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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[X] Annual Report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended Commission File
December 31, 1997 No. 0-13660
SEACOAST BANKING CORPORATION OF FLORIDA
(Exact name of registrant as specified in its charter)
Florida 59-2260678
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
815 Colorado Avenue, Stuart, FL 34994
(Address of principal executive offices) (Zip code)
(561) 287-4000
Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Class A Common Stock, Par Value $.10
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 13, 1998:
Class A Common Stock, $.10 par value - $137,719,952 based upon the closing sale
price on February 13, 1998, using beneficial ownership stock rules adopted
pursuant to Section 13 of the Securities Exchange Act of 1934, to exclude voting
stock owned by directors and certain executive officers, some of whom may not be
held to be affiliates upon judicial determination.
Class B Common Stock, $.10 par value - $3,037,387 based upon the closing sale
price on February 13, 1998, of the Class A Common Stock, $.10 par value, into
which each share of Class B Common Stock, $.10 par value, is immediately
convertible on a one-for-one basis, using beneficial ownership stock rules
adopted pursuant to Section 13 of the Securities Exchange Act of 1934, to
exclude voting stock owned by directors and certain executive officers, some of
whom may not be held to be affiliates upon judicial determination.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of February 13, 1998:
Class A Common Stock, $.10 Par Value - 4,779,544 shares
Class B Common Stock, $.10 Par Value - 377,273 shares
Documents Incorporated by Reference:
1. Portions of the registrant's 1998 Proxy Statement for the Annual Meeting of
Shareholders to be held April 23, 1998 ("1998 Proxy Statement") are
incorporated by reference into Part III.
FORM 10-K CROSS-REFERENCE INDEX
Part I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a
Vote of Security-Holders
Part II
Item 5. Market Price of and Dividends on the
Registrant's Common Equity and
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Item 7A. Market Risk
Item 8. Financial Statements and
Supplementary Data
Item 9. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure
Part III
Item 10. Directors and Executive Officers
of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Item 13. Certain Relationships and Related
Transactions
Part IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
(a)(1) List of All Financial Statements
Consolidated Balance Sheets as
of December 31, 1997 and 1996
Consolidated Statements of Income
for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Shareholders'
Equity for the years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Cash Flows
for the years ended December 31,
1997, 1996, and 1995
Notes to Consolidated Financial
Statements
Report of Independent Certified
Public Accountants
(a)(2) List of Financial Statement Schedules
(a)(3) List of Exhibits
(b) Reports on Form 8-K
(c) Exhibits
(d) Financial Statement Schedules
SPECIAL CAUTIONARY NOTICE
REGARDING FORWARD LOOKING STATEMENTS
Certain of the matters discussed under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and elsewhere in
this Annual Report may constitute forward-looking statements for purposes of the
Securities Act of 1933, as amended (the "Exchange Act", p. 8) and the Securities
Exchange Act of 1934, as amended and as such may involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of Seacoast Banking Corporation of Florida
("Seacoast" or the "Company") to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. The Company's actual results may differ materially from the results
anticipated in these forward-looking statements due to a variety of factors,
including, without limitation: the effects of future economic conditions;
governmental monetary and fiscal policies, as well as legislative and regulatory
changes; the risks of changes in interest rates on the level and composition of
deposits, loan demand, and the values of loan collateral, securities, and
interest rate risks; the effects of competition from other commercial banks,
thrifts, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market and other mutual
funds and other financial institutions operating in the Company's market area
and elsewhere, including institutions operating locally, regionally, nationally
and internationally, together with such competitors offering banking products
and services by mail, telephone and computer and the Internet; the possible
effects of the Year 2000 problem on the Company, including such problems at the
Company's vendors, counter-parties and customers; and the failure of assumptions
underlying the establishment of reserves for possible loan losses. All written
or oral forward-looking statements attributable to the Company are expressly
qualified in their entirety by these Cautionary Statements.
Part I
------
Item 1. Business
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General
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Seacoast is a bank holding company registered under the Bank Holding Company Act
of 1956, as amended ("BHC Act"). Seacoast was incorporated under the laws of the
State of Florida on January 24, 1983, by the management of its principal
subsidiary, First National Bank and Trust Company of the Treasure Coast (the
"Bank") for the purpose of forming a holding company for the Bank. On December
30, 1983, Seacoast acquired all of the outstanding shares of the common stock of
the Bank in exchange for 810,000 shares of its $.10 par value Class A common
stock ("Class A Common Stock") and 810,000 shares of its $.10 par value Class B
common stock ("Class B Common Stock").
The Bank commenced operations in 1933 under the name "Citizens Bank of Stuart"
pursuant to a charter originally granted by the State of Florida in 1926. The
Bank converted to a national banking association on August 29, 1958.
Through the Bank and its broker-dealer subsidiary, Seacoast offers a full array
of deposit accounts and retail banking services, engages in consumer and
commercial lending and provides a wide variety of trust and asset management
services, as well as securities and annuity products. Seacoast's primary service
area is the "Treasure Coast", which, as defined by Seacoast, consists of the
counties of Martin, St. Lucie and Indian River on Florida's southeastern coast.
The Bank operates banking offices in the following cities: five in Stuart, two
in Palm City, one in Jensen Beach, two on Hutchinson Island, one in Hobe Sound,
five in Vero Beach, one in Sebastian, five in Port St. Lucie, and one in Ft.
Pierce.
Most of the banking offices have one or more Automatic Teller Machines (ATM)
which provide customers with 24-hour access to their deposit accounts. Seacoast
is a member of two state-wide funds transfer systems known as the "HONOR System"
and the "Presto System", which permit banking customers access to their accounts
at over 35,000 locations in twenty-one states in the Southeast. The HONOR System
also permits the Bank's customers access to their accounts via other systems
outside the State of Florida.
Customers can also use the Bank's "MoneyPhone" system to access information on
their loan or deposit account balances, and to transfer funds between linked
accounts, make loan payments, as well as verify deposits or checks that may have
cleared. This service is accessible by phone 24 hours a day, seven days a week.
In addition, customers may access information via the Bank's Telephone Banking
Center ("TBC"). From 7 A.M. to 7 P.M., Monday through Friday, servicing
personnel in the TBC are available to open accounts, take applications for
certain types of loans, resolve account problems and offer information on other
bank products and services to existing and potential customers. The Company
recently began offering PC banking for personal computers.
Seacoast has three indirect subsidiaries. FNB Brokerage Services, Inc. ("FNB
Brokerage") provides brokerage services. South Branch Building, Inc. is a
general partner in a partnership which constructed a branch facility. Big O RV
Resort, Inc. was formed to own and operate certain properties acquired through
foreclosure, but is currently inactive. The operations of these subsidiaries
contribute less than 10% of the consolidated assets and revenues of Seacoast.
As a bank holding company, Seacoast is a legal entity separate and distinct from
its subsidiaries. Seacoast coordinates the financial resources of the
consolidated enterprise and maintains financial, operational and administrative
systems that allow centralized evaluation of subsidiary operations and
coordination of selected policies and activities. Seacoast's operating revenues
and net income are derived primarily from its subsidiaries through dividends,
fees for services performed and interest on advances and loans.
As of December 31, 1997, Seacoast and its subsidiaries employed 410 full-time
equivalent employees.
Expansion of Business
- ---------------------
Seacoast has expanded its products and services to meet the changing needs of
the various segments of its market and it expects to continue this strategy.
Prior to 1991, Seacoast had expanded geographically primarily through the
addition of branches, including the acquisition of a thrift branch in St. Lucie
County.
More recently, Seacoast has from time to time considered acquisitions of other
depository institutions or corporations engaged in bank-related activities. On
September 20, 1991, the Bank acquired from the Resolution Trust Corporation (the
"RTC") 10 branches and approximately $110 million of deposits of a failed
thrift, American Pioneer Federal Savings Bank ("American Pioneer"), for a
deposit premium of $752,000 (of which $230,000 remains outstanding as an
intangible asset at December 31, 1997). Following the acquisition, the Bank
temporarily rented all of the branch facilities from the RTC at commercially
reasonable rates to preserve existing customer relationships and to facilitate
their transfer to the Bank. On October 18, 1991, the Bank ceased renting the
branch office facilities that it did not intend to acquire in order to avoid
duplication of existing facilities. After negotiation, definitive agreements
with the RTC were executed for the purchase of five branch facilities. See "Item
2. Properties".
On April 14, 1995, the Bank acquired approximately $46 million in loans and $62
million in deposits by purchasing American Bank Capital Corporation of Florida
("American Bank") and it's subsidiary, American Bank of Martin County. The
transaction was treated as a purchase with the Bank paying $9.3 million in cash.
At December 31, 1997, intangible assets resulting from this acquisition include
goodwill of $3,582,000 and core deposit premium of $1,410,000. Following the
acquisition, the Bank closed its existing East Ocean office location to move to
a more attractive location acquired from American Bank, and continued to operate
an office location owned by American Bank in southern Martin County. See "Item
2. Properties".
On May 30, 1997, Seacoast acquired Port St. Lucie National Bank Holding Corp.
("PSHC") pursuant to which Seacoast issued and exchanged Class A Common Stock
for all of the outstanding shares of PSHC common stock, warrants and options to
purchase common stock of PSHC. PSHC merged with and into Seacoast and PSHC's
subsidiary bank, Port St. Lucie National Bank, merged with and into the Bank.
The transaction, which had a value of approximately $26 million, was accounted
for under the pooling-of-interests method for business combinations. As of May
30, 1997, PSHC had total consolidated assets of approximately $130 million,
loans of $94 million and deposits of $116 million.
Florida law permits state-wide branching and Seacoast anticipates future
expansion within its market area by opening additional offices and facilities.
New banking facilities were opened in November 1994 in St. Lucie West, a new
community west of Port St. Lucie, and in May 1996 in a WalMart superstore in
Sebastian in northern Indian River County. Most recently, in January 1997,
Seacoast opened a branch in Nettles Island, a predominately modular home
community on Hutchinson Island in southern St. Lucie County. In May, June and
July 1997, three additional branch offices were opened in Indian River County.
See "Item 2. Properties".
Competition
- -----------
Seacoast and its subsidiaries operate in the highly competitive markets of
Martin, St. Lucie and Indian River Counties in southeastern Florida. The Bank
not only competes with other banks in its markets, but it also competes with
various other types of financial institutions for deposits, certain commercial,
fiduciary and investment services and various types of loans and certain other
financial services. The Bank also competes for interest-bearing funds with a
number of other financial intermediaries and investment alternatives, including
mutual funds, brokerage and insurance firms, governmental and corporate bonds,
and other securities.
Seacoast and its subsidiaries compete not only with financial institutions based
in the State of Florida, but also with a number of large out-of-state and
foreign banks, bank holding companies and other financial institutions which
have an established market presence in the State of Florida, or which offer
products by mail, telephone or over the Internet. Many of Seacoast's competitors
are engaged in local, regional, national and international operations and have
greater assets, personnel and other resources than Seacoast. Some of such
competitors are subject to less regulation and/or more favorable tax treatment
than Seacoast.
Supervision and Regulation
- --------------------------
Bank holding companies and banks are extensively regulated under federal and
state law. This discussion is qualified in its entirety by reference to the
particular statutory and regulatory provisions referred to below and is not
intended to be an exhaustive description of the status or regulations applicable
to the Company's and the Bank's business. Supervision, regulation, and
examination of the Company and the Bank and their respective subsidiaries by the
bank regulatory agencies are intended primarily for the protection of depositors
rather than holders of Company capital stock. Any change in applicable law or
regulation may have a material effect on the Company's business.
Bank Holding Company Regulation
- -------------------------------
The Company, as a bank holding company, is subject to supervision and regulation
by the Board of Governors of the Federal Reserve System ("Federal Reserve")
under the BHC Act. The Company is required to file with the Federal Reserve
periodic reports and such other information as the Federal Reserve may request.
The Federal Reserve examines the Company, and may examine the Company's
Subsidiaries.
The BHC Act requires prior Federal Reserve approval for, among other things, the
acquisition by a bank holding company of direct or indirect ownership or control
of more than 5% of the voting shares or substantially all the assets of any
bank, or for a merger or consolidation of a bank holding company with another
bank holding company. With certain exceptions, the BHC Act prohibits a bank
holding company from acquiring direct or indirect ownership or control of voting
shares of any company which is not a bank or bank holding company and from
engaging directly or indirectly in any activity other than banking or managing
or controlling banks or performing services for its authorized subsidiaries. A
bank holding company, may, however, engage in or acquire an interest in a
company that engages in activities which the Federal Reserve has determined by
regulation or order to be so closely related to banking or managing or
controlling banks to be a proper incident thereto.
The Company is a legal entity separate and distinct from the Bank and its other
subsidiaries. Various legal limitations restrict the Bank from lending or
otherwise supplying funds to the Company or its non-bank subsidiaries. The
Company and the Bank are subject to Section 23A of the Federal Reserve Act.
Section 23A defines "covered transactions", which include extensions of credit,
and limits a bank's covered transactions with any affiliate to 10% of such
bank's capital and surplus. All covered and exempt transactions between a bank
and its affiliates must be on terms and conditions consistent with safe and
sound banking practices, and banks and their subsidiaries are prohibited from
purchasing low-quality assets from the bank's affiliates. Finally, Section 23A
requires that all of a bank's extensions of credit to an affiliate be
appropriately secured by acceptable collateral, generally United States
government or agency securities. The Company and the Bank also are subject to
Section 23B of the Federal Reserve Act, which generally limits covered and other
transactions among affiliates to terms and under circumstances, including credit
standards, that are substantially the same or at least as favorable to the bank
or its subsidiary as prevailing at the time for transactions with unaffiliated
companies.
The BHC Act, as amended by the interstate banking provisions of the Reigle-Neal
Interstate Banking and Branch Efficiency Act of 1994 ("Interstate Banking Act"),
which became effective on September 29, 1995, repealed the prior statutory
restrictions on interstate acquisitions of banks by bank holding companies, such
that Seacoast and any other bank holding company located in Florida may now
acquire a bank located in any other state, and any bank holding company located
outside Florida may lawfully acquire any bank based in another state, regardless
of state law to the contrary, in either case subject to certain deposit-
percentage, aging requirements, and other restrictions. The Interstate Banking
Act also generally provides that, after June 1, 1997, national and
state-chartered banks may branch interstate through acquisitions of banks in
other states. By adopting legislation prior to that date, a state has the
ability to either "opt in" and accelerate the date after which interstate
branching is permissible or "opt out" and prohibit interstate branching
altogether. Florida has responded to the enactment of the Interstate Branching
Act ("the Florida Branching Act"), which became effective June 1, 1997 and
permits interstate branching through merger transactions under the Interstate
Banking Act. Under the Florida Branching Act, with the prior approval of the
Florida Department of Banking and Finance, a Florida bank may establish,
maintain and operate one or more branches in a state other than the State of
Florida pursuant to a merger transaction in which the Florida bank is the
resulting bank. In addition, the Florida Branching Act provides that one or more
Florida banks may enter into a merger transaction with one or more
out-of-state banks, and an out-of-state bank resulting from such transaction may
maintain and operate the branches of the Florida bank that participated in such
merger. An out-of-state bank, however, is not permitted to acquire a Florida
bank in a merger transaction unless the Florida bank has been in existence and
continuously operated for more than three years.
Federal Reserve policy requires a bank holding company to act as a source of
financial strength and to take measures to preserve and protect bank
subsidiaries in situations where additional investments in a troubled bank may
not otherwise be warranted. In addition, under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), where a bank holding
company has more than one bank or thrift subsidiary, each of the bank holding
company's subsidiary depository institutions are responsible for any losses to
the Federal Deposit Insurance Corporation ("FDIC") as a result of an affiliated
depository institution's failure. As a result, a bank holding company may be
required to loan money to its subsidiaries in the form of capital notes or other
instruments which qualify as capital under regulatory rules. However, any loans
from the holding company to such subsidiary banks likely will be unsecured and
subordinated to such bank's depositors and perhaps to other creditors of the
bank.
On February 20, 1997, the Federal Reserve adopted, effective April 21, 1997,
amendments to its Regulation Y implementing certain provisions of The Economic
Growth and Regulatory Paperwork Reduction Act of 1996 ("EGRPRA"), which was
signed into law on September 30, 1996. Among other things, these amendments to
Federal Reserve Regulation Y reduced the notice and application requirements
applicable to bank and nonbank acquisitions and de novo expansion by
well-capitalized and well-managed bank holding companies; expanded the list of
nonbanking activities permitted under Regulation Y; reduced certain limitations
on previously permitted activities; and amended Federal Reserve anti-tying
restrictions to allow banks greater flexibility to package products and services
with their affiliates.
Bank and Bank Subsidiary Regulation Generally
- ---------------------------------------------
The Bank is subject to supervision, regulation, and examination by the Office of
the Comptroller of the Currency (the "OCC") which monitors all areas of the
operations of the Bank, including reserves, loans, mortgages, issuances of
securities, payment of dividends, establishment of branches, and capital. The
Bank is a member of the FDIC and, as such, its deposits are insured by the FDIC
to the maximum extent provided by law. See "FDIC Insurance Assessments".
Under present Florida law, the Bank may establish and operate branches
throughout the State of Florida, subject to the maintenance of adequate capital
for each branch and the receipt of OCC approval.
The OCC recently adopted a series of revisions to its regulations, including
expanding the powers exercisable by operations subsidiaries. These changes also
modernize and streamline corporate governance, investment and fiduciary powers.
In December, 1996, the OCC adopted the Federal Financial Institutions
Examination Council's ("FFIEC") updated statement of policy entitled "Uniform
Financial Institutions Rating System" ("UFIRS"), effective January 1, 1997.
UFIRS is an internal rating system used by the federal and state regulators for
assessing the soundness of financial institutions on a uniform basis and for
identifying those institutions requiring special supervisory attention. Under
the previous UFIRS, each financial institution was assigned a confidential
composite rating based on an evaluation and rating of five essential components
of an institution's financial condition and operations including Capital
adequacy, Asset quality, Management, Earnings, and Liquidity. The major changes
include an increased emphasis on the quality of risk management practices and
the addition of a sixth component for Sensitivity to Market Risk. For most
institutions, the FFIEC has indicated that market risk primarily reflects
exposures to changes in interest rates. When regulators evaluate this component,
consideration is expected to be given to: management's ability to identify,
measure, monitor, and control market risk; the institution's size; the nature
and complexity of its activities and its risk profile, and the adequacy of its
capital and earnings in relation to its level of market risk exposure. Market
risk is rated based upon, but not limited to, an assessment of the sensitivity
of the financial institution's earnings or the economic value of its capital to
adverse changes in interest rates, foreign exchange rates, commodity prices, or
equity prices; management's ability to identify, measure, monitor and control
exposure to market risk; and the nature and complexity of interest rate risk
exposure arising from nontrading positions.
FNB Brokerage, a Bank subsidiary, is registered as a securities broker-dealer
under the Exchange Act and is regulated by the Securities and Exchange
Commission. As a member of the National Association of Securities Dealers, Inc.,
it also is subject to examination and supervision of its operations and
accounts.
Community Reinvestment Act
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The Company and the Bank are subject to the provisions of the Community
Reinvestment Act of 1977, as amended (the "CRA")and the federal banking
agencies' regulations thereunder. Under the CRA, all banks and thrifts have a
continuing and affirmative obligation, consistent with its safe and sound
operation to help meet the credit needs for their entire communities, including
low and moderate income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions, nor does it limit
an institution's discretion to develop the types of products and services that
it believes are best suited to its particular community, consistent with the
CRA. The CRA requires a depository institution's primary federal regulator, in
connection with its examination of the institution, to assess the institution's
record of assessing and meeting the credit needs of the community served by that
institution, including low- and moderate-income neighborhoods. The regulatory
agency's assessment of the institution's record is made available to the public.
Further, such assessment is required of any institution which has applied to:
(i) charter a national bank; (ii) obtain deposit insurance coverage for a
newly-chartered institution; (iii) establish a new branch office that accepts
deposits; (iv) relocate an office; or (v) merge or consolidate with, or acquire
the assets or assume the liabilities of, a federally regulated financial
institution. In the case of a bank holding company applying for approval to
acquire a bank or other bank holding company, the Federal Reserve will assess
the records of each subsidiary depository institution of the applicant bank
holding company, and such records may be the basis for denying the application.
Under CRA regulations which became effective January 1, 1996, the process-based
CRA assessment factors were replaced with a new evaluation system that rates
institutions based on their actual performance in meeting community credit
needs. The evaluation system used to judge an institution's CRA performance
consists of three tests: a lending test; an investment test; and a service test.
Each of these tests will be applied by the institution's primary federal
regulator taking into account such factors as: (i) demographic data about the
community; (ii) the institution's capacity and constraints; (iii) the
institution's product offerings and business strategy; and (iv) data on the
prior performance of the institution and similarly-situated lenders. The new
lending test--the most important of the three tests for all institutions other
than wholesale and limited purpose (e.g., credit card) banks--will evaluate an
institution's lending activities as measured by its home mortgage loans, small
business and farm loans, community development loans, and, at the option of the
institution, its consumer loans.
Each of these lending categories will be weighed to reflect its relative
importance to the institution's overall business and, in the case of community
development loans, the characteristics and needs of the institution's service
area and the opportunities available for this type of lending. Assessment
criteria for the lending test will include: (i) geographic distribution of the
institution's lending; (ii) distribution of the institution's home mortgage and
consumer loans among different economic segments of the community; (iii) the
number and amount of small business and small farm loans made by the
institution; (iv) the number and amount of community development loans
outstanding; and (v) the institution's use of innovative or flexible lending
practices to meet the needs of low-to-moderate income individuals and
neighborhoods. At the election of an institution, or if particular circumstances
so warrant, the banking agencies will take into account in making their
assessments lending by the institution's affiliates as well as community
development loans made by the lending consortia and other lenders in which the
institution has invested. As part of the new regulation, all financial
institutions will be required to report data on their small business and small
farm loans as well as their home mortgage loans, which are currently required to
be reported under the Home Mortgage Disclosure Act.
The investment test focuses on the institution's qualified investments within
its service area that (i) benefit low-to-moderate income individuals and small
businesses or farms; (ii) address affordable housing needs; or (iii) involve
donations of branch offices to minority or women's depository institutions.
Assessment of an institution's performance under the investment test is based
upon the dollar amount of the institution's qualified investments, its use of
innovative or complex techniques to support community development initiatives,
and its responsiveness to credit and community development needs.
The service test evaluates an institution's systems for delivering retail
banking services, taking into account such factors as: (i) the geographic
distribution of the institution's branch offices and ATMs; (ii) the
institution's record of opening and closing branch offices and ATMs; and (iii)
the availability of alternative product delivery systems such as home banking
and loan production offices in low-to-moderate income areas. The federal
regulators also will consider an institution's community development service as
part of the service test. A separate community development test will be applied
to wholesale or limited purpose financial institutions.
Institutions having total assets of less than $250 million will be evaluated
under more streamlined criteria. Seacoast and the Bank are ineligible for these
streamlined criteria. In addition, a financial institution will have the option
of having its CRA performance evaluated based on a strategic plan of up to five
years in length that it had developed in cooperation with local community
groups. In order to be rated under a strategic plan, the institution will be
required to obtain the prior approval of its federal regulator.
The interagency CRA regulations provide that an institution evaluated under a
given test will receive one of five ratings for that test: outstanding, high
satisfactory, low satisfactory, needs to improve, or substantial non-compliance.
An institution will receive a certain number of points for its rating on each
test, and the points are combined to produce an overall composite rating of
either outstanding, satisfactory, needs to improve, or substantial
non-compliance. Under the agencies' rating guidelines, an institution that
receives an "outstanding" rating on the lending test will receive an overall
rating of at least "satisfactory", and no institution can receive an overall
rating of "satisfactory" unless it receives a rating of at least "low
satisfactory" on its lending test. In addition, evidence of discriminatory or
other illegal credit practices would adversely affect an institution's overall
rating. Under the new regulations, an institution's CRA rating would continue to
be taken into account by its primary federal regulator in considering various
types of applications. As a result of the Bank's most recent CRA examination in
November 1997, the Bank received a "satisfactory" CRA rating.
The Bank is also subject to, among other things, the provisions of the Equal
Credit Opportunity Act (the "ECOA") and the Fair Housing Act (the "FHA"), both
of which prohibit discrimination based on race or color, religion, national
origin, sex, and familial status in any aspect of a consumer or commercial
credit or residential real estate transaction. Based on recently heightened
concerns that some prospective home buyers and other borrowers may be
experiencing discriminatory treatment in their efforts to obtain loans, the
Department of Housing and Urban Development, the Department of Justice (the
"DOJ"), and all of the federal banking agencies in April 1994 issued an
Interagency Policy Statement on Discrimination in Lending in order to provide
guidance to financial institutions as to what the agencies consider in
determining whether discrimination exists, how the agencies will respond to
lending discrimination, and what steps lenders might take to prevent
discriminatory lending practices. The DOJ has also recently increased its
efforts to prosecute what it regards as violations of the ECOA and FHA.
Payment of Dividends
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The Company is a legal entity separate and distinct from its banking and other
subsidiaries. The prior approval of the OCC is required if the total of all
dividends declared by a national bank (such as the Bank) in any calendar year
will exceed the sum of such bank's net profits for the year and its retained net
profits for the preceding two calendar years, less any required transfers to
surplus. Federal law also prohibits any national bank from paying dividends that
would be greater than such bank's undivided profits after deducting statutory
bad debt in excess of such bank's allowance for loan losses.
In addition, the Company and the Bank 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 regulatory authority is authorized to determine under
certain circumstances relating to the financial condition of a national or state
member bank or a bank holding company that the payment of dividends would be an
unsafe or unsound practice and to prohibit payment thereof. The OCC and the
Federal Reserve have indicated that paying dividends that deplete a national or
state member bank's capital base to an inadequate level would be an unsound and
unsafe banking practice. The OCC and the Federal Reserve have each indicated
that financial depository institutions should generally pay dividends only out
of current operating earnings.
Capital
- -------
The Federal Reserve and the OCC have risk-based capital guidelines for bank
holding companies and national and state member banks. As fully phased-in at the
end of 1992, the guideline for a minimum ratio of capital to risk-weighted
assets (including certain off-balance-sheet activities, such as standby letters
of credit) is 8%. At least half of the total capital must consist of common
equity, retained earnings and a limited amount of qualifying preferred stock,
less goodwill and certain core deposit intangibles ("Tier 1 capital"). The
remainder may consist of subordinated debt, non qualifying preferred stock and a
limited amount of any loan loss allowance ("Tier 2 capital" and, together with
Tier 1 capital, "Total Capital").
In addition, the federal agencies have established minimum leverage ratio
guidelines for bank holding companies, national banks, and state member banks,
which provide for a minimum leverage ratio of Tier 1 capital to adjusted average
quarterly assets ("leverage ratio") equal to 3%, plus an additional cushion of
100 to 200 basis points (i.e., 1%-2%) if the institution has less than the
highest regulatory rating. The guidelines also provide that institutions
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels
without significant reliance on intangible assets. Furthermore the Federal
Reserve's guidelines indicate that the Federal Reserve will continue to consider
a "tangible Tier 1 leverage ratio" (deducting all intangibles) in evaluating
proposals for expansion or new activity. The Federal Reserve and OCC have not
advised the Company or the Bank of any specific minimum leverage ratio or
tangible Tier 1 leverage ratio applicable to them.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
among other things, requires the federal banking agencies to take "prompt
corrective action" regarding depository institutions that do not meet minimum
capital requirements. FDICIA establishes five capital tiers: "well capitalized",
"adequately capitalized", "undercapitalized", "significantly undercapitalized",
and "critically undercapitalized". A depository institution's capital tier will
depend upon how its capital levels compare to various relevant capital measures
and certain other factors, as established by regulation.
All of the federal banking agencies have adopted regulations establishing
relevant capital measures and relevant capital levels. The relevant capital
measures are the Total Capital ratio, Tier 1 capital ratio, and the leverage
ratio. Under the regulations, a national or state member bank will be (i) well
capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital
ratio of 6% or greater, and a leverage ratio of 5% or greater and is not subject
to any order or written directive by a federal bank regulatory agency to meet
and maintain a specific capital level for any capital measure, (ii) adequately
capitalized if it has a Total Capital ratio of 8% or greater, a Tier 1 capital
ratio of 4% or greater, and a leverage ratio of 4% or greater (3% in certain
circumstances), (iii) undercapitalized if it has a Total Capital ratio of less
than 8%, a Tier 1 capital ratio of less than 4% (3% in certain circumstances),
or (iv) critically undercapitalized if its tangible equity is equal to or less
than 2% of average quarterly tangible assets.
As of December 31, 1997, the consolidated capital ratios of the Company and the
Bank were as follows:
Regulatory
Minimum Company Bank
Tier 1 capital ratio.. 4.0% 13.7% 12.7%
Total Capital ratio... 8.0% 14.7% 13.6%
Leverage ratio........ 3.0-5.0% 8.4% 7.8%
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to growth
limitations and are required to submit a capital restoration plan for approval.
For a capital restoration plan to be acceptable, the depository institution's
parent holding company must guarantee that the institution comply with such
capital restoration plan. The aggregate liability of the parent holding company
is limited to the lesser of 5% of the depository institution's total assets at
the time it became undercapitalized and the amount necessary to bring the
institution into compliance with applicable capital standards. If a depository
institution fails to submit an acceptable plan, it is treated as if it is
significantly undercapitalized. If the controlling holding company fails to
fulfill its obligations under FDICIA and files (or has filed against it) a
petition under the federal Bankruptcy Code, the claim would be entitled to a
priority in such bankruptcy proceeding over third party creditors of the bank
holding company. Significantly undercapitalized depository institutions may be
subject to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets, and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
Because the Company and the Bank exceed applicable capital requirements, the
respective managements of the Company and the Bank do not believe that the
provisions of FDICIA have any material impact on the Company and the Bank or
their respective operations.
Bank regulators continue to indicate their desire to raise capital requirements
applicable to banking organizations, including a proposal to add an interest
rate-risk component to risk-based capital requirements.
FDICIA
- ------
FDICIA directs that each federal banking regulatory agency prescribe standards
for depository institutions and depository institution holding companies
relating to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth
compensation, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares, and such other standards as the agency deems
appropriate.
FDICIA also contains a variety of other provisions that may affect the
operations of the Company and the Bank, including new reporting requirements,
regulatory standards for real estate lending, "truth in savings" provisions, the
requirement that a depository institution give 90 days prior notice to customers
and regulatory authorities before closing any branch, and a prohibition on the
acceptance or renewal of brokered deposits by depository institutions that are
not well capitalized or are adequately capitalized and have not received a
waiver from the FDIC. Under regulations relating to brokered deposits, the Bank
is well capitalized and not restricted.
Enforcement Policies and Actions
- --------------------------------
FIRREA and subsequent federal legislation significantly increased the
enforcement authorities of the FDIC and other federal depository institution
regulators, and authorizes the imposition of civil money penalties up to $1
million per day. Persons who are affiliated with depository institutions can be
removed from any office held in such institution and banned for life from
participating in the affairs of any such institution. The banking regulators
have not hesitated to use the new enforcement authorities provided under FIRREA.
Depositor Preference
- --------------------
The Omnibus Budget Reconciliation Act of 1993 provides that deposits and certain
claims for administrative expenses and employee compensation against an insured
depository institution would be afforded a priority over other general unsecured
claims against such an institution in the "liquidation or other resolution" of
such an institution by any receiver.
Fiscal and Monetary Policy
- --------------------------
Banking is a business which depends on interest rate differentials. In general,
the difference between the interest paid by a bank on its deposits and its other
borrowings, and the interest received by a bank on its loans and securities
holdings, constitutes the major portion of a bank's earnings. Thus, the earnings
and growth of Seacoast and the Bank are subject to the influence of economic
conditions generally, both domestic and foreign, and also to the monetary and
fiscal policies of the United States and its agencies, particularly the Federal
Reserve. The Federal Reserve regulates the supply of money through various
means, including open market dealings in United States government securities,
the discount rate at which banks may borrow from the Federal Reserve, and the
reserve requirements on deposits. The nature and timing of any changes in such
policies and their effect on Seacoast and it's subsidiaries cannot be predicted.
FDIC Insurance Assessments
- --------------------------
The Bank is subject to FDIC deposit insurance assessments. The Bank's deposits
are primarily insured by the FDIC's Bank Insurance Fund ("BIF"). The Bank is
also a member of the Savings Association Insurance Fund ("SAIF") to the extent
that the Bank owns savings deposits acquired in 1991 from the RTC in the
American Pioneer transaction. In 1996, the FDIC adopted a new risk-based premium
schedule which decreased the assessment rates for BIF depository institutions.
Under this schedule, which took effect for assessment periods after January 1,
1996, the premiums ranged from zero to $.27 for every $100 of deposits. Prior to
January 1, 1996, the premiums ranged from $.04 to $.31 for every $100 of
deposit. Each financial institution is assigned to one of three capital groups -
well capitalized, adequately capitalized or undercapitalized - and further
assigned to one of three subgroups within a capital group, on the basis of
supervisory evaluations by the institution's primary federal and, if applicable,
state regulators and other information relevant to the institution's financial
condition and the risk posed to the applicable insurance fund. The actual
assessment rate applicable to a particular institution will, therefore, depend
in part upon the risk assessment classification so assigned to the institution
by the FDIC. SAIF insured deposits are assessed premiums for the SAIF which have
remained unchanged at $.23 to $.31 per $100 of deposits, based upon the
institution's assigned risk category and supervisory evaluation. In the third
quarter of 1996 a special one-time SAIF assessment of $0.657 per $100 of
deposits was levied, resulting in a $500,000 charge to the Bank. Effective
October 1, 1996 for all Oakar and Sasser institutions, and January 1, 1997 for
all other institutions, the SAIF assessment was changed to four to 31 basis
points per annum. During the years ended December 31, 1997, and 1996, the Bank
paid $136,000 and $634,000, respectively, in BIF and SAIF deposit premiums.
The FDIC's Board of Directors has retained the 1996 BIF assessment schedule of
zero to 27 basis points per annum for the first semiannual period of 1998.
EGRPRA recapitalized the FDIC's SAIF Fund to bring it into parity with BIF. As
part of this recapitalization, The Deposit Insurance Funds Act of 1996 (the
"Funds Act") authorized FICO to levy assessments on BIF-assessable deposits at a
rate equal to one-fifth of the FICO assessment rate that is applied to deposits
assessable by SAIF. The actual annual assessment rates for FICO for 1998 have
been set at 1.25 basis points for BIF-assessable deposits and 6.25 basis points
for SAIF deposits.
Community Development Act
- -------------------------
The Community Development Act has several titles. Title I provides for the
establishment of community development financial institutions to provide equity
investments, loans and development services to financially underserved
communities. A portion of this Title also contains various provisions regarding
reverse mortgages, consumer protections for qualifying mortgages and hearings
for home equity lending, among other things. Title II provides for small
business loan securitization and securitizations of other loans, including
authorizing a study on the impact of additional securities based on pooled
obligations. Small business capital enhancement is also provided. Title III of
the Act provides for paperwork reduction and regulatory improvement, including
certain examination and call report issues, as well as changes in certain
consumer compliance requirements, certain audit requirements and real estate
appraisals, and simplification and expediting processing of bank holding company
applications, merger applications and securities filings, among other things. It
also provides for commercial mortgage-related securities to be added to the
definition of a "mortgage-related security" in the Exchange Act. This will
permit commercial mortgages to be pooled and securitized, and permit investment
in such instruments without limitation by insured depository institutions. It
also pre-empts state legal investment and blue sky laws related to qualifying
commercial mortgage securities. Title IV deals with money laundering and
currency transaction reports, and Title V reforms the national flood insurance
laws and requirements. The nature, timing, and effect upon the Company of any
changes resulting from the Community Development Act cannot be predicted.
Legislative and Regulatory Changes
- ----------------------------------
Various changes have been proposed with respect to restructuring and changing
the regulation of the financial services industry. FIRREA required a study of
the deposit insurance system. On February 5, 1991, the Department of the
Treasury released "Modernizing the Financial System; Recommendations for Safer,
More Competitive Banks". Among other matters, this study analyzed and made
recommendations regarding reduced bank competitiveness and financial strength,
overextension of deposit insurance, the fragmented regulatory system and the
under- capitalized deposit insurance fund. It proposed restoring competitiveness
by allowing banking organizations to participate in a full range of financial
services outside of insured commercial banks. Deposit insurance coverage would
be narrowed to promote market discipline.
The Interstate Banking Act also directed the Secretary of the Treasury to take a
broad look at the strengths and weaknesses of the United States' financial
services system. In June 1997, the Treasury Department proposed legislation to
eliminate what it deemed outmoded barriers to competition among financial
services providers. On November 17, 1997, the United States Department of the
Treasury released its study "American Finance for the 21st Century" which
considered changes in the financial services industry during the next 10 years
and beyond and reviewed the adequacy of existing statutes and legislation.
EGRPRA streamlined the non-banking activities application process for
well-capitalized and well-managed bank holding companies. Under EGRPRA,
qualified bank holding companies may commence a regulatory approved non-banking
activity without prior notice to the Federal Reserve, and instead, written
notice is required within 10 days after commencing the activity. Under EGRPRA,
the prior notice period is reduced to 12 days in the event of any non-banking
acquisition or share purchase or de novo non-banking activity previously
approved by order of the Federal Reserve, but not yet implemented by
regulations, assuming the size of the acquisition or proposed activity does not
exceed 10% of risk- weighted assets of the acquiring bank holding company and
the consideration does not exceed 15% of Tier 1 capital.
Other legislative and regulatory proposals regarding changes in banking, and the
regulation of banks, thrifts and other financial institutions and bank and bank
holding company powers are being considered by the executive branch of the
Federal government, Congress and various state governments, including Florida.
Among other items under consideration are the possible combination of the BIF
and SAIF, changes in or repeal of the Glass-Steagall Act which separates
commercial banking from investment banking, and changes in the BHC Act to
broaden the powers of "financial services" companies to own and control
depository institutions and engage in activities not closely related to banking.
Certain of these proposals, if adopted, could significantly change the
regulation of banks and the financial services industry. It cannot be predicted
whether any of these proposals will be adopted, and, if adopted, how these
proposals will affect the Company and the Bank. In a case presented to the
United States Supreme Court in 1996, the court found that the powers of banking
affiliates to conduct insurance business in the State of Florida was
permissible.
New Accounting Pronouncements
- -----------------------------
In June 1997, the FASB issued Statements of Financial Accounting Standards
Number 130, Comprehensive Income ("SFAS 130"), and Number 131, Disclosures about
Segments of an Enterprise ("SFAS 131"). The Company is required to adopt these
statements in 1998. SFAS 130 establishes standards for reporting comprehensive
income and SFAS 131 establishes standards for reporting information about
operating segments. Management does not believe that the adoption of SFAS 130
and 131 will have a significant impact on the Company's financial statements or
related disclosures.
The Year 2000 Issue
- -------------------
The Company has been evaluating its own systems, and does not believe that it
has material exposure to the Year 2000 issue with respect to its own information
systems. As part of its assessment, Company management has been evaluating Year
2000 compliance by its vendors, and to date has not discovered any Year 2000
problem with significant counter-parties that it believes are reasonably likely
to have a material adverse effect upon the Company. However, the Company has not
begun evaluating the effects of the Year 2000 problem on its loan and deposit
customers, and no assurance can be given that potential Year 2000 problems at
those with whom the Company does business will not occur, and if these occur,
consequences to the Company will not be material. Some of the Company's
technology systems have already been determined to be Year 2000 ready with
testing planned for other systems in 1998. The Company is in the process of
outsourcing its core processing systems to a third party with whom it is working
with a view to preventing any material Year 2000 problems. The costs related to
the conversion are expensed as incurred and are not expected to have a material
impact on future results of operations. The new third party core processing
vendor is expected to be Year 2000 ready by the end of 1998.
Management believes that its plans for dealing with the Year 2000 issue will
result in timely and adequate modifications of systems and technology.
Ultimately, the potential impact of the Year 2000 issue will depend not only on
the corrective measures the Company undertakes, but also on the way in which the
Year 2000 issue is addressed by governmental agencies, businesses, and other
entities who provide data to, or receive data from, the Company, or whose
financial condition or operational capability is important to the Company as
borrowers, vendors, customers or investment opportunities. Therefore,
communications with these parties have commenced to heighten their awareness of
the Year 2000 issue. Over the next two years, the plans of such third parties to
address the Year 2000 issue will be monitored and any identified impact on the
Company will be evaluated.
Statistical Information
- -----------------------
Certain statistical information (as required by Guide 3) is included in response
to Item 7 of this Annual Report on Form 10- K. Certain statistical information
is included in response to Item 6 and Item 8 of this Annual Report on Form 10-K.
Item 2. Properties
- -------------------
Seacoast and the Bank's main office occupy approximately 62,000 square feet of a
68,000 square foot building in Stuart, Florida. The building, together with an
adjacent 10-lane drive-in banking facility and an additional 27,000 square foot
office building, are situated on approximately eight acres of land in the center
of Stuart zoned for commercial use. The building and land are owned by the Bank,
which leases out portions of the building not utilized by Seacoast and the Bank
to unaffiliated parties.
Adjacent to the main office, the Bank leases approximately 21,400 square feet of
office space to house operational departments, primarily information systems and
retail support. The Bank owns its data processing equipment which is used for
servicing bank deposits and loan accounts as well as on-line banking services,
providing tellers and other customer service personnel with access to customers'
records.
As of December 31, 1997, the net carrying value of branch offices (excluding the
main office) was approximately $9.2 million. Seacoast's branch offices are
described as follows:
JENSEN BEACH, opened in 1977, is a free-standing facility located in the
commercial district of a residential community contiguous to Stuart. The 1,920
square foot bank building and land are owned by the Bank. Improvements include
three drive-in teller lanes and one drive-up ATM as well as a parking lot and
landscaping.
EAST OCEAN BOULEVARD, opened at its original location in 1978, is a 2,400 square
foot building leased by the Bank. It is still located on the main thoroughfare
between downtown Stuart and Hutchinson Island's beach-front residential
developments. The acquisition of American Bank provided an opportunity for the
Bank to move to a new location in April 1995. The first three floors of a four
story office condominium were acquired in the acquisition. The 2,300 square foot
branch area on the first floor has been remodeled and operates as a full service
branch including five drive-in lanes and a drive-up ATM. The remaining 2,300
square feet on the ground floor was sold in June 1996 and the third floor was
sold in December 1995. All of the second floor has been leased to tenants.
COVE ROAD, opened in late 1983, is conveniently located close to housing
developments in the residential areas south of Stuart known as Port Salerno and
Hobe Sound. South Branch Building, Inc., a subsidiary of the Bank, is a general
partner in a partnership which entered into a long term land lease for
approximately four acres of property on which it constructed a 7,500 square foot
building. The Bank leases the building and utilizes 3,450 square feet of the
available space. The balance is sublet by the Bank to other business tenants.
The Bank has improved its premises with three drive-in lanes, bank equipment,
and furniture and fixtures, all of which are owned by the Bank. A drive-up ATM
was added in early 1997.
HUTCHINSON ISLAND, opened on December 31, 1984, is in a shopping center located
on a coastal barrier island, close to numerous oceanfront condominium
developments. In 1993, the branch was expanded from 2,800 square feet to 4,000
square feet and is under a long term lease to the Bank. The Bank has improved
the premises with bank equipment, a walk-up ATM and three drive-in lanes, all
owned by the Bank.
RIVERGATE originally opened October 28, 1985 and occupied 1,700 square feet of
leased space in the Rivergate Shopping Center, Port St. Lucie, Florida. The Bank
moved to larger facilities in the shopping center in April of 1999 under a long
term lease agreement. Furniture and bank equipment located in the prior
facilities were moved to the new facility which occupies approximately 3,400
square feet, with three drive-in lanes and a drive-up ATM.
NORTHPORT was acquired on June 28, 1986 from Citizens Federal Savings & Loan
Association of Miami. This property consists of a storefront under long term
lease in the St. Lucie Plaza Shopping Center, Port St. Lucie, of approximately
4,000 square feet. This office was closed March 31, 1994 and the property is
presently utilized by local community groups for meetings.
WEDGEWOOD COMMONS, opened in April 1988, is located on an out parcel under long
term lease in the Wedgewood Commons Shopping Center, south of Stuart on U.S.
Highway 1. The property consists of a 2,800 square foot building which houses
four drive-in lanes, a walk-up ATM and various bank equipment, all of which are
owned by the Bank and are located on the leased property.
BAYSHORE, opened on September 27, 1990, occupies 3,520 square feet of a 50,000
square foot shopping center located in Port St. Lucie. The Bank has leased the
premises under a long term lease agreement and has made improvements to the
premises, including the addition of three drive-in lanes and a walk-up ATM, all
of which are owned by the Bank. A second location, acquired in the merger with
PSHC, and in close proximity to this location, was closed on June 1, 1997 and
subsequently sold in September 1997.
HOBE SOUND, acquired from the RTC on December 23, 1991, is a two story facility
containing 8,000 square feet and is centrally located in Hobe Sound.
Improvements include two drive-in teller lanes, a drive-up ATM, and equipment
and furniture, all of which are owned by the Bank.
FORT PIERCE, acquired from the RTC on December 23, 1991, is a 2,895 square foot
facility located in the heart of Fort Pierce and has three drive-in lanes and a
drive-up ATM. Equipment and furniture are all owned by the Bank.
MARTIN DOWNS, purchased from the RTC in February 1992, is a 3,960 square foot
bank building located at a high traffic intersection in Palm City, an emerging
commercial and residential community west of Stuart. Improvements include three
drive-in teller lanes, a drive-up ATM, equipment and furniture.
TIFFANY, purchased from the RTC in May 1992, is a two story facility which
contains 8,250 square feet and is located on a corner of U.S. Highway One in
Port St. Lucie offering excellent exposure in one of the fastest growing
residential areas in the region. The second story which contains 4,250 square
feet is leased to tenants. Three drive-in teller lanes, a walk-up ATM, equipment
and furniture are utilized and owned by the Bank.
VERO BEACH, purchased from the RTC in February 1993, is a 3,300 square foot bank
building located in Vero beach on U.S. Highway One and represents the Bank's
initial presence in this Indian River County market. A leasehold interest in a
long-term land lease was acquired. Improvements include three drive-in teller
lanes, a walk-up ATM, equipment and furniture, all of which are owned by the
Bank.
BEACHLAND, opened in February 1993, consists of 4,150 square feet of leased
space located in a three-story commercial building on Beachland Boulevard, the
main beachfront thoroughfare in Vero Beach, Florida. An additional 1,050 square
feet were leased during 1996. This facility has 2 drive-in teller lanes, a
drive-up ATM, and furniture and equipment, all owned by the Bank.
SANDHILL COVE, opened in September 1993, is in an upscale life-care retirement
community. The 135 square foot office is located within the community facilities
which are located on a 36-acre development in Palm City, Florida. This community
contains approximately 168 private residences.
ST. LUCIE WEST, opened in November 1994, was in a 3,600 square foot building
located at 1320 S.W. St. Lucie Blvd, Port St. Lucie. As a result of the PSHC
acquisition, this facility was closed in June 1997 and the property was sold in
September 1997. On June 1, 1997, the Bank moved its St. Lucie West operations to
the Renar Centre (previously occupied by PSHC). The Bank leases 4,320 square
feet on the first floor of this facility and 2,468 square feet on the second
floor. The facility includes three drive-in teller lanes, a drive-up ATM, and
furniture and equipment.
MARINER SQUARE, acquired from American Bank in April 1995, is a 3,600 square
foot leased space located on the ground floor of a three story office building
located on U.S.Highway 1 between Hobe Sound and Port Salerno. Approximately 700
square feet of the space is sublet to a tenant. The space occupied by the Bank
has been improved to be a full service branch with two drive-in lanes, one
serving as a drive-up ATM lane as well as a drive-in teller lane, all owned by
the Bank.
SEBASTIAN, opened in May 1996, is located within a 174,000 square foot WalMart
Superstore on U.S. 1 in northern Indian River County. The leased space occupied
by the Bank totals 865 square feet. The facility has a walk-up ATM, owned by the
Bank.
NETTLES ISLAND was opened in January 1997 in southern St. Lucie County on
Hutchinson Island. It occupies 350 square feet of leased space in a
predominantly modular home community. Furniture and equipment are owned. No ATM
or drive-in lanes are offered.
U.S. 1 AND PORT ST. LUCIE BOULEVARD office opened as a Bank location on June 1,
1997, upon the merger with PSHC. At the date of the merger, the leased space
consisted of 5,188 square feet on the first floor and 1,200 square feet on the
second floor. In October 1997, 1,800 square feet of the leased space on the
first floor and 1,200 square feet of leased space on the second floor were
assigned to another tenant. The present space leased by the Bank totals 3,388
square feet. The facility has two drive-in lanes, a walk-up ATM, and furniture
and equipment, all owned by the Bank.
SOUTH VERO SQUARE opened in May 1997 in a 3,150 quare foot building owned by the
Bank on South U.S. 1 in Vero Beach. The facility includes three drive-in teller
lanes, a drive-up ATM, and furniture and equipment, all owned by the Bank.
OAK POINT opened in June 1997. It occupies 12,000 square feet of leased space on
the first and second floor of a 19,700 square foot 3-story building in Indian
River County. The office is in close proximity to Indian River Memorial Hospital
and the peripheral medical community adjacent to the hospital. The facility
includes three drive-in teller lanes, a walk-up ATM, and furniture and
equipment, all owned by the Bank. Approximately 2,000 square feet of the second
floor is sublet to tenants.
ROUTE 60 VERO opened in July 1997. Similar to the Sebastian office, this
facility is housed in a WalMart Superstore in western Vero Beach in Indian River
County. The branch occupies 750 square feet of leased space and includes a
walk-up ATM.
In 1998, one new branch in Indian River County will open:
SEBASTIAN WEST will open on March 2, 1998 in a 3,150 square foot building owned
by the Bank. It is located at the intersection of Fellsmere Road and Roseland
Road in Sebastian. The facility will include three drive-in teller lanes, a
drive-up ATM, and furniture and equipment, all owned by the Bank.
For additional information, refer to Notes F and I of the Notes to Consolidated
Financial Statements in the 1997 Annual Report of Seacoast incorporated herein
by reference pursuant to Item 8 of
this document.
Item 3. Legal Proceedings
- --------------------------
The Company and its subsidiaries, because of the nature of their business, are
at times subject to numerous legal actions, threatened or filed, in the normal
course of their business. Although the amount of any ultimate liability with
respect to such matters cannot be determined, in the opinion of management,
after consultation with legal counsel, those claims and lawsuits, when resolved,
should not have a material adverse effect on the consolidated results of
operation or financial condition of Seacoast and its subsidiaries.
Item 4. Submission of Matters to a Vote of Security-Holders
- ------------------------------------------------------------
None.
Part II
Item 5. Market Price of and Dividends on the Registrant's Common
- ------- --------------------------------------------------------
Equity and Related Stockholder Matters
--------------------------------------
The Class A Common Stock is traded in the over the counter market and quoted on
the Nasdaq National Market System ("Nasdaq National Market"). There is no
established public trading market for the Class B Common Stock of Seacoast. As
of February 13, 1998, there were approximately 1,257 record holders of the Class
A Common Stock and 89 record holders of the Class B Common Stock.
Seacoast Class A Stock is traded in the over-the-counter market and is quoted on
the Nasdaq National Market under the symbol "SBCFA". The following table sets
forth the high, low and last sale prices per share of Seacoast Class A Stock on
the Nasdaq National Market and the dividends paid per share of Seacoast Class A
Stock for the indicated periods.
Sale Price Per Annual Dividends
Share of Seacoast Declared Per Share
Class A Stock of Seacoast Class
A Stock
High Low
1997
First Quarter.......... 29.50 25.625 0.20
Second Quarter......... 30.50 24.625 0.20
Third Quarter.......... 38.50 29.75 0.20
Fourth Quarter......... 39.50 34.25 0.22
1996
First Quarter.......... 22.75 20.25 0.15
Second Quarter......... 22.75 21.00 0.15
Third Quarter.......... 24.00 21.75 0.15
Fourth Quarter......... 26.50 23.25 0.20
Seacoast's Articles of Incorporation prohibit the declaration or payment of cash
dividends on Class B Common Stock unless cash dividends are declared or paid on
Class A Common Stock in an amount equal to at least 110% of any cash dividend on
Class B Common Stock. Dividends on Class A Common Stock payable in shares of
Class A Common Stock shall be paid to holders of Class A Common and Class B
Common Stock at the same time and on the same basis.
In 1995, cash dividends of $.54 per share of Class A Common Stock and $.489 per
share of Class B Common Stock were paid. In 1996, cash dividends of $.65 per
share of Class A Common Stock and $.585 per share of Class B Common Stock were
paid. In 1997, cash dividends of $.82 per share of Class A Common Stock and $.74
per share of Class B Common Stock were paid.
Dividends from the Bank are Seacoast's primary source of funds to pay dividends
on Seacoast capital stock. Under the National Bank Act, the Bank 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 the Bank also limits dividends that may be paid to Seacoast. Information
regarding a restriction on the ability of the Bank to pay dividends to Seacoast
is contained in Note B of the "Notes to Consolidated Financial Statements"
contained in Item 8 hereof. See also "Supervision and Regulation" contained in
Item 1 of this document.
The OCC and Federal Reserve have the general authority to limit the dividends
paid by insured banks and bank holding companies, respectively, if such payment
may be deemed to constitute an unsafe or unsound practice. If, in the particular
circumstances, the OCC determines that the payment of dividends would constitute
an unsafe or unsound banking practice, the OCC may, among other things, issue a
cease and desist order prohibiting the payment of dividends. This rule is not
expected to adversely affect the Bank's ability to pay dividends to Seacoast.
See "Supervision and Regulation" contained in Item 1 of this document.
Each share of Class B Common Stock is convertible by its holder into one share
of Class A Common Stock at any time prior to a vote of shareholders authorizing
a liquidation of Seacoast.
Item 6. Selected Financial Data
- --------------------------------
Selected financial data is incorporated herein by reference under the caption
"Financial Highlights" on page 4 of the 1997 Annual Report. See Exhibit 13.
Item 7. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations, under the caption "Financial Review - 1997 Management's Discussion
and Analysis", on pages 18 through 30 of the 1997 Annual Report is incorporated
herein by reference. See Exhibit 13.
Item 7A. Market Risk
- ---------------------
Market risk reflects the risk of economic loss resulting from adverse changes in
market prices and interest rates. This risk of loss can be reflected in either
diminished current market values or reduced potential net income in future
periods.
The Company market risk arises from interest rate risk inherent in its lending
and deposit taking activities. The structure of the Company's loan and deposit
portfolios is such that a significant decline in the primary rate may adversely
effect net market values and interest income. Management seeks to manage this
risk through the utilization of various tools, including the pricing and
maturities of its assets and liabilities, including its investments. The
composition and size of the investment portfolio is managed so as to reduce the
interest rate risk in the deposit and loan portfolios. Currently, the Company
does not use any off-balance sheet derivatives. See the "Interest Rate
Sensitivity" section of the Annual Report for further information regarding the
risk associated with changes in interest rates.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The report of Arthur Andersen LLP, independent certified public accountants, and
the consolidated financial statements are included on pages 35 through 49 of the
1997 Annual Report and are incorporated herein by reference. "Selected Quarterly
Information - Consolidated Quarterly Average Balances, Yields & Rates" and
Quarterly Consolidated Income Statements" included on pages 31 through 33 of the
1997 Annual Report are incorporated herein by reference. See Exhibit 13.
Item 9. Changes in and Disagreements with Accountants on
- ---------------------------------------------------------
Accounting and Financial Disclosure
-----------------------------------
Not applicable.
Part III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Information concerning the directors and executive officers of Seacoast is set
forth under the headings "Proposal One - Election of Directors" and "Executive
Officers" on pages 2 through 8 in the 1997 Proxy Statement and is incorporated
herein by reference.
Item 11. Executive Compensation
- --------------------------------
Information set forth under the headings "Proposal One - Election of Directors -
Compensation of Executive Officers", "Salary and Benefits Committee Report",
"Summary Compensation Table", "Grants of Options/SARs in 1997", "Aggregated
Options/SAR Exercises in 1997 and 1997 Year-End Option/SAR Values", "Profit
Sharing Plan", "Employment and Severance Agreements", and "Information About the
Board of Directors and its Committees" on pages 6 through 15 of the 1997 Proxy
Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
Information set forth under the headings, "Proposal One Election of Directors -
General" on pages 2 through 7, "Proposal One - Election of Directors -
Management Stock Ownership" on page 7, and "Principal Shareholders" on page 16
in the 1997 Proxy Statement, relating to the number of shares of Class A Common
Stock and Class B Common Stock beneficially owned by the directors of Seacoast,
all such directors and officers as a group and certain beneficial owners is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Information set forth under the heading "Proposal One - Election of Directors -
Certain Transactions and Business Relationships" on page 15 through 16 of the
1997 Proxy Statement is incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------------------------------------------------------------------------
a)(1) List of all financial statements
The following consolidated financial statements and report of independent
certified public accountants of Seacoast, included in the 1997 Annual
Report are incorporated by reference into Item 8 of this Annual Report on
Form 10-K.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
a)(2) List of Financial Statement Schedules
Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
a)(3) Listing of Exhibits
The following Exhibits are filed as part of this report in Item 14 (c):
Exhibit 3.1 Amended and Restated Articles of Incorporation
---------------------------------------------------------------
Incorporated herein by reference from registrant's Current Report on Form
8-K, File No. 0-13660, dated June 6, 1997
Exhibit 3.2 Amended and Restated By-laws of the Corporation
----------------------------------------------------------------
Incorporated herein by reference from Exhibit 3.2 of Registrant's Current
Report on Form 8-K, File No. 0-13660, dated June 6, 1997
Exhibit 4.1 Specimen Class A Common Stock Certificate
-----------------------------------------------------
Incorporated herein by reference from Exhibit 4.1 of the Registrant's
Registration Statement on Form S-1, File No. 2-88829
Exhibit 4.2 Specimen Class B Common Stock Certificate
-----------------------------------------------------
Incorporated herein by reference from Exhibit 4.2 of registrant's
Registration Statement on Form S-1, File No. 2-88829
Exhibit 10.1 Profit Sharing Plan, as amended
--------------------------------------------
Exhibit 10.2 Employee Stock Purchase Plan
-----------------------------------------
Incorporated herein by reference from registrant's Registration Statement
on Form S-8 File No. 33-25267, dated November 18, 1988
Exhibit 10.3 Amendment #1 to the Employee Stock Purchase Plan
-------------------------------------------------------------
Incorporated herein by reference from registrant's Annual Reports on Form
10-K, dated March 29, 1991
Exhibit 10.4 Executive Employment Agreement
---------------------------------------------
Dated March 22, 1991 between A. Douglas Gilbert and the Bank, incorporated
herein by reference from registrant's Annual Reports on Form 10-K, dated
March 29, 1991
Exhibit 10.5 Executive Employment Agreement
----------------------------------------------
Dated January 18, 1994 between Dennis S. Hudson, III and the Bank,
incorporated herein by reference from registrant's Annual Reports on Form
10-K, dated March 28, 1995.
Exhibit 10.6 Executive Employment Agreement
--------------------------------------------
Dated July 31, 1995 between C. William Curtis, Jr. and the Bank,
incorporated herein by reference from registrant's Annual Reports on Form
10-K, dated March 28, 1996.
Exhibit 10.7 Executive Employment Agreement
--------------------------------------------
Dated February 19, 1997 between J. Hal Roberts, Jr. and the Bank,
incorporated herein by reference from registrant's Annual Reports on Form
10-K, dated March 24, 1997.
Exhibit 13 1997 Annual Report
------------------------------
The following portions of the 1997 Annual Report are incorporated herein by
reference:
Financial Highlights
Financial Review - Management's Discussion and Analysis
Selected Quarterly Information - Quarterly Consolidated
Income Statements
Selected Quarterly Information - Consolidated Quarterly
Average Balances, Yields & Rates
Financial Statements
Notes to Consolidated Financial Statements
Financial Statements - Report of Independent Certified
Public Accountants
Exhibit 21 Subsidiaries of Registrant
--------------------------------------
Incorporated herein by reference from Exhibit 22 of Registrant's Annual
Report on Form 10-K, File No. 0-13660, dated March 17, 1992.
Exhibit 23 Consent of Independent Certified Public Accountants
---------------------------------------------------------------
Exhibit 27 Financial Data Schedule (for SEC use only)
------------------------------------------------------
b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 1997.
c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this report.
d) Financial Statement Schedules
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Stuart,
State of Florida, on the 28th day of March, 1998.
SEACOAST BANKING CORPORATION OF FLORIDA
(Registrant)
By: /s/ Dale M. Hudson
Dale M. Hudson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date
/s/ Dennis S. Hudson, Jr. March 27, 1998
- -------------------------
Dennis S. Hudson, Jr., Chairman of the Board
and Director
/s/ Dale M. Hudson March 27, 1998
- ------------------
Dale M. Hudson, President, Chief Executive
Officer and Director
/s/ Dennis S. Hudson, III March 27, 1998
- -------------------------
Dennis S. Hudson, III Executive Vice
President, Chief Operating Officer and
Director
/s/ William R. Hahl March 27, 1998
- -------------------
William R. Hahl, Senior Vice President and
Chief Financial Officer
/s/ Jeffrey C. Bruner March 27, 1998
- ---------------------
Jeffrey C. Bruner, Director
March 27, 1998
- -----------------
John H. Crane, Director
/s/ Evans Crary, Jr. March 27, 1998
- --------------------
Evans Crary, Jr., Director
March 27, 1998
- ------------------------
Christopher E. Fogal, Director
March 27, 1998
- --------------------
Jeffrey S. Furst, Director
/s/ John R. Santarsiero, Jr. March 27, 1998
- -----------------------------
John R. Santarsiero, Jr., Director
/s/ Thomas H. Thurlow, Jr. March 27, 1998
- --------------------------
Thomas H. Thurlow, Jr., Director