
|
77.4 |
|
Land |
|
|
50.8 |
|
|
|
0.9 |
|
|
|
51.7 |
|
|
|
73.9 |
|
|
|
11.7 |
|
|
|
85.6 |
|
Industrial |
|
|
8.2 |
|
|
|
0.4 |
|
|
|
8.6 |
|
|
|
20.7 |
|
|
|
0.6 |
|
|
|
21.3 |
|
Healthcare |
|
|
4.8 |
|
|
|
1.5 |
|
|
|
6.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Marina |
|
|
28.1 |
|
|
|
0.2 |
|
|
|
28.3 |
|
|
|
30.5 |
|
|
|
3.9 |
|
|
|
34.4 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.4 |
|
|
|
0.9 |
|
|
|
6.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128.7 |
|
|
|
4.5 |
|
|
|
133.2 |
|
|
|
226.8 |
|
|
|
28.1 |
|
|
|
254.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
186.3 |
|
|
|
6.5 |
|
|
|
192.8 |
|
|
|
419.2 |
|
|
|
52.4 |
|
|
|
471.6 |
|
Individuals: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
30.7 |
|
|
|
|
|
|
|
30.7 |
|
|
|
38.4 |
|
|
|
|
|
|
|
38.4 |
|
Construction |
|
|
11.1 |
|
|
|
6.8 |
|
|
|
17.9 |
|
|
|
27.4 |
|
|
|
11.6 |
|
|
|
39.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41.8 |
|
|
|
6.8 |
|
|
|
48.6 |
|
|
|
65.8 |
|
|
|
11.6 |
|
|
|
77.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
228.1 |
|
|
$ |
13.3 |
|
|
$ |
241.4 |
|
|
$ |
485.0 |
|
|
$ |
64.0 |
|
|
$ |
549.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
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. |
43
The following is the geographic location of the Companys construction and land development loans
(excluding loans to individuals) totaling $186,299,000 at September 30, 2009 and $419,223,000 at
September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
% of Total |
|
|
|
Construction |
|
|
|
and Land Development |
|
|
|
Loans |
|
Florida County |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Palm Beach |
|
|
24.6 |
|
|
|
18.7 |
|
St. Lucie |
|
|
13.8 |
|
|
|
16.2 |
|
Indian River |
|
|
11.9 |
|
|
|
11.4 |
|
Brevard |
|
|
9.3 |
|
|
|
6.5 |
|
Highlands |
|
|
8.4 |
|
|
|
3.7 |
|
Miami-Dade |
|
|
8.2 |
|
|
|
2.3 |
|
Volusia |
|
|
6.7 |
|
|
|
5.2 |
|
Martin |
|
|
4.6 |
|
|
|
11.0 |
|
Orange |
|
|
3.4 |
|
|
|
7.3 |
|
Broward |
|
|
2.7 |
|
|
|
1.5 |
|
Okeechobee |
|
|
1.7 |
|
|
|
1.8 |
|
Collier |
|
|
1.6 |
|
|
|
0.7 |
|
Marion |
|
|
1.0 |
|
|
|
0.6 |
|
Hendry |
|
|
0.8 |
|
|
|
0.4 |
|
Charlotte |
|
|
0.5 |
|
|
|
0.7 |
|
Lake |
|
|
0.3 |
|
|
|
0.7 |
|
Pinellas |
|
|
0.3 |
|
|
|
0.0 |
|
Bradford |
|
|
0.0 |
|
|
|
0.7 |
|
Dade |
|
|
0.0 |
|
|
|
3.7 |
|
Osceola |
|
|
0.0 |
|
|
|
3.6 |
|
Lee |
|
|
0.0 |
|
|
|
2.9 |
|
Other |
|
|
0.2 |
|
|
|
0.4 |
|
|
|
|
|
|
|
|
Total |
|
|
100.0 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
The Companys ten largest commercial real estate funded and unfunded loan relationships at
September 30, 2009 aggregated to $174.9 million (versus $232.5 million a year ago) and for the top
45 commercial real estate relationships in excess of $5 million the aggregate funded and unfunded
totaled $441.6 million (compared to 54 relationships aggregating to $618.3 million a year ago).
44
Commercial real estate mortgage loans, excluding construction and development loans, were comprised
of the following loan types at September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30 |
|
2009 |
|
|
2008 |
|
(In millions) |
|
Funded |
|
|
Unfunded |
|
|
Total |
|
|
Funded |
|
|
Unfunded |
|
|
Total |
|
Office buildings |
|
$ |
144.2 |
|
|
$ |
1.5 |
|
|
$ |
145.7 |
|
|
$ |
143.6 |
|
|
$ |
2.2 |
|
|
$ |
145.8 |
|
Retail trade |
|
|
151.4 |
|
|
|
|
|
|
|
151.4 |
|
|
|
101.6 |
|
|
|
1.1 |
|
|
|
102.7 |
|
Industrial |
|
|
89.3 |
|
|
|
2.0 |
|
|
|
91.3 |
|
|
|
92.2 |
|
|
|
1.6 |
|
|
|
93.8 |
|
Healthcare |
|
|
25.4 |
|
|
|
0.6 |
|
|
|
26.0 |
|
|
|
31.6 |
|
|
|
0.8 |
|
|
|
32.4 |
|
Churches and educational facilities |
|
|
30.8 |
|
|
|
0.1 |
|
|
|
30.9 |
|
|
|
35.6 |
|
|
|
0.1 |
|
|
|
35.7 |
|
Recreation |
|
|
3.3 |
|
|
|
0.5 |
|
|
|
3.8 |
|
|
|
1.8 |
|
|
|
0.4 |
|
|
|
2.2 |
|
Multifamily |
|
|
35.1 |
|
|
|
0.7 |
|
|
|
35.8 |
|
|
|
19.2 |
|
|
|
0.7 |
|
|
|
19.9 |
|
Mobile home parks |
|
|
5.6 |
|
|
|
|
|
|
|
5.6 |
|
|
|
3.1 |
|
|
|
|
|
|
|
3.1 |
|
Lodging |
|
|
25.6 |
|
|
|
|
|
|
|
25.6 |
|
|
|
26.7 |
|
|
|
0.1 |
|
|
|
26.8 |
|
Restaurant |
|
|
5.0 |
|
|
|
|
|
|
|
5.0 |
|
|
|
8.6 |
|
|
|
|
|
|
|
8.6 |
|
Agriculture |
|
|
12.0 |
|
|
|
1.2 |
|
|
|
13.2 |
|
|
|
8.7 |
|
|
|
0.4 |
|
|
|
9.1 |
|
Convenience Stores |
|
|
22.8 |
|
|
|
|
|
|
|
22.8 |
|
|
|
23.6 |
|
|
|
|
|
|
|
23.6 |
|
Other |
|
|
34.0 |
|
|
|
0.5 |
|
|
|
34.5 |
|
|
|
43.1 |
|
|
|
1.2 |
|
|
|
44.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
584.5 |
|
|
$ |
7.1 |
|
|
$ |
591.6 |
|
|
$ |
539.4 |
|
|
$ |
8.6 |
|
|
$ |
548.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate and adjustable rate loans secured by commercial real estate, excluding construction
loans, totaled approximately $361 million and $224 million, respectively, at September 30, 2009,
compared to $310 million and $229 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 September 30, 2009, approximately $326 million
or 58 percent of the Companys residential mortgage loan balances were adjustable, compared to $316
million or 57 percent a year ago. Loans secured by residential properties having fixed rates
totaled approximately $173 million at September 30, 2009, of which 15- and 30-year mortgages
totaled approximately $32 million and $58 million, respectively. The remaining fixed rate balances
were 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 September 30,
2009. In comparison, loans secured by residential properties having fixed rates totaled
approximately $178 million at September 30, 2008, with 15- and 30-year fixed rate residential
mortgages totaling approximately $37 million and $56 million, respectively.
Commercial loans decreased and totaled $65,954,000 at September 30, 2009, compared to $88,549,000 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.
45
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 $66,739,000 (versus $75,296,000 a year ago), real estate construction
loans to individuals secured by residential properties totaling $11,071,000 (versus $27,392,000 a
year ago), and residential lot loans to individuals totaling $30,741,000 (versus $38,374,000 a year
ago).
At September 30, 2009, the Company had commitments to make loans (excluding unused home equity
lines of credit) of $105,486,000, compared to $191,812,000 at September 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 $48,850,000 at September 30, 2009, $16,202,000 greater than one
year earlier and $19,462,000 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 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.
Its estimate includes consideration of the level of unemployment which is incorporated into the
overall allowance. In addition, the portfolio is segregated into a graded loan portfolio,
residential, installment, home equity, and unsecured signature lines and loss factors are
calculated for each portfolio. The loss factors assigned to the graded loan portfolio are based on
historical migration of actual losses by grade and a range of losses over various periods. Loss
factors for the other portfolios are based on historical losses over prior 12 months and
prospective factors that consider loan type, delinquencies, loan to value, purpose of the loan, and
type of collateral.
46
In general, collateral values for residential real estate have declined since 2006 with values
being more stable over the last nine months. The decline in residential collateral values have
impacted our actual loan losses and are expected to continue to do so in the future. Loans
originated during the years 2005-2007 have seen property values decline approximately 50% from
their original appraised values with less stress on loans originated in other years. Residential
loans that become 90 days past due are placed on nonaccrual. A specific allowance is made for any
loan that becomes 120 days past due. Residential loans are subsequently written down if they
become 180 days past due supported by a current appraisal, consistent with current banking
regulations. Specific reserves and write downs are currently at 25% of all residential loans on
nonacrrual including an estimate for disposition costs.
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 1.87 percent at September 30,
2008 and 1.75 percent at December 31, 2008, to 3.25 percent at September 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, $15,109,000 in the second
quarter, and $40,142,000 in the third quarter, a total of $63,791,000 for the nine-month period
ended September 30, 2009. Net charge-offs over the nine-month period consisted of $30,905,000 in
net charge-offs related to nonperforming construction and land development loans, $11,382,000 in
net charge-offs for residential real estate mortgages, $18,861,000 in net charge-offs related to
commercial real estate mortgages, $1,906,000 in net charge-offs for commercial and financial loans,
and $737,000 in net charge-offs for installment loans to individuals. A year ago, net charge-offs
of $47,232,000 were recorded during the first nine months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
September 30, 2008 |
|
Nine Months Ended |
|
Charge- |
|
|
|
|
|
|
|
|
|
|
Charge- |
|
|
|
|
|
|
|
(In thousands) |
|
Offs |
|
|
Recoveries |
|
|
Net |
|
|
Offs |
|
|
Recoveries |
|
|
Net |
|
Construction and land development |
|
$ |
31,451 |
|
|
$ |
(546 |
) |
|
$ |
30,905 |
|
|
$ |
45,119 |
|
|
$ |
(1,855 |
) |
|
$ |
43,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate mortgages |
|
|
11,494 |
|
|
|
(112 |
) |
|
|
11,382 |
|
|
|
1,874 |
|
|
|
(40 |
) |
|
|
1,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate mortgages |
|
|
18,903 |
|
|
|
(42 |
) |
|
|
18,861 |
|
|
|
1,088 |
|
|
|
|
|
|
|
1,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and financial |
|
|
1,988 |
|
|
|
(82 |
) |
|
|
1,906 |
|
|
|
973 |
|
|
|
(172 |
) |
|
|
801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to individuals |
|
|
965 |
|
|
|
(228 |
) |
|
|
737 |
|
|
|
292 |
|
|
|
(47 |
) |
|
|
245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
64,801 |
|
|
$ |
(1,010 |
) |
|
$ |
63,791 |
|
|
$ |
49,346 |
|
|
$ |
(2,114 |
) |
|
$ |
47,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
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 September 30, 2009, the
Company had $1.372 billion in loans secured by real estate, representing 91.2 percent of total
loans, up slightly from 90.6 percent at September 30, 2008. In addition, the Company is subject to
a geographic concentration of 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 $186 million or 12.4 percent of
total loans at September 30, 2009, down from $419 million or 24.1 percent at September 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.
48
NONPERFORMING ASSETS
Nonperforming assets at September 30, 2009 totaled $180,800,000 and are comprised of $153,981,000
of nonaccrual loans and $26,819,000 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
$80,344,000 at September 30, 2008 (comprised of $75,793,000 of nonaccrual loans and $4,551,000 of
OREO). At September 30, 2009, virtually all nonaccrual loans were secured with real estate,
including $34.3 million of nonaccrual loans that are land and acquisition and development loans
related to the residential market. At September 30, 2009, nonaccrual loans have been written down
by approximately $64.6 million or 32 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
strategies, including troubled debt restructurings, where appropriate. The increase in nonaccrual
loans of $67.0 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, second and third 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 73 applications were received seeking restructured
residential mortgages during the third quarter of 2009, compared to 102 applications and 93
applications received during the second and first quarter of 2009, respectively, 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 $36.9 million at September 30, 2009, of
which $29.7 million were performing in accordance with their restructured terms. Accruing
restructured loans totaled $16.1 million at September 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual Loans |
|
|
Accruing |
|
September 30, 2009 |
|
Non- |
|
|
Per- |
|
|
|
|
|
|
Restructured |
|
(In thousands) |
|
Current |
|
|
forming |
|
|
Total |
|
|
Loans |
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
$ |
23,497 |
|
|
$ |
10,778 |
|
|
$ |
34,275 |
|
|
$ |
|
|
Commercial |
|
|
8,884 |
|
|
|
12,880 |
|
|
|
21,764 |
|
|
|
|
|
Individuals |
|
|
5,392 |
|
|
|
356 |
|
|
|
5,748 |
|
|
|
1,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,773 |
|
|
|
24,014 |
|
|
|
61,787 |
|
|
|
1,382 |
|
Residential real estate mortgages |
|
|
20,457 |
|
|
|
15,409 |
|
|
|
35,866 |
|
|
|
13,612 |
|
|
Commercial real estate mortgages |
|
|
24,502 |
|
|
|
28,824 |
|
|
|
53,326 |
|
|
|
226 |
|
|
Commercial and financial |
|
|
160 |
|
|
|
1,829 |
|
|
|
1,989 |
|
|
|
|
|
|
Installment loans to individuals |
|
|
1,013 |
|
|
|
|
|
|
|
1,013 |
|
|
|
841 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
83,905 |
|
|
$ |
70,076 |
|
|
$ |
153,981 |
|
|
$ |
16,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
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 September 30, 2009 the Company had $342,742,000 in securities available for sale and securities
held for investment carried at $19,296,000. The Companys securities portfolio increased
$65,257,000 or 22.0 percent from September 30, 2008, and $16,137,000 or 4.7 percent from December
31, 2008.
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
$350,757,000 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 $137,640,000 and $11,256,000
at September 30, 2009 and 2008, respectively, and were higher when compared to $105,190,000
outstanding at December 31, 2008, which reflects recent funding from the capital raise during the
third quarter of 2009.
At September 30, 2009, available for sale securities had gross losses of $2,273,000 and gross gains
of $9,618,000, compared to gross losses of $4,752,000 and gross gains of $1,391,000 at September
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, second and third 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 17 to 21 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.
50
DEPOSITS AND BORROWINGS
Total deposits decreased $77,505,000 or 4.2 percent to $1,761,287,000 at September 30, 2009
compared to one year earlier, reflecting declines in deposits of $52.3 million in the Companys
central Florida region as a result of reduced construction and development activities during 2008.
Since September 30, 2008, interest bearing deposits (NOW, savings and money markets deposits)
decreased $41,316,000 or 5.0 percent to $788,154,000, noninterest bearing demand deposits decreased
$21,654,000 or 7.6 percent to $264,092,000, and certificates of deposit (CDs) decreased
$14,535,000 or 2.0 percent to $709,041,000. Included in CDs, brokered time deposits increased
$15,369,000 to $55,469,000 at September 30, 2009 from prior year, of which $16,625,000 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.
Since year-end 2008 total deposits decreased by $49.2 million, with CDs declining by $23.9 million,
lower cost NOW, savings and money market interest-bearing deposits decreasing $14.1 million and
noninterest bearing deposits lower by $11.2 million. The decline in CDs was principally in
brokered CDs, which declined $45.0 million since year-end 2008 to $55.5 million at September 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.
Repurchase agreement balances increased over the past twelve months by $2,528,000 or 3.5 percent to
$68,797,000 at September 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. At
September 30, 2009, the number of sweep repurchase accounts was 208, compared to 251 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 September 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.
51
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 September 30, 2009 included derivative product assets of $77,000. In comparison, at
September 30, 2008 net derivative product assets of $28,000 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 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 $156 million at September 30, 2009 and $250 million at
September 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 1.4
percent if interest rates gradually rise 200 basis points over the next 12 months and 0.5 percent
if interest rates gradually rise 100 basis points.
52
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 32 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. In the event of severe market disruptions, we have access to secured
borrowings through the FHLB and the Federal Reserve Bank of Atlanta.
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 September 30, 2009, Seacoast National had
available lines of credit under current lendable collateral value, which is subject to change, of
$379 million. Seacoast National had $22 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 $252 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 $170,155,000 on a consolidated basis at September 30, 2009 as
compared to $50,183,000 at September 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 $6,412,000
or 16.5 percent to $32,515,000 and federal funds sold by $11,256,000 to zero, while
interest bearing deposits increased to $137,640,000 from zero. The interest bearing deposits are
maintained in our Seacoast Nationals account at the Federal Reserve Bank of Atlanta. 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.
53
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 September 30, 2009, the
Company had cash and cash equivalents at the parent of approximately $45 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 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.
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 |
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2007 |
|
|
|
4th Qtr |
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
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 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
QUARTERLY TRENDS LOANS AT END OF PERIOD (Continued) (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
57.2 |
|
|
$ |
47.4 |
|
|
$ |
32.6 |
|
|
$ |
17.4 |
|
Townhomes |
|
|
23.8 |
|
|
|
20.0 |
|
|
|
21.7 |
|
|
|
6.1 |
|
Single family residences |
|
|
56.7 |
|
|
|
49.5 |
|
|
|
37.2 |
|
|
|
26.8 |
|
Single family land and lots |
|
|
112.1 |
|
|
|
95.1 |
|
|
|
70.2 |
|
|
|
52.8 |
|
Multifamily |
|
|
32.6 |
|
|
|
34.0 |
|
|
|
30.7 |
|
|
|
26.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
282.4 |
|
|
|
246.0 |
|
|
|
192.4 |
|
|
|
129.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
29.1 |
|
|
|
31.1 |
|
|
|
27.8 |
|
|
|
17.3 |
|
Retail trade |
|
|
60.4 |
|
|
|
63.6 |
|
|
|
68.5 |
|
|
|
68.7 |
|
Land |
|
|
92.5 |
|
|
|
75.4 |
|
|
|
73.9 |
|
|
|
73.3 |
|
Industrial |
|
|
16.9 |
|
|
|
20.8 |
|
|
|
20.7 |
|
|
|
13.3 |
|
Healthcare |
|
|
1.0 |
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
Churches and educational facilities |
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
Lodging |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convenience stores |
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Marina |
|
|
26.8 |
|
|
|
28.9 |
|
|
|
30.5 |
|
|
|
30.7 |
|
Other |
|
|
11.3 |
|
|
|
6.3 |
|
|
|
5.4 |
|
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239.8 |
|
|
|
227.2 |
|
|
|
226.8 |
|
|
|
209.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
39.4 |
|
|
|
40.0 |
|
|
|
38.4 |
|
|
|
35.7 |
|
Construction |
|
|
32.4 |
|
|
|
27.1 |
|
|
|
27.4 |
|
|
|
20.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71.8 |
|
|
|
67.1 |
|
|
|
65.8 |
|
|
|
56.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total construction and land development |
|
|
594.0 |
|
|
|
540.3 |
|
|
|
485.0 |
|
|
|
395.2 |
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
Real estate mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
317.6 |
|
|
|
318.8 |
|
|
|
316.5 |
|
|
|
329.0 |
|
Fixed rate |
|
|
89.1 |
|
|
|
90.2 |
|
|
|
93.4 |
|
|
|
95.5 |
|
Home equity mortgages |
|
|
91.7 |
|
|
|
93.1 |
|
|
|
84.3 |
|
|
|
84.8 |
|
Home equity lines |
|
|
56.3 |
|
|
|
59.4 |
|
|
|
59.7 |
|
|
|
58.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
554.7 |
|
|
|
561.5 |
|
|
|
553.9 |
|
|
|
567.8 |
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
144.3 |
|
|
|
142.3 |
|
|
|
143.6 |
|
|
|
146.4 |
|
Retail trade |
|
|
83.8 |
|
|
|
93.5 |
|
|
|
101.6 |
|
|
|
111.9 |
|
Land |
|
|
|
|
|
|
|
|
|
|
0.6 |
|
|
|
|
|
Industrial |
|
|
104.3 |
|
|
|
93.3 |
|
|
|
92.2 |
|
|
|
94.7 |
|
Healthcare |
|
|
39.9 |
|
|
|
33.6 |
|
|
|
31.6 |
|
|
|
29.2 |
|
Churches and educational facilities |
|
|
40.2 |
|
|
|
36.5 |
|
|
|
35.6 |
|
|
|
35.2 |
|
Recreation |
|
|
2.8 |
|
|
|
1.8 |
|
|
|
1.8 |
|
|
|
1.7 |
|
Multifamily |
|
|
20.0 |
|
|
|
19.1 |
|
|
|
19.2 |
|
|
|
27.2 |
|
Mobile home parks |
|
|
3.2 |
|
|
|
3.1 |
|
|
|
3.1 |
|
|
|
3.0 |
|
Lodging |
|
|
27.9 |
|
|
|
28.0 |
|
|
|
26.7 |
|
|
|
26.6 |
|
Restaurant |
|
|
8.0 |
|
|
|
9.0 |
|
|
|
8.6 |
|
|
|
6.2 |
|
Agricultural |
|
|
12.4 |
|
|
|
9.0 |
|
|
|
8.7 |
|
|
|
8.5 |
|
Convenience stores |
|
|
23.1 |
|
|
|
24.9 |
|
|
|
23.6 |
|
|
|
23.5 |
|
Other |
|
|
40.1 |
|
|
|
41.6 |
|
|
|
42.5 |
|
|
|
43.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
550.0 |
|
|
|
535.7 |
|
|
|
539.4 |
|
|
|
557.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate mortgages |
|
|
1,104.7 |
|
|
|
1,097.2 |
|
|
|
1,093.3 |
|
|
|
1,125.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & financial |
|
|
93.9 |
|
|
|
94.8 |
|
|
|
88.5 |
|
|
|
82.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and trucks |
|
|
24.1 |
|
|
|
23.0 |
|
|
|
21.9 |
|
|
|
20.8 |
|
Marine loans |
|
|
33.3 |
|
|
|
25.2 |
|
|
|
26.0 |
|
|
|
26.0 |
|
Other |
|
|
27.5 |
|
|
|
27.9 |
|
|
|
27.4 |
|
|
|
26.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84.9 |
|
|
|
76.1 |
|
|
|
75.3 |
|
|
|
72.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
0.5 |
|
|
|
0.4 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,878.0 |
|
|
$ |
1,808.8 |
|
|
$ |
1,742.6 |
|
|
$ |
1,676.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
QUARTERLY TRENDS LOANS AT END OF PERIOD (Continued) (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
16.3 |
|
|
$ |
16.8 |
|
|
$ |
9.0 |
|
Townhomes |
|
|
4.2 |
|
|
|
2.3 |
|
|
|
|
|
Single family residences |
|
|
20.5 |
|
|
|
16.7 |
|
|
|
7.1 |
|
Single family land and lots |
|
|
51.4 |
|
|
|
43.3 |
|
|
|
25.4 |
|
Multifamily |
|
|
24.8 |
|
|
|
17.6 |
|
|
|
16.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117.2 |
|
|
|
96.7 |
|
|
|
57.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
17.4 |
|
|
|
13.8 |
|
|
|
13.8 |
|
Retail trade |
|
|
70.0 |
|
|
|
55.9 |
|
|
|
23.0 |
|
Land |
|
|
60.9 |
|
|
|
51.2 |
|
|
|
50.8 |
|
Industrial |
|
|
9.0 |
|
|
|
8.5 |
|
|
|
8.2 |
|
Healthcare |
|
|
5.7 |
|
|
|
6.0 |
|
|
|
4.8 |
|
Churches and educational facilities |
|
|
|
|
|
|
|
|
|
|
|
|
Lodging |
|
|
0.6 |
|
|
|
|
|
|
|
|
|
Convenience stores |
|
|
|
|
|
|
|
|
|
|
|
|
Marina |
|
|
31.6 |
|
|
|
30.0 |
|
|
|
28.1 |
|
Other |
|
|
6.2 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
201.4 |
|
|
|
166.8 |
|
|
|
128.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individuals |
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
34.0 |
|
|
|
32.4 |
|
|
|
30.7 |
|
Construction |
|
|
16.2 |
|
|
|
11.8 |
|
|
|
11.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50.2 |
|
|
|
44.2 |
|
|
|
41.8 |
|
|
|
|
|
|
|
|
|
|
|
Total construction and land development |
|
|
368.8 |
|
|
|
307.7 |
|
|
|
228.1 |
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
Real estate mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
333.1 |
|
|
|
328.0 |
|
|
|
325.9 |
|
Fixed rate |
|
|
90.8 |
|
|
|
90.6 |
|
|
|
89.5 |
|
Home equity mortgages |
|
|
85.5 |
|
|
|
83.8 |
|
|
|
83.9 |
|
Home equity lines |
|
|
60.3 |
|
|
|
60.1 |
|
|
|
59.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
569.7 |
|
|
|
562.5 |
|
|
|
559.0 |
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
140.6 |
|
|
|
141.6 |
|
|
|
144.2 |
|
Retail trade |
|
|
109.1 |
|
|
|
120.0 |
|
|
|
151.4 |
|
Land |
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
95.3 |
|
|
|
93.0 |
|
|
|
89.3 |
|
Healthcare |
|
|
28.3 |
|
|
|
30.9 |
|
|
|
25.4 |
|
Churches and educational facilities |
|
|
34.8 |
|
|
|
34.6 |
|
|
|
30.8 |
|
Recreation |
|
|
1.7 |
|
|
|
1.4 |
|
|
|
3.3 |
|
Multifamily |
|
|
27.2 |
|
|
|
31.7 |
|
|
|
35.1 |
|
Mobile home parks |
|
|
3.0 |
|
|
|
5.6 |
|
|
|
5.6 |
|
Lodging |
|
|
26.3 |
|
|
|
26.3 |
|
|
|
25.6 |
|
Restaurant |
|
|
6.1 |
|
|
|
5.1 |
|
|
|
5.0 |
|
Agricultural |
|
|
8.2 |
|
|
|
11.8 |
|
|
|
12.0 |
|
Convenience stores |
|
|
23.3 |
|
|
|
23.2 |
|
|
|
22.8 |
|
Other |
|
|
43.0 |
|
|
|
47.6 |
|
|
|
34.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
546.9 |
|
|
|
572.8 |
|
|
|
584.5 |
|
|
|
|
|
|
|
|
|
|
|
Total real estate mortgages |
|
|
1,116.6 |
|
|
|
1,135.3 |
|
|
|
1,143.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & financial |
|
|
75.5 |
|
|
|
71.8 |
|
|
|
66.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Installment loans to individuals |
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and trucks |
|
|
19.4 |
|
|
|
18.0 |
|
|
|
16.6 |
|
Marine loans |
|
|
26.3 |
|
|
|
26.9 |
|
|
|
26.8 |
|
Other |
|
|
25.7 |
|
|
|
24.3 |
|
|
|
23.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71.4 |
|
|
|
69.2 |
|
|
|
66.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
0.3 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,632.6 |
|
|
$ |
1,584.3 |
|
|
$ |
1,504.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
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 |
) |
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
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 |
) |
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
QUARTERLY TRENDS INCREASE (DECREASE) IN LOANS BY QUARTER (Continued) (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
(3.0 |
) |
|
$ |
(9.8 |
) |
|
$ |
(14.8 |
) |
|
$ |
(15.2 |
) |
Townhomes |
|
|
(1.2 |
) |
|
|
(3.8 |
) |
|
|
1.7 |
|
|
|
(15.6 |
) |
Single family residences |
|
|
(2.3 |
) |
|
|
(7.2 |
) |
|
|
(12.3 |
) |
|
|
(10.4 |
) |
Single family land and lots |
|
|
(4.3 |
) |
|
|
(17.0 |
) |
|
|
(24.9 |
) |
|
|
(17.4 |
) |
Multifamily |
|
|
(1.9 |
) |
|
|
1.4 |
|
|
|
(3.3 |
) |
|
|
(3.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.7 |
) |
|
|
(36.4 |
) |
|
|
(53.6 |
) |
|
|
(62.5 |
) |
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
(1.8 |
) |
|
|
2.0 |
|
|
|
(3.3 |
) |
|
|
(10.5 |
) |
Retail trade |
|
|
(8.6 |
) |
|
|
3.2 |
|
|
|
4.9 |
|
|
|
0.2 |
|
Land |
|
|
9.9 |
|
|
|
(17.1 |
) |
|
|
(1.5 |
) |
|
|
(0.6 |
) |
Industrial |
|
|
3.9 |
|
|
|
3.9 |
|
|
|
(0.1 |
) |
|
|
(7.4 |
) |
Healthcare |
|
|
|
|
|
|
|
|
|
|
(1.0 |
) |
|
|
|
|
Churches and educational facilities |
|
|
|
|
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
|
|
Lodging |
|
|
(11.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Convenience stores |
|
|
0.1 |
|
|
|
(1.8 |
) |
|
|
|
|
|
|
|
|
Marina |
|
|
3.7 |
|
|
|
2.1 |
|
|
|
1.6 |
|
|
|
0.2 |
|
Other |
|
|
1.4 |
|
|
|
(5.0 |
) |
|
|
(0.9 |
) |
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.6 |
) |
|
|
(12.6 |
) |
|
|
(0.4 |
) |
|
|
(17.5 |
) |
Individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
|
|
|
|
0.6 |
|
|
|
(1.6 |
) |
|
|
(2.7 |
) |
Construction |
|
|
(0.3 |
) |
|
|
(5.3 |
) |
|
|
0.3 |
|
|
|
(7.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.3 |
) |
|
|
(4.7 |
) |
|
|
(1.3 |
) |
|
|
(9.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total construction and land development |
|
|
(15.6 |
) |
|
|
(53.7 |
) |
|
|
(55.3 |
) |
|
|
(89.8 |
) |
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
4th Qtr |
|
Real estate mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
(1.9 |
) |
|
|
1.2 |
|
|
|
(2.3 |
) |
|
|
12.5 |
|
Fixed rate |
|
|
1.6 |
|
|
|
1.1 |
|
|
|
3.2 |
|
|
|
2.1 |
|
Home equity mortgages |
|
|
0.3 |
|
|
|
1.4 |
|
|
|
(8.8 |
) |
|
|
0.5 |
|
Home equity lines |
|
|
(2.8 |
) |
|
|
3.1 |
|
|
|
0.3 |
|
|
|
(1.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2.8 |
) |
|
|
6.8 |
|
|
|
(7.6 |
) |
|
|
13.9 |
|
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
12.6 |
|
|
|
(2.0 |
) |
|
|
1.3 |
|
|
|
2.8 |
|
Retail trade |
|
|
7.6 |
|
|
|
9.7 |
|
|
|
8.1 |
|
|
|
10.3 |
|
Land |
|
|
(5.3 |
) |
|
|
|
|
|
|
0.6 |
|
|
|
(0.6 |
) |
Industrial |
|
|
(1.2 |
) |
|
|
(11.0 |
) |
|
|
(1.1 |
) |
|
|
2.5 |
|
Healthcare |
|
|
7.5 |
|
|
|
(6.3 |
) |
|
|
(2.0 |
) |
|
|
(2.4 |
) |
Churches and educational facilities |
|
|
|
|
|
|
(3.7 |
) |
|
|
(0.9 |
) |
|
|
(0.4 |
) |
Recreation |
|
|
(0.2 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
(0.1 |
) |
Multifamily |
|
|
6.2 |
|
|
|
(0.9 |
) |
|
|
0.1 |
|
|
|
8.0 |
|
Mobile home parks |
|
|
(0.7 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
(0.1 |
) |
Lodging |
|
|
5.2 |
|
|
|
0.1 |
|
|
|
(1.3 |
) |
|
|
(0.1 |
) |
Restaurant |
|
|
(0.2 |
) |
|
|
1.0 |
|
|
|
(0.4 |
) |
|
|
(2.4 |
) |
Agricultural |
|
|
(0.5 |
) |
|
|
(3.4 |
) |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
Convenience stores |
|
|
(0.1 |
) |
|
|
1.8 |
|
|
|
(1.3 |
) |
|
|
(0.1 |
) |
Other |
|
|
1.8 |
|
|
|
1.5 |
|
|
|
0.9 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.7 |
|
|
|
(14.3 |
) |
|
|
3.7 |
|
|
|
18.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate mortgages |
|
|
29.9 |
|
|
|
(7.5 |
) |
|
|
(3.9 |
) |
|
|
32.2 |
|
Commercial & financial |
|
|
(32.8 |
) |
|
|
0.9 |
|
|
|
(6.3 |
) |
|
|
(5.7 |
) |
Installment loans to individuals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and trucks |
|
|
(0.9 |
) |
|
|
(1.1 |
) |
|
|
(1.1 |
) |
|
|
(1.1 |
) |
Marine loans |
|
|
0.1 |
|
|
|
(8.1 |
) |
|
|
0.8 |
|
|
|
|
|
Other |
|
|
(0.7 |
) |
|
|
0.4 |
|
|
|
(0.5 |
) |
|
|
(1.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.5 |
) |
|
|
(8.8 |
) |
|
|
(0.8 |
) |
|
|
(2.4 |
) |
Other |
|
|
(0.4 |
) |
|
|
(0.1 |
) |
|
|
0.1 |
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(20.4 |
) |
|
$ |
(69.2 |
) |
|
$ |
(66.2 |
) |
|
$ |
(65.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
63
QUARTERLY TRENDS INCREASE (DECREASE) IN LOANS BY QUARTER (Continued) (Dollars in Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development |
|
|
|
|
|
|
|
|
|
|
|
|
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums |
|
$ |
(1.1 |
) |
|
$ |
0.5 |
|
|
$ |
(7.8 |
) |
Townhomes |
|
|
(1.9 |
) |
|
|
(1.9 |
) |
|
|
(2.3 |
) |
Single family residences |
|
|
(6.3 |
) |
|
|
(3.8 |
) |
|
|
(9.6 |
) |
Single family land and lots |
|
|
(1.4 |
) |
|
|
(8.1 |
) |
|
|
(17.9 |
) |
Multifamily |
|
|
(2.0 |
) |
|
|
(7.2 |
) |
|
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.7 |
) |
|
|
(20.5 |
) |
|
|
(39.1 |
) |
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
0.1 |
|
|
|
(3.6 |
) |
|
|
|
|
Retail trade |
|
|
1.3 |
|
|
|
(14.1 |
) |
|
|
(32.9 |
) |
Land |
|
|
(12.4 |
) |
|
|
(9.7 |
) |
|
|
(0.4 |
) |
Industrial |
|
|
(4.3 |
) |
|
|
(0.5 |
) |
|
|
(0.3 |
) |
Healthcare |
|
|
5.7 |
|
|
|
0.3 |
|
|
|
(1.2 |
) |
Churches and educational facilities |
|
|
|
|
|
|
|
|
|
|
|
|
Lodging |
|
|
0.6 |
|
|
|
(0.6 |
) |
|
|
|
|
Convenience stores |
|
|
|
|
|
|
|
|
|
|
|
|
Marina |
|
|
0.9 |
|
|
|
(1.6 |
) |
|
|
(1.9 |
) |
Other |
|
|
0.2 |
|
|
|
(4.8 |
) |
|
|
(1.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.9 |
) |
|
|
(34.6 |
) |
|
|
(38.1 |
) |
Individuals |
|
|
|
|
|
|
|
|
|
|
|
|
Lot loans |
|
|
(1.7 |
) |
|
|
(1.6 |
) |
|
|
(1.7 |
) |
Construction |
|
|
(4.1 |
) |
|
|
(4.4 |
) |
|
|
(0.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(5.8 |
) |
|
|
(6.0 |
) |
|
|
(2.4 |
) |
|
|
|
|
|
|
|
|
|
|
Total construction and land development |
|
|
(26.4 |
) |
|
|
(61.1 |
) |
|
|
(79.6 |
) |
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
1st Qtr |
|
|
2nd Qtr |
|
|
3rd Qtr |
|
Real estate mortgages |
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustable |
|
|
4.1 |
|
|
|
(5.1 |
) |
|
|
(2.1 |
) |
Fixed rate |
|
|
(4.7 |
) |
|
|
(0.2 |
) |
|
|
(1.1 |
) |
Home equity mortgages |
|
|
0.7 |
|
|
|
(1.7 |
) |
|
|
0.1 |
|
Home equity lines |
|
|
1.8 |
|
|
|
(0.2 |
) |
|
|
(0.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
1.9 |
|
|
|
(7.2 |
) |
|
|
(3.5 |
) |
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings |
|
|
(5.8 |
) |
|
|
1.0 |
|
|
|
2.6 |
|
Retail trade |
|
|
(2.8 |
) |
|
|
10.9 |
|
|
|
31.4 |
|
Land |
|
|
|
|
|
|
|
|
|
|
|
|
Industrial |
|
|
0.6 |
|
|
|
(2.3 |
) |
|
|
(3.7 |
) |
Healthcare |
|
|
(0.9 |
) |
|
|
2.6 |
|
|
|
(5.5 |
) |
Churches and educational facilities |
|
|
(0.4 |
) |
|
|
(0.2 |
) |
|
|
(3.8 |
) |
Recreation |
|
|
|
|
|
|
(0.3 |
) |
|
|
1.9 |
|
Multifamily |
|
|
|
|
|
|
4.5 |
|
|
|
3.4 |
|
Mobile home parks |
|
|
|
|
|
|
2.6 |
|
|
|
|
|
Lodging |
|
|
(0.3 |
) |
|
|
|
|
|
|
(0.7 |
) |
Restaurant |
|
|
(0.1 |
) |
|
|
(1.0 |
) |
|
|
(0.1 |
) |
Agricultural |
|
|
(0.3 |
) |
|
|
3.6 |
|
|
|
0.2 |
|
Convenience stores |
|
|
(0.2 |
) |
|
|
(0.1 |
) |
|
|
(0.4 |
) |
Other |
|
|
(0.6 |
) |
|
|
4.6 |
|
|
|
(13.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10.8 |
) |
|
|
25.9 |
|
|
|
11.7 |
|
|
|
|
|
|
|
|
|
|
|
Total real estate mortgages |
|
|
(8.9 |
) |
|
|
18.7 |
|
|
|
8.2 |
|
Commercial & financial |
|
|
(7.3 |
) |
|
|
(3.7 |
) |
|
|
(5.8 |
) |
Installment loans to individuals |
|
|
|
|
|
|
|
|
|
|
|
|
Automobile and trucks |
|
|
(1.4 |
) |
|
|
(1.4 |
) |
|
|
(1.4 |
) |
Marine loans |
|
|
0.3 |
|
|
|
0.6 |
|
|
|
(0.1 |
) |
Other |
|
|
(0.4 |
) |
|
|
(1.4 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.5 |
) |
|
|
(2.2 |
) |
|
|
(2.5 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(44.1 |
) |
|
$ |
(48.3 |
) |
|
$ |
(79.7 |
) |
|
|
|
|
|
|
|
|
|
|
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.
65
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:
|
|
the effects of future economic, business and market conditions and changes, domestic and
foreign, including seasonality; |
|
|
governmental monetary and fiscal policies; |
|
|
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 coverage; |
|
|
changes in accounting policies, rules and practices; |
|
|
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; |
|
|
changes in borrower credit risks and payment behaviors; |
|
|
changes in the availability and cost of credit and capital in the financial markets; |
|
|
changes in the prices, values and sales volumes of residential and commercial real estate; |
|
|
the effects of competition from a wide variety of local, regional, national and other
providers of financial, investment and insurance services; |
|
|
the failure of assumptions and estimates underlying the establishment of reserves for
possible loan losses and other estimates; |
|
|
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; |
|
|
changes in technology or products that may be more difficult, costly, or less effective than
anticipated; |
|
|
the effects of war or other conflicts, acts of terrorism or other catastrophic events that
may affect general economic conditions; |
|
|
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; |
|
|
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 |
|
|
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.
66
|
|
|
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 0.1
percent versus the EVE in a stable rate environment, while a 200 basis point increase in rates is
estimated to decrease the EVE 7.4 percent.
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.
67
|
|
|
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 September 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.
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.
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.
68
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.
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.
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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. |
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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.
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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 September 30, 2009, our nonperforming loans (which consist of non-accrual
loans) totaled $86.9 million and $154.0 million, or 5.18% and 10.23% of the loan portfolio,
respectively. At December 31, 2008 and September 30, 2009, our nonperforming assets (which include
foreclosed real estate) were $92.0 million and $180.8 million, or 3.97% and 8.45% of assets,
respectively. In addition, we had approximately $13.9 million and $10.8 million in accruing loans
that were 30-89 days delinquent at December 31, 2008 and September 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.
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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.
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.
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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.
Commercial real estate (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 51.2% as of September 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 $83.3 million in provisions for loan losses have been taken
during the nine months ended September 30, 2009.
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 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.
Completion of our testing of goodwill as of September 30, 2009 supported the conclusion reached at
June 30, 2009.
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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, collected on September 30, 2009. Additional special assessments may be imposed by
the FDIC for future periods and the FDIC recently approved collecting a prepayment of insurance
premiums for the next three years (for 2010, 2011 and 2012) plus fourth quarter 2009s premium in
December 2009.
We also 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
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.
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
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 purchases, 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 $45.6 million of cash and
short-term investments currently held by us at September 30, 2009, largely due to the receipt of
proceeds from our capital raise consummated in the third quarter of 2009. We invested all of the
$50.0 million of the TARP CPP proceeds and an additional $25.0 million of proceeds from the capital
raised 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.
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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 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.
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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 September 30, 2009, we had deferred tax assets of $16.0 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 carry-forwards 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 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.
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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 and 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 589,625 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:
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ensuring that incentive compensation for senior executives does not encourage unnecessary and
excessive risks that threaten the value of the financial institution; |
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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; |
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prohibition on making golden parachute payments to senior executives; and |
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agreement not to deduct for tax purposes executive compensation in excess of $500,000 for
each senior executive. |
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
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a prohibition on making any golden parachute payment to a senior executive officer or any of
our next five most highly compensated employees; |
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a prohibition on any compensation plan that would encourage manipulation of the reported
earnings to enhance the compensation of any of its employees; and |
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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 recipients of TARP capital, 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 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.
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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 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.
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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.
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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:
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risks of unknown or contingent liabilities; |
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unanticipated costs and delays; |
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risks that acquired new businesses do not perform consistent with our growth and
profitability expectations; |
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risks of entering new markets or product areas where we have limited experience; |
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risks that growth will strain our infrastructure, staff, internal controls and management,
which may require additional personnel, time and expenditures; |
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exposure to potential asset quality issues with acquired institutions; |
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difficulties, expenses and delays of integrating the operations and personnel of acquired
institutions, and start-up delays and costs of other expansion activities; |
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potential disruptions to our business; |
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possible loss of key employees and customers of acquired institutions; |
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potential short-term decreases in profitability; and |
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diversion of our managements time and attention from our existing operations and business. |
81
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 52,849,625
shares are currently outstanding (with an additional 6.0 million shares anticipated to be issued
during the fourth quarter of 2009), 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 2.23 percent of the shares of our common stock outstanding as of September 30, 2009
(including the shares issuable upon exercise of the Warrant in our total outstanding shares).
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.
82
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 66 2/3% of the shares of Series A Preferred Stock
outstanding is required for:
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any authorization or issuance of shares ranking senior to the Series A Preferred Stock; |
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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 |
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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.
83
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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
Issuer purchases of equity securities during the first, second and third quarters of 2009 were as
follows:
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Maximum |
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Total |
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Total Number of |
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Number of |
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Number of |
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Shares Purchased |
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Shares that May |
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Shares |
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Average Price |
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as Part of Public |
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yet be Purchased |
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Period |
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Purchased |
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Paid Per Share |
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Announced Plan* |
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Under the Plan |
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1/1/09 to 1/31/09 |
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0 |
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$ |
0 |
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666,799 |
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158,201 |
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2/1/09 to 2/28/09 |
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126 |
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4.80 |
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666,925 |
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158,075 |
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3/1/09 to 3/31/09 |
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0 |
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0 |
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666,925 |
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158,075 |
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Total 1st Quarter |
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126 |
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4.80 |
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666,925 |
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158,075 |
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4/1/09 to 4/30/09 |
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1,732 |
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3.28 |
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668,657 |
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156,343 |
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5/1/09 to 5/31/09 |
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0 |
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|
0 |
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|
668,657 |
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|
156,343 |
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6/1/09 to 6/30/09 |
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|
0 |
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|
|
0 |
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|
|
668,657 |
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156,343 |
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Total 2nd Quarter |
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1,732 |
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3.28 |
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668,657 |
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156,343 |
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7/1/09 to 7/31/09 |
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0 |
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0 |
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668,657 |
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156,343 |
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8/1/09 to 8/31/09 |
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0 |
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|
0 |
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668,657 |
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|
156,343 |
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9/1/09 to 9/30/09 |
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0 |
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0 |
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668,657 |
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156,343 |
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Total 3rd Quarter |
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0 |
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0 |
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668,657 |
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156,343 |
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* |
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The plan to purchase equity securities totaling 825,000 was approved on September 18, 2001,
with no expiration date. |
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Item 3. |
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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 arrears 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 $1,250,000 and the amount of the arrearage on the payments on the subordinated debt
associated with trust preferred securities is $696,000. The total arrearage on both securities is
$1,946,000 as of September 30, 2009.
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Item 4. |
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Submission of Matters to a Vote of Security Holders |
None
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Item 5. |
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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.
84
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. |
Exhibit 31.2
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Certification of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
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. |
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. |
85
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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November 9, 2009 |
/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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November 9, 2009 |
/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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86