Refining Our Banking
Seacoast Banking Cor po ration of Flo r ida
2006 Annual Re port
re • fin • ing
Employing finer distinctions and subtle changes to achieve improvement.
Market Overview
Financial Highlights
Letter to Shareholders
Refining Our Brand
Refining Our Culture
Refining Our Local Market Strategy
Refining Our Market Exposure
Corporate Directory
Investor Information
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I
VII
2
Seacoast Banking Corporation of Florida
Market
Overview
Seacoast National Bank (“Seacoast National”) was originally chartered
in 1926 and is the operating subsidiary of Seacoast Banking Corporation
of Florida (“Seacoast”). In the 80 years since, Seacoast National has grown
along Florida’s southeast coastal region, becoming the second largest
publicly traded bank holding company headquartered in Florida.
Seacoast National’s market area is bounded
by Orlando in north central Florida, Brevard
County to the north, Palm Beach to the south
and by the Big Lake Region in south central
Florida.
For a number of years, Seacoast National
has leveraged its presence in a tremendously
strong marketplace, resulting in record loan
and deposit growth, and noninterest income
from other business lines including wealth
management. In recent years, the company
expanded into new markets through de novo
growth and successfully completed two bank
integrations in 2006, bringing total branch
locations to forty-three.
In the legacy markets along the Treasure
Coast, two locally owned competitors were
purchased by Cleveland-based National City
Corporation in 2006. The entrance of new
competitors and expansion of existing ones
reaffirms the attractiveness of these markets
to financial service providers.
Seacoast National remains Martin County’s
largest financial institution with eleven locations
including one Private Banking Center and
a 20 percent total deposit market share.
Population growth between 2006 and 2011
is projected to grow at 9.5 percent. Martin
County is considered one of the state’s
top wealth markets with residents having
the second highest per-capita and passive
incomes in the State of Florida. Martin County
commissioners approved a change to allow
biotechnology and research and development
facilities to be located at major expressway
interchanges. This completes the research cor-
ridor bridging The Scripps Research Institute in
Palm Beach County and Torrey Pines Institute
for Molecular Studies in St. Lucie County.
The population of St. Lucie County grew
28 percent from 1990 to 2000 and is projected
to increase 17.5 percent by 2011. The county’s
largest city, Port St. Lucie, was labeled the
nation’s fastest-growing city in 2005. In the Port
St. Lucie-Fort Pierce MSA, Seacoast National
ranks first with a 15 percent total deposit market
share. A new branch location will open in western
Port St. Lucie in late 2007, located near the
Tradition master-planned community. This
opening will mark the eighth Seacoast National
location in the county. Tradition is also the
site for the planned 100,000 square foot
Torrey Pines Institute for Molecular Studies
facility. This biotech company is projected to
bring 190 jobs to the area with a near-term
potential for two spin-off companies and a
long-term potential for even more. Combined
with Scripps and the Burnham Institute in
Orlando, Torrey Pines will help form Florida’s
biotechnology corridor which is positioned to
attract other companies considering relocation
2006 Annual Report
3
or expansion. Florida State University has
already announced plans to open a medical
school campus in Fort Pierce.
In Indian River County, with eight branches,
the bank ranks seventh in deposit market
share with 6.25 percent of total deposits.
Indian River County ranks third among Florida’s
67 counties in passive income. The population
is forecast to grow at 11 percent through 2011.
The New Piper Aircraft, a leader in light aircraft
manufacturing, has called Vero Beach home
since 1957. During the second half of 2006,
CVS Pharmacy opened a major regional
distribution center in Indian River County,
which will employ 300 workers by the end of
2007. MDI/Macho Products, the largest U.S.
producer of martial arts protective gear, and
Parker Hannifin Corporation, the country’s
leading manufacturer of custom hoses, are
but a few of other nationally known and
respected companies located here.
In northern Palm Beach County, Seacoast
National has five offices. Total deposits reached
$73 million and total loans grew to $356 million
in just over three years. Palm Beach County
has the highest per-capita income in the State
of Florida and ranks among the 50 highest
income counties in the United States. Seacoast
Banking Centre, a signature building located
in front of The Gardens Mall in Palm Beach
Gardens, was completed in the second quarter
of 2006 and is the bank’s headquarters for the
county where we are a niche business bank,
focusing on professionals, commercial and
commercial real estate.
Palm Beach County has enjoyed a higher
increase in the number of jobs than either the
United States or Florida over the past decade.
Since 1990 the county added 160,000 jobs,
roughly one third of southeast Florida’s
employment growth. With the arrival of
Scripps Florida, Northern Palm Beach County
is entering a new era of sustained growth that
will create countless opportunities for the
region’s dynamic business community.
Our business bank strategy of targeting com-
mercial loans and deposits to provide greater
earning ability and accelerated profitability
is in place in Orange and Seminole counties.
These three locations are the result of Seacoast
National’s successful integration with Century
National Bank in August of 2006. The Orlando
MSA’s projected population growth from 2006
to 2011 is expected to exceed 13 percent.
The greater Orlando MSA is the third most
populated metropolitan area in the State. The
area’s diverse economy boasts manufacturing,
universities and medical in addition to tourism.
Brevard County’s loan production office, which
produced over $15 million in commercial and
commercial real estate loans in 2006, will be
joined by two Viera branch locations in 2007.
Situated on former ranch and scrub forest
land, Viera is a fast-growing, master-planned
community in Brevard and is home to the
county’s government buildings and the Space
Coast Stadium, the Brevard County Manatees
and is training home to the Washington
Nationals. Viera will eventually encompass
22,000 acres around a vibrant town center
and is projected to be a city of 40,000 people
by 2015. The population in this county grew
19 percent from 1990 to 2000 and is projected
to continue at this pace into 2011.
2006 saw the completion of Seacoast National’s
integration with Big Lake National Financial
Corporation. This expansion added eight
branch locations in south central Florida with
$204 million in loans and $301 million in
deposits. The Big Lake Region is the last
agricultural stronghold in the State. In coastal
Florida, little land is available, prices are
soaring, insurance is uncertain and expensive.
These economic drivers are pushing developers
and homebuyers to the Big Lake Region in the
state’s rural interior, the largest remaining area
of undeveloped land.
4
Seacoast Banking Corporation of Florida
Financial
Highlights
(Dollars in thousands, except per share data)
2006
2005
2004
2003
2002
For the year
Net interest income
$89,040
$72,185
$52,774
$44,165
$45,960
Provision for loan losses
3,285
1,317
1,000
0
0
Noninterest income:
Securities gains (losses)
Other
Noninterest expenses
Income before income taxes
Provision for income taxes
Net income
Core earnings1
Per Share Data
Net income:
Diluted
Basic
Cash dividends declared
Book value
Dividends to net income
At year-end
Assets
Securities
Net loans
Deposits
(157)
24,260
73,045
36,813
12,959
23,854
39,168
1.28
1.30
0.61
11.20
47.10%
128
20,517
59,100
32,413
11,654
20,759
33,624
1.24
1.27
0.58
8.94
44
(1,172)
18,462
47,281
22,999
8,077
14,922
23,941
0.95
0.97
0.54
7.00
20,987
42,463
21,427
7,411
14,016
22,781
0.89
0.91
0.46
6.71
457
18,336
39,790
24,963
9,677
15,286
24,461
0.97
1.00
0.37
6.59
46.30%
55.60%
50.60%
37.30%
$2,389,435
$2,132,174
$1,615,876
$1,353,823
$1,281,297
443,941
543,024
1,718,196
1,280,989
588,017
892,949
560,829
702,632
493,287
681,335
1,891,018
1,784,219
1,372,466
1,129,642
1,030,540
Shareholders’ equity
212,425
152,720
108,212
104,084
100,747
Performance ratios:
Return on average assets
1.03%
1.07%
1.05%
1.07%
1.26%
Return on average equity
Net interest margin2
Average equity to average assets
12.06
4.15
8.55
14.95
3.97
7.17
13.75
3.89
7.63
13.73
3.57
7.82
15.75
4.00
7.99
1. Income before taxes excluding the provision for loan losses, securities gains (losses), the gain on sale of partnership interest,
and expenses associated with foreclosed and repossessed asset management and dispositions.
2. On a fully taxable equivalent basis.
2006 Annual Report
5
Letter to
Shareholders
Seacoast reached $2.18 billion in earning assets, generating $23.9 million in
earnings with a 1.03 percent return on assets and a return on equity of 12.06
percent. Total loan outstandings grew by $443 million or 34 percent to $1.733
billion as interest rates continued the climb that began in 2005. Commercial
and commercial real estate loan production was also $443 million.
Residential loan production was $172 million
in 2006, generating $1.1 million in mortgage
banking fees and bringing residential mortgages
to 28 percent of the total loan portfolio. Seacoast’s
Total Line of Credit offers homeowners the
ability to convert the outstanding balance
on their line to a fixed rate. This product helped
grow total consumer loan production to $280
million in 2006.
Seacoast Marine Finance, our yacht lending
division, felt the impact of increased rates
and higher energy costs, which disrupted boat
sales. This niche market lender produced
$153 million in new loans, generating fees
of $2.7 million from the non-recourse sale
of these loans.
Our growth and continued success is driven by
the fundamentals of quality lending: character,
capital, capacity, conditions and collateral.
Because our credit underwriting and servicing
is consistent, we experience very low non-
performing assets and net charge-off ratios.
Total deposits increased to $1.891 billion or
6 percent during the year as a result of new
customers acquired from our expansion into
6
Seacoast Banking Corporation of Florida
Seacoast Banking Corporation of Florida Officers, left to right:
Dennis S. Hudson III, Chairman and Chief Executive Officer,
Jean Strickand, Senior Executive Vice President,
A.Douglas Gilbert, President and Chief Operating Officer,
$2000
C. William Curtis, Jr., Senior Executive Vice President
392
473
$1500
$1000
$500
345
new markets including the Big Lake Region.
244
Demand deposit account balances at year-end
represented 20.7 percent of total deposits.
233
173
185
94
752
790
120
106
907
1,138
In 2006, Wealth Management, including
1,255
FNB Brokerage Services, Inc., member NASD/
SIPC, a wholly owned subsidiary of Seacoast
National Bank, and our Trust and Investment
Management Services generated $5.9 million
in fee income, an increase of 14.1 percent over
2005. This year, Seacoast continued to seize
opportunities resulting from competitors
pulling out of the $500,000 to $2 million invest-
ment wealth management market. With the
highly favorable demographics in our markets,
there is significant opportunity within our
Total Deposits
existing client base to cross-serve our customers
($ in millions)
into wealth management services.
>$100K
Core Interest Time DDA
Bearing
Deposits
2002 2003 2004 2005 2006
To help leverage this opportunity, Seacoast
National Bank hired David Osgood as Director
of Wealth Management who serves as a liaison
between our local market presidents, line of
business managers and a highly trained team
of wealth management representatives, over
90 percent of whom have earned Certified
Financial Planner (CFP), Certified Financial
Advisor (CFA), Certified Trust Financial Advisor
(CTFA) or Series 7 Registered Representative
credentials.
Dennis S. Hudson III
Chairman & CEO
A. Douglas Gilbert
President & COO
$1800
$1500
$1200
$900
$600
02 03 04 05 06
Total Loans
($ in millions)
$2000
$1500
$1000
$500
392
473
345
244
173
1,255
1,138
120
907
233
185
106
94
790
752
2002 2003 2004 2005 2006
Core Interest Time DDA
Bearing
Deposits
>$100K
Total Deposits
($ in millions)
2006 Annual Report
7
$1800
$1500
$1200
$900
$600
02 03 04 05 06
Total Loans
($ in millions)
“ With our expansion and
favorable markets, we see
tremendous opportunities
for this unique franchise
we now call Seacoast.”
– Jean Strickland,
President and Chief
Operating Officer,
Seacoast National Bank
Refining
Our Brand
2006 marked Seacoast National Bank’s 80th anniversary. With this milestone
came a name change, shedding First National Bank and Trust Company
of the Treasure Coast in favor of Seacoast National Bank – a name that
better reflects the markets we serve and ties our consumer brand to
our institutional brand, creating a stronger, more unified identity.
The past two years have brought about
tremendous change for Seacoast National
Bank, and we must recognize that we need to
be more competitive and bring our operating
practices in line with the best in the financial
services industry. We need to better utilize our
human and financial resources. To accomplish
this, we began a process to reassess almost
everything we do. We will continue to review
our work activities to identify ways we can
better meet the needs of our customers and
ensure that we have the right technology, and
are leveraging it toward our goal of optimum
performance. All of these improvements will
require the efforts of all employees to develop
a strong sales and service culture, to grow our
customer base, our revenues and to provide
shareholder value.
We conducted a series of ten highly targeted
focus groups to help us understand the demo-
graphically and geographically diverse Big
Lake markets, and how Seacoast is perceived
in our oldest legacy market in Martin County
as well as the business niche in Palm Beach
County. Results of this research are being used
8
Seacoast Banking Corporation of Florida
to help us develop new branding and name
awareness communications that will evolve
throughout 2007. These are designed to
deliver our brand message of convenience,
relationship building and local, knowledgeable
decision makers, and build awareness of the
Seacoast National Bank name in both our
legacy and emerging markets.
2006 was also a year of awards and accolades.
Seacoast National Bank was named Business
of the Year by the Business Development Board
of Martin County. Jean Strickland, President
and Chief Operating Offi cer of Seacoast
National Bank, was named Business Person
of the Year by the Stuart/Martin County
Chamber of Commerce. C. William Curtis,
Jr., Chairman of Indian River County, was
honored by the Indian River County Chamber of
Commerce with the Alma Lee Loy Community
Service Award recognizing the work of an
outstanding individual in the county. Dale
M. Hudson, Vice-Chairman of Seacoast
Banking Corporation of Florida, and his wife
Mary, were named Individual Philanthropists
of the Year by the Association of Fundraising
Professionals, Treasure Coast Chapter.
As we celebrate these successes, we are all
very much aware of the importance of our
continued commitment and dedication to the
success and profi tability of Seacoast and our
responsibility to produce shareholder value.
With our expansion and favorable markets,
we see tremendous opportunities for this
unique franchise we now call Seacoast.
FEEL GOOD ABOUT YOUR BANK
Seacoast’s new branding campaign is designed to
deliver our brand message of convenience, relationship
building and local, knowledgeable decision makers,
and to build awareness of the Seacoast National Bank
name in our legacy and emerging markets. The exe-
cutions are a respectful recognition of the individuals
we serve, utilizing authentic, genuine portraits of
people, a message that shows we understand them,
with an offer of something they want or need, and a
promise: “Feel good about your bank.”
BRAND IDENTITY
Seacoast National Bank’s new name and logo creates a
stronger, more unifi ed brand identity, better refl ecting
the markets we serve and tying our consumer brand
to our institutional brand.
2006 Annual Report
9
Refining Our
Culture
We have been fortunate in our recent business combinations to have
integrated other relationship-driven organizations that seek to increase
shareholder value through a relationship approach to banking.
Our core value of taking personal responsibility
for service, relationships and profitability
has been a common theme around which
we could all rally, as we worked hard this past
year to integrate systems and processes of
two banks formerly acquired. We are proud
of our newly integrated team and are excited
about the foundation we have to build from
as we continue to strengthen teamwork and
refine our culture.
For the past two years, we have been focused
on succession planning in order to leverage
current management expertise for the benefit
and development of future management.
This succession process identifies quality,
competent, experienced people and provides
personnel training to support the bank’s
performance goals.
Seacoast National Bank Vice Chairman,
A. Douglas Gilbert has responsibility over
local market bank presidents including
Mike Sheffey, President of the Orlando Bank,
Greg Leach, President of the Palm Beach Bank,
Joe Mullins, President of the Big Lake Bank
and Tom Wilkinson, President of the
Treasure Coast.
C. William Curtis, Jr., Senior Executive Vice
President and Chief Banking Officer, Seacoast
Banking Corporation of Florida and President
of Indian River County for Seacoast National
10
Seacoast Banking Corporation of Florida
Left to right: Lang B. Ryder, Senior Vice President, Seacoast Marine Finance,
Thomas L. Hall, Executive Vice President, Retail Banking and Consumer Lending,
Harry (Russ) Holland, Executive Vice President, Commercial Lending,
Leonard J. Hoag, President, FNB Brokerage Services, Inc, FNB Insurance
Services and Executive Vice President, Wealth Management
Each of us will take personal
responsibility for service,
relationships and profitability.
Bank, announced his intention to retire January
31, 2008. Until then, Curtis will retain his holding
company title and has assumed the position
of Chairman of Indian River County to assist in
the transition and to continue the local market
legacy that he introduced to Seacoast National
Bank. The following additional organizational
realignment was made effective July 1, 2006:
Tom Wilkinson was promoted to President
of the Treasure Coast, taking responsibility for
Martin, St. Lucie and Indian River counties. He
continues to oversee the commercial lenders for
the Treasure Coast and the emerging Brevard
County market. Jay Hart was promoted to
President of Indian River County and will
continue to direct commercial lending in that
market. Thom Jones will continue in his position
as President of St. Lucie County and Tom Hall
was promoted to Executive Vice President
of Retail Banking and Consumer Lending
lines of business, including the Telephone
Banking Center/Alternative Banking. As the
line of business executive for retail banking,
Hall also leads the bank’s private banking
strategy and serves as a retail banking strategic
resource to local market presidents.
Joining Seacoast National in July as Executive
Vice President, Russ Holland serves as the
commercial lending line of business executive,
and as such, is a resource to local market
bank presidents and regional commercial
lending managers. We reorganized commercial
construction loan funding and administration
to make it highly centralized. A senior
commercial real estate lender now oversees
these efforts.
Training is a key element throughout our
organization, from management succession
to the Compass Program which provides
a continuing education program for Retail
Banking employees who wish to further their
careers. Other training initiatives include
a program offered in conjunction with the
Alzheimer’s Association, designed to help
Retail Banking employees identify the
symptoms of Alzheimer’s disease and other
memory loss conditions. The program is
the first training of its kind in the country
and Seacoast plans to institute the program
bank wide in 2007. We have a formal lending
training program in place with the goal to
continue to enhance our lenders’ abilities and
to ensure that employees new to our lending
team learn our credit culture and assist them
in becoming strong lenders.
2006 Annual Report
11
Refining Our
Local Market Strategy
To better build strong customer relationships, Seacoast employs a distributed
decision-making process that empowers at the local market level. This flat
organizational structure is unusual in the banking industry, as it is less
streamlined and cost-efficient than a centralized structure, but we believe
will yield far better relationship results.
We have often said that we bank friends,
neighbors and family. Our local market strategy
will ensure that we can continue to make
that statement. This strategy requires that
we employ very strong, competent leaders as
presidents in our local markets and that they
have the followership with the local market
team, the community and our customers. We
have always believed that people bank with
people and our commitment to the local
market strategy is consistent with this belief.
We have been fortunate to have acquired
talent, through acquisition and otherwise,
who have long tenures living, working and
contributing through civic and volunteer
efforts in the markets they serve. We know
that our local market strategy will continue
to give us a competitive edge by allowing us
to provide the sophisticated products of a
large regional bank with the high touch
service of a community bank.
Compensation is a distributed process as well.
Local market presidents manage expenses
and revenue growth and the compensation
structure is based on performance of the local
market. While this practice encourages personal
responsibility for service, relationships and
12
Seacoast Banking Corporation of Florida
Seacoast National Bank Local Market Presidents, left to right:
Michael W. Sheffey, President, Orlando Bank,
Gregory E. Leach, President, Palm Beach County,
Jasper W. Hart, President, Indian River County,
Thomas G. Jones, President, St. Lucie County,
Thomas H. Wilkinson, President, Treasure Coast,
Joseph Mullins, President, Big Lake Bank
This strategy requires that we employ very
strong, competent leaders as presidents
in our local markets.
profi tability, local markets also benefi t from
the experience of line of business senior
management providing additional expertise
and the ability to pursue larger customers
and profi table growth.
This local market strategy is supported by
involving the most infl uential local market
leaders and customers as community board
members and third-party infl uencers.
S Y N E R G Y
Local Markets
Lines of Business
Support Areas
LOCAL MARKET STRATEGY
Seacoast National Bank has leveraged our internal resources to achieve optimum performance.
Line of business managers and support areas support the local markets in achieving success.
2006 Annual Report
13
Refining Our
Market Exposure
In the 80 years since its original charter, Seacoast National has grown along
Florida’s southeast coastal region, becoming the second largest publicly
traded bank holding company headquartered in Florida. Seacoast National’s
market area is bounded by Orlando in north central Florida, Brevard
County to the north, Palm Beach to the south and by the Big Lake Region
in south central Florida.
Brevard County
Martin County
St. Lucie County
Loan Production Office
Hutchinson Island
Fort Pierce
Viera – Opening 2007
Jensen Beach
Fort Pierce Wal-Mart
Jensen West
St. Lucie West
Indian River County
Colorado Avenue*
Sebastian West
East Ocean
Sebastian Wal-Mart
Sandhill Cove
Tiffany
Bayshore
Rivergate
Oak Point
Beachland*
Palm City
Port St. Lucie Wal-Mart
Wedgewood Commons
Vero Beach Wal-Mart
Cove Road
US 1 & 12th Street
Mariner Square
South Vero Square
Hobe Sound
Gatlin Boulevard –
Opening 2007
Desoto County
Arcadia
Glades County
Moore Haven
Palm Beach County
Tequesta
Jupiter
Juno Beach
Northlake Boulevard
PGA Boulevard
Hardee County
Wauchula
Orange County
Hendry County
Maitland
Orlando
Clewiston
Labelle
Seminole County
Longwood
Highlands County
Lake Placid
Okeechobee County
South Parrott
North Parrott
Vero SR 60
Seminole
Orange
Brevard
Indian River
Okeechobee
St. Lucie
Martin
Palm Beach
Hardee
Highlands
Desoto
Glades
Hendry
* Private Banking Center
14
Seacoast Banking Corporation of Florida
FINANCIAL SECTION
CONTENTS
Management’s Discussion & Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Management’s Assessment of Internal Controls over Financial Reporting . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
38
54
55
57
15
MANAGEMENT’S DISCUSSION & ANALYSIS
Overview and Outlook
Our Business
Seacoast Banking Corporation of Florida is a single-bank holding company located on Florida’s southeast
coast (as far south as Palm Beach County and north to Brevard County) as well as Florida’s interior around
Lake Okeechobee and up to and including Orlando. The Company has 42 full service branches, one of which
was acquired in Indian River County from another Florida based institution in January 2005 and three of
which were acquired in Orlando (two in Orange County and one in Seminole County), a result of the
acquisition of Century National Bank (“Century”) in April 2005. In addition, the Company acquired Big Lake
National Bank (“Big Lake”) with nine offices located in central Florida serving the counties of DeSoto,
Glades, Hardee, Hendry, Highlands, Okeechobee, and St. Lucie on April 1, 2006 and opened a new branch in
Palm Beach County in May 2006.
The Company plans to open three to four new branches over the next two years. The coastal markets in
which the Company operates have had population growth rates over the past 10 years of over 20 percent and
are expected to grow an additional 20 percent or more over the next 10 years. Prospectively, the Company will
consider other strategic acquisitions as part of the Company’s overall future growth plans provided they are in
complementary and attractive growth markets within the state of Florida.
For purposes of the following discussion, the words the “Company,” “we,” “us” and “our” refer to the
combined entities of Seacoast Banking Corporation of Florida and its direct and indirect wholly owned
subsidiaries.
Strategic Overview
In order to improve its net interest margin the Company has reduced its residential portfolio from over
50 percent of total loans, in 2002, to approximately 30 percent in 2006. Over this period commercial/
commercial real estate and consumer lending capabilities were improved, including market expansion into
Palm Beach and Brevard Counties, and more recently, Orange and Seminole Counties as well as counties in
the Lake Okeechobee region. The Company has plans to enter the Ft. Lauderdale/Broward county market with
a loan production office in 2007 and plans to explore other markets to further enhance its loan production
capabilities.
The added lending capabilities resulted in the largest commercial and commercial real estate production
in the Company’s history in 2006 and 2005. A total of $443 million was originated in 2006, compared to
$465 million in 2005 and $372 million in 2004. In 2006 the Company closed $172 million in residential loans,
lower than the $195 million in closed production in 2005, a slower residential real estate market and slightly
higher interest rates have dampened residential sales and as a result residential loan production. However, with
better market penetration, expanded coverage and the expectation that housing inventories (the so-called “glut”
of homes existing today) will diminish during 2007, the Company expects to be able to originate $185 million
in residential loans in 2007.
The net interest margin has improved from 3.57 percent in 2003 to 4.15 percent in 2006. The current
inverted interest rate curve will not allow for further improvement in the net interest margin in 2007 but the
Company’s improved loan mix, will over time, provide for a higher margin when the curve becomes steeper.
The Company refers to its brand of banking as the third alternative to banking: all of the sophisticated
products and services of its largest competitors delivered with the high touch quality customer service and
convenience of a small community bank. While this strategy is more costly from an overhead perspective, it
provides high value customer relationships and a much lower overall cost of funds when compared to peers.
The Company’s cost of interest bearing deposits has historically ranked in the lowest quartile compared to its
peers.
16
The Company believes it has an opportunity to increase its market share in 2007 because of the
acquisition of two of its primary competitors in its coastal markets. National City Corporation (“NCC”), a
Cleveland, Ohio based institution, made its first acquisition in the State of Florida and plans to integrate the
Florida based companies in the second quarter of 2007. While NCC will likely be an able competitor and
intent on retention of its newly acquired customer base, acquisitions often experience customer and employee
loss due to difficulties with their integration.
Loan Growth and Lending Policies
The Company’s lending policies, credit monitoring and underwriting have historically produced, over the
long term, low net charge offs and nonperforming loans and minimal past dues. Our Company’s credit culture
emphasizes discipline to the fundamentals of quality lending regardless of the economic cycle or competitive
pressures to do otherwise. The majority of the Company’s commercial and commercial real estate loans are
originated in its markets by experienced professional loan officers who retain credit monitoring and collection
responsibilities until the loan is repaid. During 2006, the Company enhanced its credit process by delineating a
separate commercial real estate construction loan disbursement function devoted to monitoring construction
activities by borrowers as well as the Company’s funding for those activities.
Subsequent to the historic low interest rate environment of 2002 and 2003, when much of the Company’s
residential loan portfolio being refinanced was sold through the Company’s mortgage banking unit, the
Company began selectively adding residential loans, primarily with adjustable rates, to its loan portfolio. This,
coupled with higher consumer, commercial and commercial real estate production during 2004, 2005 and
2006, resulted in loan portfolio growth improving to 26.9 percent in 2004, 43.4 percent in 2005 and
34.4 percent in 2006. The Company’s expansion into Palm Beach County with a total of five offices, the loan
production office in Brevard County, the acquisition of Century in Orlando and Big Lake has contributed to
overall loan growth, as well as an improved loan mix and lending capacity. Total loans outstanding in these
new markets have grown to $356 million, $60 million, $136 million and $195 million, respectively, at
December 31, 2006. This market expansion has provided the Company with greater opportunities to profitably
grow the loan portfolio, which has in turn contributed to gains in net interest income.
Deposit Growth, Mix and Costs
While the Company benefited in 2005 and 2004 from low interest notes and increases in low cost and no
cost deposits, this trend reversed in 2006. Interest rates have increased 425 basis points since the Federal
Reserve began increasing interest rates, with 100 basis points occurring during the last twelve months,
resulting in disintermediation (customers desiring higher cost certificates of deposit). In addition, a deteriorat-
ing residential real estate market translated to lower escrow deposits held by title companies, attorneys, etc.,
and remaining funds as a result of FEMA and insurance deposits from the 2004-05 hurricanes were disbursed.
The Company is confident of its continued emphasis on its brand of banking with high quality customer
service and convenient branch locations will provide stable low cost deposit funding growth over the long
term. The Company believes it is the most convenient bank in its Treasure Coast markets with more locations
than any competitor in the counties of Martin, St. Lucie and Indian River, which are located on Florida’s
southeast coast.
Over the past year, noninterest bearing demand deposits decreased 17.2 percent and low cost NOW,
savings and money market deposits increased 5.4 percent. Positively impacting the full year’s results was the
Company’s acquisition of Big Lake which added $301 million in deposits. Big Lake’s deposit mix is favorable
with 25.9 percent of Big Lake’s deposits comprised of noninterest bearing demand deposits at December 31,
2006, lower cost interest bearing core deposits representing 52.2 percent, and the remainder in certificates of
deposit. While interest rates increased during 2006, the Company’s overall deposit mix remains favorable and
its average cost of deposits, including noninterest bearing demand deposits, remains low. The average cost of
deposits for the fourth quarter of 2006 increased 100 basis points over the prior year to 2.54 percent. The
Company is executing the same value building customer relationship strategy for retail deposits in all of its
markets, including its denovo entry into Northern Palm Beach County where noninterest bearing deposits and
17
low cost interest bearing deposits represent 23.1 percent and 46.2 percent of total deposits at December 31,
2006.
Noninterest Income Sources
In addition to fee income from mortgage banking activities, the Company derives fees from service
charges on deposit accounts, investment management, trust and brokerage services, as well as from originating
and selling large yacht loans. It is the Company’s objective to increase its share of its customers financial
services and to generate approximately 30 percent of total revenues from all fee businesses in the coming
years. In 2006 and 2005, the Company collected approximately 21 percent and 22 percent of total revenues
(net interest income and noninterest income), respectively, from its fee-based business activities.
Critical Accounting Policies and Estimates
The Company’s consolidated financial statements are prepared in accordance with generally accepted
accounting principles, or “GAAP,” including prevailing practices within the financial services industry. The
preparation of consolidated financial statements requires management to make judgments in the application of
certain of its accounting policies that involve significant estimates and assumptions. These estimates and
assumptions, which may materially affect the reported amounts of certain assets, liabilities, revenues and
expenses, are based on information available as of the date of the financial statements, and changes in this
information over time and the use of revised estimates and assumptions could materially affect amounts
reported in subsequent financial statements. After consultation with the Company’s Audit Committee, we
believe the most critical accounting estimates and assumptions that may affect the Company’s financial status
and that involve the most difficult, subjective and complex assessments are:
(cid:129) the allowance and the provision for loan losses;
(cid:129) the fair value of securities held for sale;
(cid:129) goodwill impairment; and
(cid:129) contingent liabilities.
The following is a brief discussion of the critical accounting policies intended to facilitate a reader’s
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. For more information regarding management’s judgments relating to significant account-
ing policies and recent accounting pronouncements, see “Notes to Consolidated Financial Statements,
Note A-Significant Accounting Policies.”
Allowance and Provision for Loan Losses
Management determines the provision for loan losses charged to operations by constantly analyzing and
monitoring delinquencies, nonperforming loans and the level of outstanding balances for each loan category,
as well as the amount of net charge-offs, and by estimating losses inherent in its portfolio. While the
Company’s policies and procedures used to estimate the provision for loan losses charged to operations are
considered adequate by management and are reviewed from time to time by the Office of the Comptroller of
the Currency (OCC), there exist factors beyond the control of the Company, such as general economic
conditions both locally and nationally, which make management’s judgment as to the adequacy of the
provision and allowance for loan losses necessarily approximate and imprecise (see “Nonperforming Assets”.)
A provision of $3,285,000 was recorded during 2006, partially as a result of loan growth of $443 million
or 34 percent in 2006, including $204 million of loans from the acquisition of Big Lake. A $1,317,000
provision was recorded during 2005, when loans increased $390 million or 43 percent (including $107 million
in loans from the acquisition of Century), and provisioning of $1,000,000 occurred in 2004, when loans
increased $191 million or 27 percent. The increased loss exposure as a result of the loan growth in 2006, 2005
and 2004 was partially offset by the Company’s continued stable credit quality. Net recoveries totaled
18
$(106,000) or (0.01) percent of average loans in 2006, compared to net charge-offs of $134,000 or 0.01 percent
of average loans for 2005 and $562,000 or 0.07 percent of average loans for 2004. Net charge-offs were
nominal in prior years as well with $666,000 or 0.10 percent of average loans for 2003, $208,000 or
0.03 percent of average loans for 2002 and $184,000 or 0.02 percent of average loans for 2001. Nearly all of
the net charge-offs in 2004 and 2003 were attributable to the Company’s commercial and financial loan
portfolio that represents less than 10 percent of the total loan portfolio. The Company’s net charge-off ratios
have been much better than the banking industry as a whole and this year’s results are consistent with the
Company’s historical trends.
The Company’s expansion into Palm Beach and Brevard counties, the addition of Big Lake and Century,
as well as growth in the Company’s other markets over the last three years has resulted in double-digit
commercial and residential real estate loan growth. A historically favorable credit loss experience in these
portfolios limited the need to provide large additions to the allowance for loan losses during 2004, 2005 and
most of 2006. Also, while Century’s portfolio is only six years old, no credit losses have ever been recorded
for Century. However, during the fourth quarter of 2006 provisioning was increased to $2,250,000, represent-
ing 68 percent of total provisioning for 2006. During the fourth quarter, the Company undertook a
comprehensive review of all large credits, primarily construction loans, where the primary source of repayment
is related to the sale of residential real estate. The review was undertaken to ensure that there was proper
identification of risks associated with recent changes in market conditions impacting the Florida real estate
market. While no immediate or impaired loans were identified, the change in market condition was partially
responsible for the increase in provisioning during the quarter and for the year. In addition, during the fourth
quarter a specific loan loss allowance established for an $8.0 million credit secured with new and used boat
inventory and placed on nonaccrual during the third quarter of 2006 was increased to $1.1 million (see
“Nonperforming Assets”). Declines in economic activity could impact the demand for real estate and the
Company’s loss experience resulting in larger additions to the allowance for loan losses prospectively. The last
time the Company experienced significant net charge-offs and nonperforming loans was during the period
1988-1993 when the real estate markets in Florida experienced deflation and the national economy was in
recession. Management believes that its current credit granting processes follows a comprehensive and
disciplined approach that mitigates risk and lowers the likelihood of significant increases in charge-offs and
nonperforming loans during all economic cycles.
Table 12 provides certain information concerning the Company’s allowance for loan losses for the years
indicated.
The allowance for loan losses totaled $14,915,000 at December 31, 2006, $5,909,000 greater than one
year earlier. The increase in the allowance included the carryover of $2,518,000 from the acquisition of Big
Lake. None of the allowance added for Big Lake resulted from any impaired loans.
A model utilized to analyze the adequacy of the allowance for loan losses takes into account such factors
as credit quality, loan concentrations, internal controls, audit results, staff turnover, local market economics
and loan growth. In its continuing evaluation of the allowance and its adequacy, management also considers,
among other factors, the Company’s loan loss experience, loss experience of peer banks, the amount of past
due and nonperforming loans, current and anticipated economic conditions, and the values of loan collateral.
Commercial and commercial real estate loans are assigned internal risk ratings reflecting the probability of the
borrower defaulting on any obligation and the probable loss in the event of default. Retail credit risk is
managed from a portfolio view rather than by specific borrower and are assigned internal risk rankings
reflecting the combined probability of default and loss. The independent Credit Administration department
assigns risk factors to the individual internal risk ratings based on a determination of the risk using a variety
of tools and information. Loan Review is an independent unit that performs risk reviews and evaluates a
representative sample of credit extensions after the fact. 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 the Board of Directors.
The allowance as a percentage of loans outstanding decreased from 0.73 percent to 0.70 percent during
2005 and increased to 0.86 percent during 2006. The overall amount of the allowance for loan losses reflects
19
the allocation to residential and commercial real estate secured loan portfolios held by the Company, ranging
from a high of 87.8 percent of total loans in 2006 to a low of 80.8 percent in 2002 whose historical charge-
offs and delinquencies have been favorable. The better than peer performance credit quality results are
attributed to conservative, long-standing and consistently applied loan credit policies and to a knowledgeable,
experienced and stable staff. The allowance for loan losses represents management’s estimate of an amount
adequate in relation to the risk of losses inherent in the loan portfolio.
Table 13 summarizes the Company’s allocation of the allowance for loan losses to each type of loan and
information regarding the composition of the loan portfolio at the dates indicated.
Concentration of credit risk, discussed under “Loan Portfolio” of this discussion and analysis, can affect
the level of the allowance and 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 Company’s significant concentration of credit is a collateral concentration of loans
secured by real estate. At December 31, 2006, the Company had $1.5 million in loans secured by real estate,
representing 87.8 percent of total loans, up slightly from 85.9 percent at December 31, 2005. 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 meaningful credit exposure to commercial real estate developers and investors
with total commercial real estate construction and land development loans of 27.7 percent of total loans at
year-end 2006, versus 26.7 percent at year-end 2005. Generally, all of the Company’s exposure to these credits
are not only secured by project assets with fifty percent or more pre sales or leases, but are guaranteed by the
personal assets of all of the participants. Levels of exposure to this industry group, together with an assessment
of current trends and expected future financial performance, are carefully analyzed and monitored in order to
determine an adequate allowance level. Problem loan activity for this exposure needs to be evaluated over the
long term to include all economic cycles when determining an adequate allowance level.
While it is the Company’s policy to charge off in the current period loans in which a loss is considered
probable, there are additional risks of future losses that cannot be quantified precisely or attributed to
particular loans or classes of loans. Because these risks include the state of the economy as well as conditions
affecting individual borrowers, management’s judgment of the allowance is necessarily approximate and
imprecise. It is also subject to regulatory examinations and determinations as to adequacy, which may take
into account such factors as the methodology used to calculate the allowance for loan losses and the size of
the allowance for loan losses in comparison to a group of peer companies identified by the regulatory
agencies.
In assessing the adequacy of the allowance, management relies predominantly on its ongoing review of
the loan portfolio, which is undertaken both to ascertain whether there are probable losses 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.
Nonperforming Assets
Table 14 provides certain information concerning nonperforming assets for the years indicated.
Comprised entirely of nonaccrual loans, there was $12,465,000 in nonperforming assets at December 31,
2006, compared to $372,000 at December 31, 2005. At December 31, 2006, $4.4 million of nonaccrual loans
were secured with real estate. Also, included in nonaccrual loans at December 31, 2006 was a loan of
approximately $8.0 million secured with both new and used boat inventory that is in the process of being
liquidated. This relationship dates back over a number of years and represents the only retail floor plan loan in
the Company’s loan portfolio. The fair value of the collateral is believed to be sufficient to cover the loan
balance provided the liquidation occurs on a timely basis and in an orderly fashion. However, the borrower
recently filed for bankruptcy protection and the Company has classified the credit as impaired with a specific
valuation allowance of $1.1 million at December 31, 2006.
20
Nonperforming assets are subject to changes in the economy, both nationally and locally, changes in
monetary and fiscal policies, and changes in conditions affecting various borrowers from the Company’s
subsidiary bank. No assurance can be given that nonperforming assets will not in fact increase or otherwise
change. A similar judgmental process is involved in the methodology used to estimate and establish the
Company’s allowance for loan losses. Management does not expect significant losses for which an allowance
for loan losses has not been provided associated with the ultimate realization of these assets.
Fair Value of Securities Available for Sale
The fair value of the available for sale portfolio at December 31, 2006 was less than historical amortized
cost, producing net unrealized losses of $3,479,000 that have been included in other comprehensive income as
a component of shareholders’ equity. The fair value of each security was obtained from independent pricing
sources utilized by many financial institutions. However, actual values can only be determined in an arms-
length transaction between a willing buyer and seller; and 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 in the held for sale portfolio.
The credit quality of the Company’s security holdings is investment grade and higher and are traded in
highly liquid markets. Therefore, negative changes in the fair values as a result of unforeseen deteriorating
economic conditions should only be temporary. Further, management believes that the Company’s other
sources of liquidity, as well as the cash flow from principal and interest payments from the securities
portfolios, reduces the risk that losses would be realized as a result of needed liquidity from the securities
portfolio.
Goodwill Impairment
The Company’s goodwill is no longer amortized, but tested annually for impairment. The amount of
goodwill at December 31, 2006 totaled $49.4 million, including approximately $2.6 million that was acquired
in 1995 as a result of the purchase of a community bank in the Company’s Treasure Coast market,
$28.8 million from the acquisition of Century in 2005, and $17.9 million from the acquisition of Big Lake in
2006. Management does not expect any material change in the amount of goodwill associated with the
acquisition of Big Lake; however, estimated fair values of acquired assets and liabilities, including identifiable
intangible assets, are subject to refinement as plans are finalized and additional information becomes available.
The assessment as to the continued value for goodwill involves judgments, assumptions and estimates
regarding the future.
The Company has a bank deposit market share of approximately 12 percent in the Treasure Coast market,
which had a population increase of over 20 percent during the past ten years. The population growth and other
demographics of the counties Century operated in are similar to those of the Company’s other markets. The
population in these markets is forecast by the Bureau of Economic and Business Research at the University of
Florida to continue to grow at a 20 percent plus rate over the next ten years. Our highly visible local market
orientation, combined with a wide range of products and services and favorable demographics, has resulted in
increasing profitability in these markets. There is data available indicating that both the products and
customers serviced have grown since these acquisitions, which is attributable to the increased profitability and
supports the goodwill value at December 31, 2006.
Contingent Liabilities
We are subject to contingent liabilities, including judicial, regulatory and arbitration proceedings, tax and
other claims arising from the conduct of our business activities. These proceedings include actions brought
against us and/or our subsidiaries with respect to transactions in which we 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 we will incur an expense and the amount can be reasonably estimated. We
involve internal and external experts, such as attorneys, consultants and other professionals, in assessing
probability and in estimating any amounts involved. Throughout the life of a contingency, we or our experts
21
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. No amounts have been accrued as of December 31, 2006 as management is not aware of any probable
losses.
Results of Operation
Net Interest Income Net interest income (on a fully taxable equivalent basis) for 2006 totaled
$89,294,000, $16,997,000 or 23.5 percent more than for 2005. Net interest income for 2006 included
$8.9 million from the addition of Big Lake. While net interest income year over year was improved, a result
of an improving asset mix, growth in earning assets, and margin improvement, results for the last two quarters
of 2006 steadily declined from the second quarter of 2006, impacted by a more challenging environment, with
deposits declining and an unfavorable change in deposit mix.
Year over year the mix of earning assets improved. Loans (the highest yielding component of earning
assets) as a percentage of average earning assets totaled 72.6 percent for 2006 compared to 61.3 percent a year
ago, while average securities decreased from 32.7 percent to 24.3 percent and average federal funds sold and
other investments decreased to 3.1 percent from 6.0 percent. In addition to increasing total loans as a
percentage of earning assets, the Company successfully maintained the mix of loans, with commercial and
commercial real estate volumes representing 60.3 percent of total loans at December 31, 2006 (versus
60.1 percent at December 31, 2005) and residential loan balances (including home equity loans and lines, and
construction loans) representing 34.9 percent of total loans (versus 33.5 percent at December 31, 2005) (see
“Loan Portfolio”).
Net interest margin on a tax equivalent basis increased 18 basis points to 4.15 percent for 2006, compared
to 2005. The following table details net interest income and margin results (on a tax equivalent basis) for the
past five quarters:
Net Interest Income
Net Interest Margin
(Dollars in thousands)
Fourth quarter 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,062
20,274
24,030
23,144
21,846
4.04%
4.16
4.29
4.22
3.95
The yield on earning assets for 2006 was 6.52 percent, 111 basis points higher than for 2005, reflecting
an improving earning assets mix over 2005 and into 2006 and increased interest rates. Interest rates have
increased 425 basis points since the Federal Reserve began increasing interest rates, with 100 basis points
occurring during the last twelve months. The following table details the yield on earning assets (on a tax
equivalent basis) for the past five quarters:
4th Quarter
2006
3rd Quarter
2006
2nd Quarter
2006
1st Quarter
2006
4th Quarter
2005
Yield . . . . . . . . . . . . . . . . . . . . .
6.73%
6.71%
6.47%
6.11%
5.76%
The yield on loans improved 80 basis points to 7.34 percent over the last twelve months as a result of a
improving yields due to loan growth and a greater percent of the portfolio in floating rate loans. In addition,
an increase in the yield on investment securities of 63 basis points year over year to 4.29 percent was recorded
and the yield on federal funds sold and other investments grew 144 basis points to 4.75 percent. Average
earning assets for 2006 increased $327.7 million or 18.0 percent compared to 2005. Average loan balances
grew $444.6 million or 39.8 percent to $1,560.7 million, average federal funds sold and other investments
decreased $42.1 million or 38.4 percent to $67.5 million, and average investment securities were $74.8 million
or 12.5 percent lower, totaling $521.4 million. The Company expects to continue to use security maturities to
fund loan growth in 2007.
22
The increase in loans was principally in commercial real estate loans, in part reflecting the Company’s
successful de novo expansion into northern Palm Beach County and the opening of a loan production office in
Brevard County. The addition of Big Lake increased average loan balances $201 million during 2006. The
addition of another full service branch in Palm Beach County in May 2006 and one in Brevard County in
early 2007, as well as Big Lake’s eight locations will further assist in expanding the Company’s loan
origination capabilities. At December 31, 2006, commercial lenders in these markets (Palm Beach County,
Brevard County, Orlando and the Big Lake region) have new loan pipelines totaling $95 million and total
outstanding loans of $747.7 million at December 31, 2006. At December 31, 2006, the Company’s total
commercial loan pipeline was $271 million.
Total commercial loan production for 2006 totaled $443 million compared to $465 million for 2005.
Economic conditions in the markets the Company serves may be more challenging, even so commercial loan
production results are expected to be approximately $495 million for 2007.
Closed residential loan production during 2006 totaled $172 million, of which $49 million was sold
servicing released to manage interest rate risk and to generate fee income. In comparison, $195 million in
residential loans were produced in 2005, with $80 million sold servicing released. Higher mortgage rates and a
slow down in existing home sales in the Company’s markets have reduced demand for residential mortgages
and demand is expected to remain soft in 2007.
Activity in the Company’s securities portfolio was limited in 2006, with maturities of securities of
$151.1 million and purchases totaling $92.6 million. Sales proceeds totaling $112.4 million including securities
from Big Lake’s portfolio, which under purchase accounting were adjusted to fair value at April 1, 2006,
thereby providing the Company the opportunity to reposition these securities. In comparison, for 2005
maturities and purchases of securities totaled $214.9 million and $145.3 million, respectively, and sales
proceeds totaled $51.0 million. The investment portfolio is expected to continue to provide needed liquidity to
fund the expected growth in the loan portfolio.
While still a significant component favorably affecting the Company’s net interest margin, lower cost
interest bearing deposits have declined as a percentage of deposits. Consistent with prior periods where interest
rates have increased, customers have migrated to higher cost certificates of deposit from alternative lower cost
interest bearing deposit products. Exacerbating this migration, local competitors aggressively increased their
certificate of deposit rates throughout 2006. Lower cost interest bearing deposits (NOW, savings and money
market balances) were 56.7 percent of average interest bearing liabilities for 2006, versus 60.0 percent for
2005. Average certificates of deposit for 2006 increased to 32.0 percent of interest bearing liabilities from
29.5 percent a year ago. The trend worsened as the year progressed evidenced by fourth quarter 2006 average
balance results, with lower cost deposits making up 53.6 percent of average interest bearing liabilities and
certificates of deposit 33.6 percent.
The cost of interest-bearing liabilities in 2006 increased 115 basis points to 3.06 percent from 2005, a
result of the impact of the Federal Reserve increasing short-term interest rates by 50 basis points in the fourth
quarter of 2005, the first quarter of 2006, and the second quarter of 2006, a total of 150 basis points. Based on
recent Federal Reserve commentary, it would appear short-term interest rates are not likely to change much.
During 2006, approximately $309 million of the Company’s certificates of deposit matured and $529 million
will mature in 2007. The following table details the cost of interest bearing liabilities for the past five quarters:
4th Quarter
2006
3rd Quarter
2006
2nd Quarter
2006
1st Quarter
2006
4th Quarter
2005
Rate . . . . . . . . . . . . . . . . . . . . .
3.52%
3.21%
2.89%
2.55%
2.27%
Average deposits are higher year over year, increasing 16.5 percent in 2006, with average NOW, savings
and money market balances increasing $115.3 million or 14.0 percent, noninterest bearing deposits higher by
$31.1 million or 7.5 percent, and certificates of deposit increasing $125.1 million or 30.9 percent. Average
short-term borrowings (principally sweep repurchase agreements with customers of the Company’s subsidiary
bank and Federal Funds purchased) increased, by $34.1 million or 40.1 percent to $119.0 million for 2006,
versus a year ago. Trend results for the last half of 2006 differ somewhat from the year over year comparisons.
Since second quarter 2006 (which included the Big Lake acquisition), average NOW, savings and money
23
market balances declined $68.3 million or 6.9 percent, noninterest bearing demand deposits were lower by
$80.5 million or 16.2 percent, and certificates of deposit increased $47.9 million or 9.0 percent. Some of the
decline in low-cost/no cost funding was caused by interest rate disintermediation as customers migrated to
higher paying certificates of deposit and, in some instances, to repurchase agreements. Growth in certificates
of deposit was intentionally limited, with the Company remaining cautious in the pricing of its certificates of
deposit as it believes the growing risk of a slowing economy could produce lower short term interest rates in
the future. Slowing activity in the residential real estate market (resulting in declining title company and
escrow deposits) and completed commercial real estate construction projects (and associated deposits depleting
at end of construction) also contributed to the decrease in deposits from second quarter 2006. Current
economic factors, including an inverted Treasury yield curve, are likely to continue to challenge deposit
growth and constrain margin expansion in 2007.
Average other borrowings increased $9.4 million or 15.8 percent during 2005, compared to 2004. A
$6.0 million advance on a $15.0 million unsecured revolving line of credit (initially drawn upon in June
2005) was repaid during the first quarter of 2005 and replaced by a 3-year term loan of $12.0 million and an
unsecured revolving line of credit for $8.0 million. The revolving line of credit was never drawn upon during
2006. The $12.0 million term loan was obtained to provide a longer term source for funding, rather than the
single revolving line of credit which had to be renewed annually (see Note I-Borrowings).
Net interest income (on a fully taxable equivalent basis) for 2005 totaled $72,297,000, $19,390,000 or
36.6 percent higher than for 2004. Net interest income for 2005 included $7.9 million from the addition of
Century, with $1.7 million added in the second quarter, $2.9 million in the third quarter, and $3.3 million in
the fourth quarter. Net interest margin on a tax equivalent basis increased 8 basis points to 3.97 percent from
3.89 percent for 2004.
The net interest margin steadily improved quarter to quarter during 2005, increasing from 3.90 percent in
the first quarter of 2005 to 4.04 percent in the fourth quarter of 2005. The yield on earning assets for 2005
was 5.41 percent, 47 basis points higher than 2004’s result, reflecting an improving earning assets mix in 2005
and a rising interest rate environment. Interest rates increased 200 basis points in 2005 as a result of Federal
Reserve actions.
The yield on loans improved 48 basis points to 6.54 percent over 2005 compared to 2004 as a result of a
change in mix due to loan growth and a greater percent of the portfolio in floating rate loans. In addition, an
increase in the yield on investment securities of 25 basis points year over year to 3.66 percent was recorded
and the yield on federal funds sold and interest bearing deposits grew 175 basis points to 3.31 percent.
Average earning assets for 2005 increased $463.2 million or 34.1 percent compared to 2004. Average loan
balances grew $316.5 million or 39.6 percent to $1,116.1 million, average federal funds sold and interest
bearing deposits increased $90.8 million to $109.6 million, and average investment securities were $55.9 mil-
lion or 10.3 percent higher, totaling $596.2 million. The increase in loans was principally in commercial real
estate loans, in part reflecting the Company’s successful de novo expansion into northern Palm Beach County
and the opening of a loan production office in Brevard County (in August 2004). The acquisition of Century
in Orange and Seminole County (principally Orlando, Florida) increased average loan balances by $75 million
during 2005. Total loans in these new markets totaled $396 million at December 31, 2005 and commercial
lenders in these markets (Palm Beach County, Brevard County and the Orlando area) had pipelines aggregating
to $121 million.
Total commercial loan production for 2005 was $465 million, compared to $372 million in 2004, and
closed residential loan production during 2005 totaled $195 million, of which $80 million was sold servicing
released to manage interest rate risk and to generate fee income. In comparison, a total of $205 million in
closed residential production occurred during the twelve months ended December 31, 2004, of which
$78 million was sold servicing released. Residential production was lower during the second half of 2005,
declining $24 million from the first six months of the year, in part, a result of fewer residential loan originators
(due to vacant positions).
Activity in the Company’s securities portfolio was limited in 2005, with maturities of securities of
$214.9 million and purchases totaling $145.3 million. Sales proceeds totaling $51.0 million were entirely
24
comprised of securities from Century’s portfolio, which under purchase accounting were adjusted to fair
market value at April 30, 2005, thereby providing the Company the opportunity to reposition these securities.
In comparison, for 2004 maturities and purchases of securities totaled $132.3 million and $308.2 million,
respectively, and sales proceeds totaled $136.7 million.
The mix of earning assets improved year over year from 2004 to 2005. Loans (the highest yielding
component of earning assets) as a percentage of average earning assets totaled 61.3 percent for 2005 compared
to 58.9 percent a year ago, while securities decreased from 39.8 percent to 32.7 percent and federal funds sold
and interest bearing deposits increased from 1.4 percent to 6.0 percent. In addition to increasing total loans as
a percentage of earning assets, the Company successfully changed the mix of loans, with commercial volumes
increasing as a percentage of total loans (see “Loan Portfolio” and Table 9 — Loans Outstanding).
Lower cost interest bearing deposits (NOW, savings and money market balances) increased to 60.0 percent
of interest bearing liabilities, versus 55.3 percent a year ago, favorably affecting deposit mix. Average
certificates of deposit (a higher cost component of interest-bearing liabilities) as a percentage of interest-
bearing liabilities decreased to 29.5 percent in 2005, compared to 34.0 percent in 2004, reflecting diminished
funding requirements. Approximately $218 million in certificates of deposit matured during 2005. Borrowings
(including federal funds purchased, sweep repurchase agreements with customers of the Company’s subsidiary,
subordinated debt and other borrowings) remained relatively level at 10.5 percent of interest bearing liabilities
for 2005, versus 10.7 percent in 2004.
The cost of interest-bearing liabilities in 2005 increased 55 basis points to 1.91 percent from 1.36 percent,
principally due to the Federal Reserve increasing short-term interest rates at a “measured pace” during the
year, by 50 basis points in the fourth quarter, 75 basis points in the third quarter, 25 basis points in the second
quarter and 50 basis points in the first quarter. During 2005, the cost of interest bearing liabilities increased
from 1.56 percent in the first quarter of 2005 to 2.27 percent in the fourth quarter of 2005.
The average aggregated balance for NOW, savings and money market balances increased $245.7 million
or 42.4 percent to $825.0 million from 2004 and average noninterest bearing deposits increased $155.2 million
or 59.6 percent to $415.4 million, while average certificates of deposit increased $48.8 million or 13.7 percent
to $405.0 million. Of the growth indicated for aggregated NOW, savings and money market balances,
noninterest bearing deposits and certificates of deposit, the Century acquisition accounted for $128.8 million,
$70.7 million and $13.2 million of the increases indicated, respectively. Growth in deposits in the fourth
quarter of 2004 and first quarter of 2005 was favorably impacted by insurance proceeds received by customers
as a result of damage from two hurricanes that impacted the Company’s market area in September 2004. The
Company’s market expansion and commercial lending growth favorably impacted deposit growth as well, with
most new commercial loan relationships resulting in a new noninterest bearing deposit relationship.
Average short-term borrowings (principally sweep repurchase agreements with customers of the
Company’s subsidiary banks) also increased, by $12.7 million or 17.6 percent to $85.0 million for 2005,
versus 2004. Average other borrowings including subordinated debt increased by $19.6 million or 49.0 percent
to $59.5 million, reflecting the issuance of $20.6 million in subordinated debentures on the last day of the first
quarter (March 31, 2005), an additional issuance of $20.6 million in subordinated debentures on December 16,
2005, and $6.0 million in advances on a $15.0 million unsecured revolving line of credit (initially drawn upon
in June 2005). The debentures were issued in conjunction with the formation of a Delaware trust subsidiary,
SBCF Capital Trust I, and a Connecticut trust subsidiary, SBCF Statutory Trust II, each completing a private
placement of $20.0 million of Floating Rate Preferred Securities on their formation dates. The proceeds from
the sale of the trust preferred securities and advances on the line of credit were used to support the purchase
of Century, to maintain capital, and for general corporate purposes (see Note I-Borrowings).
Noninterest Income
Noninterest income, excluding gains and losses from securities sales and gain on sale of a partnership
interest, totaled $23,113,000 for 2006, $2,596,000 or 12.7 percent higher than for 2005. Noninterest income,
as defined above and excluding interest rate swap profits and losses, accounted for 20.6 percent of total
25
revenue (net interest income plus noninterest income, excluding securities gains or losses, the gain on sale of
partnership interest and interest rate swap profit and losses) in 2006 compared to 22.1 percent a year ago.
Revenues from the Company’s financial services businesses increased year over year, higher by $725,000
or 14.1 percent in 2006 versus 2005, compared to an increase of $443,000 or 9.4 percent for 2005 versus
2004. Of the $725,000 increase, trust revenue was higher by $285,000 or 11.1 percent and brokerage
commissions and fees were greater by $440,000 or 17.2 percent. Fees from the sale of annuities and mutual
funds were $257,000 and $159,000 higher in 2006, respectively, and during the second quarter brokerage
commissions and fees totaled an unusually strong $1,042,000, with a commission of $168,000 collected from
a single customer on an insurance annuity sale. Revenues from wealth management services improved
significantly in 2006, and the Company believes it can be successful and expand its customer relationships
through sales of investment management and brokerage products, including insurance and grow revenues by
ten percent per year.
Service charges on deposits were $1,762,000 or 35.1 percent higher year over year versus 2005. In
comparison, 2005’s service charges on deposits were $543,000 or 12.1 percent higher compared to 2004.
Service charges on deposits from the acquisition of Big Lake comprised $1,501,000 of 2006’s overall increase.
Overdraft fees were higher during 2006 and 2005, increasing $1,410,000 or 38.6 percent in 2006, versus 2005,
and $694,000 or 23.4 percent higher in 2005, versus 2004. Of the $1,410,000 increase in overdraft fees in
2006, $1,183,000 was from the addition of Big Lake. The increase in overdraft fees during 2005 was
nominally affected by the addition of Century, and was primarily caused by the Company instituting new
policies and procedures which added additional customer flexibility in managing their deposit account balance
which resulted in higher overdraft fees being collected. Growth rates for remaining service charge fees on
deposits have been lower, 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 balance requirements.
Marine finance fees from the non-recourse sale of marine loans decreased $359,000 or 11.7 percent
compared to 2005’s results, after increasing $71,000 or 2.4 percent on 2005 versus 2004. The Company’s
marine finance division (Seacoast Marine Finance) produced $153 million in marine loans during 2006,
compared to $189 million in 2005 and $171 million in 2004. Of the $153 million of production during 2006,
$148 million was sold. In comparison, for 2005 marine loans totaling $177 million were sold. Marine loan
production was lower during 2006 as higher oil prices dampened demand and resulted in fewer finance
opportunities. Seacoast Marine Finance is headquartered in Ft. Lauderdale, Florida with lending professionals
in Florida, California and New England. The production team in California is capable of not only serving
California, but Washington and Oregon as well. The Company will continue to look for opportunities to
expand its market penetration of its marine business.
Greater usage of check cards over the past several years by core deposit customers and an increased
cardholder base has increased interchange income. Debit card income increased $435,000 or 25.4 percent in
2006 year over year, and was $370,000 or 27.5 percent higher in 2005 than 2004. Contributing to the increase
in 2006 was the addition of approximately $330,000 in revenue from Big Lake. Other deposit based electronic
funds transfer (“EFT”) income increased by $4,000 in 2006 compared to 2005, after declining $59,000 or
12.5 percent in 2005 versus 2004. Debit card and other deposit based EFT revenue is dependent upon business
volumes transacted, as well as the amplitude of fees permitted by VISA and MasterCard.
The company is a leader in the production of residential mortgages in its markets, with loans processed
by commissioned originators, many referred by the Company’s branch personnel. Mortgage banking revenue
as a component of overall noninterest income has diminished, from 8.8 percent for 2005 to 4.9 percent for
2006. Year over year, mortgage banking fees decreased $679,000 or 37.5 percent in 2006 compared to 2005
and $14,000 in 2005 versus 2004. Sales of residential loans in 2006 totaled $49 million, versus $80 million in
2005 and $78 million in 2004. This is directly related to a greater volume of loans as a percent of overall
production being retained in the loan portfolio, primarily loans with adjustable rates. While the addition of the
Big Lake region further expands the Company’s market reach and ability to generate mortgage revenues are
dependent upon favorable interest rates, as well as, good overall economic conditions. During 2006, higher
26
interest rates and housing prices have dampened the residential real estate markets not only in Florida, but
nationwide.
Merchant income for 2006 was $315,000 or 14.1 percent higher than in 2005, and was $268,000 or
13.7 percent higher in 2005 compared to 2004. 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 the
Company’s banking subsidiary. The Company’s expansion into new markets has positively impacted merchant
income, with Big Lake and Century contributing to the increase for 2006.
After signing a lease for banking facilities in 2002, the Company invested in the partnership to construct
the high-rise building with 67,500 square feet of rentable space in 2004 for its corporate headquarters in Palm
Beach County (opened in May 2006). The Company’s investment represented 10 percent of total funds
contributed to the partnership. In November 2006, the partnership was dissolved upon settlement of the sale of
the building. As a result, the Company garnered a $1,147,000 gain which was recognized during the fourth
quarter of 2006.
Noninterest Expenses
The Company’s overhead ratio has ranged in the low 60s over the past few years. The efficiency ratio of
63.3 percent for 2006 compares to last year’s ratio of 63.7 percent. When compared to 2005, noninterest
expenses for 2006 increased by $13,945,000 or 23.6 percent to $73,045,000, compared to an increase of
$11,819,000 or 25.0 percent in 2005. Of the $13,945,000 increase in 2006, $5,658,000 was due to the addition
of Big Lake; only nine months of overhead for Big Lake was included in 2006’s results. In addition, one-time
costs of $582,000 related to the Big Lake integration and $304,000 for the Company’s banking subsidiary
name change were incurred. After the acquisition of Big Lake, the Company chose to align its banking
subsidiary’s name more closely with its corporate identity, renaming its banking subsidiary Seacoast National
Bank. For 2005, of the $11,819,000 increase, $3,738,000 was due to the addition of Century; only eight
months of overhead for Century was included in 2005’s results. Remaining growth in 2005 is attributable to
increased wages, benefits, occupancy, marketing and other overhead due to the addition of branches and
personnel in the Palm Beach and Brevard County markets, and from higher commissions, stock awards and
other incentive compensation related to the Company’s improved performance. Also impacting overhead in
2006 and 2005 are marketing expenses associated with the Company’s new markets.
Salaries and wages increased $5,363,000 or 22.5 percent in 2006, compared to prior year. Included in the
year-over-year increase was $2,445,000 related to the addition of Big Lake. Commissions and incentives were
$201,000 greater year over year, including $374,000 for Big Lake. Base salaries increased $5,568,000 or
28.6 percent year over year for 2006, with additional salaries of $2,514,000 and $530,000, respectively, for the
acquired companies Big Lake and Century comprising most of the increase compared to 2005. Full-time
equivalent employees totaled 534 at December 31, 2006, compared to 426 at December 31, 2005. For 2005,
base salaries increased $2,798,000 or 16.8 percent. A portion of the increase in base salaries was directly
attributable to lending and branch personnel in the new Palm Beach County market ($337,000) and to the
addition of Century ($1,005,000). Key manager incentives and stock award compensation (tied to specific
Company performance measurements) were higher in 2005, representing $1,560,000 of the overall increase of
$1,691,000 in incentives for 2005.
Likewise, employee benefits increased $1,009,000 or 16.0 percent in 2006, and were $1,282,000 or
25.5 percent higher in 2005 compared to 2004. Group health insurance accruals were $818,000 higher in
2006, as were payroll taxes, up $328,000 year over year, reflecting a larger work force. During 2005, higher
group health insurance costs, payroll taxes and profit sharing accruals for the Company’s 401K plan of
$517,000, $232,000 and $505,000, respectively, were the primary cause for the increase year over year.
Outsourced data processing costs totaled $7,443,000 for 2006, an increase of $966,000 or 14.9 percent
from a year ago versus a $761,000 or 13.3 percent increase in 2005. The Company’s subsidiary bank utilizes
third parties for its core data processing systems and merchant credit card services processing. Outsourced data
processing costs are directly related to the number of transactions processed, which can be expected to
27
increase as the Company’s business volumes grow and new products such as bill pay, internet banking, etc.
become more popular.
Occupancy and furniture and equipment expenses during 2006, on an aggregate basis, increased
$2,711,000 or 37.4 percent year over year, versus a $1,099,000 or 17.9 percent increase in 2005. Costs related
to new locations impacted both 2006 and 2005. Of the $2,711,000 increase for 2006, $789,000 was related to
Big Lake, $278,000 to Century, $483,000 to the new Palm Beach County office opened in May 2006, and
$242,000 for lease payments on premises for new branch sites, principally rent for land for offices anticipated
to open in 2007. Of the $1,099,000 increase for 2005, $547,000 was related to Century and $281,000 to new
Palm Beach County sites.
Marketing expenses, including sales promotion costs, ad agency production and printing costs, newspaper
and radio advertising, and other public relations costs associated with the Company’s efforts to market
products and services, increased by $1,165,000 or 36.5 percent in 2006, compared to a $729,000 or
29.6 percent increase in 2005 versus 2004. For 2006, increases occurred in ad agency costs related to
production and printing, newspaper and radio advertising, direct mail campaigns and public relations totaling
$588,000. In addition, market research regarding the name change and bank integrations added $78,000,
donations increased $210,000, public relations an additional $194,000 and business meals $94,000. For 2005,
ad agency production and printing costs were $146,000 higher year over year, media costs for newspaper and
radio advertising were up $104,000, sales promotions was $89,000 higher, expenditures for direct mail
campaigns were $109,000 greater, charitable donations were up $80,000, and public relations costs increased
$101,000. A checking account acquisition program initiated in November 2005 targeting non-customers, with
an emphasis on gathering new low cost deposit accounts and increasing noninterest fee income, added $59,000
to the fourth quarter of 2005 as well; the program was discontinued in 2006. For 2006 and 2005, expenditures
were primarily focused on the Company’s newer markets, the Palm Beach and Brevard County markets, and
the Big Lake region.
Legal and professional fees increased $197,000 or 7.6 percent to $2,792,000 for 2006, compared to a
$752,000 or 40.8 percent increase in 2005 compared to 2004. During 2006, fees for the Company’s subsidiary
bank’s primary regulator, the Office of the Comptroller of the Currency, increased $108,000, and fees were
incurred with outside parties assisting with the comprehensive review of large credits conducted during the
fourth quarter (see “Allowance and Provisioning for Loan Losses”). Higher professional fees and audit fees
associated with the Company’s external audit and outside consulting assistance were the causes for the
increase in 2005.
The Big Lake acquisition in the second quarter of 2006 and Century acquisition in the second quarter of
2005 increased core deposit intangibles to $7.9 million at December 31, 2006. The intangible assets for Big
Lake and Century were assigned initial estimated lives of 8.7 years and 5.0 years, respectively. For the fourth
quarter of 2006 and total year 2006, amortization of intangibles totaled $315,000 and $1,063,000, respectively.
For the fourth quarter of 2005 and total year 2005, amortization of intangibles totaled $119,000 and $533,000,
respectively.
Remaining noninterest expenses increased $2,004,000 in 2006 or 22.4 percent to $10,962,000 and
$1,999,000 in 2005 or 28.7 percent to $8,958,000. Increasing year over year for 2006 versus 2005 were costs
for postage, courier and delivery (up $257,000 on an aggregate basis), insurance (up $208,000, primarily for
property and liability), stationery, printing and supplies (up $389,000), telephone and data lines (up $479,000),
bank paid closing costs (up $142,000), as well as costs related to the name change ($207,000), correspondent
clearing charges ($89,000), and travel reimbursement, including mileage, airline and hotel (up $198,000).
Increasing year over year for 2005 versus 2004 were costs for postage, courier and delivery services (up
$144,000 on an aggregate basis), telephone and data lines (up $190,000), professional development (up
$171,000), employment advertising, placement and relocation costs (up $268,000), higher miscellaneous losses
due to fraud and robbery (up $381,000), and stationery, printing and supplies (up $130,000). Increasing to a
lesser extent in 2005 were property and liability insurance, travel reimbursement, books and publications, and
bank paid closing costs.
28
The Company is completing a review of its processes, operations and costs, and based upon this review,
the Company has targeted quarterly overhead to remain relatively flat in 2007 when compared to 2006 after
adjusting for the acquisition completed in the second quarter of 2006. Federal Deposit Insurance Corporation
(“FDIC”) insurance premiums have been reformulated for 2007 and are expected to increase to as much as
$1 million in the coming year; more than offsetting, under the FDIC’s new rules the Company is entitled to a
one-time credit for premiums previously paid that is expected to total approximately $1,240,000. Any credit
not used in 2007 may be applied to reduce up to 90 percent of insurance assessments in future years.
Interest Rate Sensitivity
Fluctuations in rates may result in changes in the fair value of the Company’s 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 Company’s
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 Company’s most recent Asset and Liability Management Committee (“ALCO”) model
simulations indicate net interest income would decrease 1.2 percent if interest rates gradually rise 200 basis
points over the next twelve months. With the Federal Reserve now pausing, having increased the federal funds
rate by 425 basis points from June 2004 through June 2006, and possibly decreasing rates in the future, the
model simulation indicates net interest income would increase 0.4 percent over the next twelve months given a
gradual decline in interest rates of 100 basis points. It has been the Company’s experience that non-maturity
core deposit balances are stable and subjected to limited re-pricing when interest rates increase or decrease
within a range of 200 basis points.
On December 31, 2006, the Company had a negative gap position based on contractual and prepayment
assumptions for the next twelve months, with a negative cumulative interest rate sensitivity gap as a percentage
of total earning assets of 23.0 percent (see “Table 19 — Interest Rate Sensitivity Analysis”), compared to a
negative gap of 5.8 percent a year ago.
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
Company’s risk management profile.
Market Risk
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 (EVE) to
adverse movements in interest rates, is the Company’s primary market risk, and mainly arises from the
structure of the balance sheet (non-trading activities). Seacoast is also exposed to market risk in its investing
activities. The 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 ALCO are reviewed and approved by the Company’s 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 Company’s tolerance for interest rate risk over short-term and long-term
horizons.
The Company also performs valuation analysis, which is used for discerning levels of risk present in the
balance sheet that might not be taken into account in the net interest income simulation analysis. 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
29
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 of which is referred to as EVE. The sensitivity of EVE to
changes in the level of interest rates is a measure of the longer-term re-pricing risk and options risk 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
0.7 percent versus the EVE in a stable rate environment. An instantaneous 100 basis point decrease in rates is
estimated to decrease the EVE 2.7 percent versus the EVE in a stable rate environment.
While an instantaneous and severe shift in interest rates is used in this analysis to provide an estimate of
exposure under an extremely adverse scenario, a gradual shift in interest rates would have a much more
modest impact. Since EVE measures the discounted present value of cash flows over the estimated lives of
instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over
a shorter time horizon, i.e., the next fiscal year. Further, EVE does not take into account factors such as future
balance sheet growth, changes in product mix, change in yield curve relationships, and changing product
spreads that could mitigate the adverse impact of changes in interest rates.
Liquidity Risk Management
Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-
based liability, as well as the risk of not being able to meet unexpected cash needs. Liquidity planning and
management are necessary to ensure the ability to fund operations cost-effectively and to meet current and
future potential obligations such as loan commitments and unexpected deposit outflows.
In the table that follows, all deposits with indeterminate maturities such as demand deposits, NOW
accounts, savings accounts and money market accounts are presented as having a maturity of one year or less.
Contractual Commitments
December 31, 2006
Total
One Year
or Less
Over
One Year
Through
Five Years
(In thousands)
Deposit maturities . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings. . . . . . . . . . . . . . . . . . . .
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . .
$1,891,018
206,476
26,522
41,238
42,274
$1,850,421
206,476
—
—
3,818
$40,547
—
26,522
—
10,863
Over Five
Years
$
50
—
—
41,238
27,593
$2,207,528
$2,060,715
$77,932
$68,881
Funding sources primarily include customer-based core deposits, purchased funds, and collateralized
borrowings, cash flows from operations, and asset securitizations and sales.
Cash flows from operations are a significant component of liquidity risk management and consider both
deposit maturities and the scheduled cash flows from loan and investment maturities and payments. Deposits
are a primary source of liquidity. The stability of this funding source is affected by factors, including returns
available to customers on alternative investments, the quality of customer service levels and competitive
forces.
30
We purchase funds on an unsecured basis from correspondent banks and routinely use securities and loans
as collateral for secured borrowings. In the event of severe market disruptions, we have access to secured
borrowings through the Federal Reserve Bank.
Contractual maturities for assets and liabilities are reviewed to adequately maintain current and expected
future liquidity requirements. Sources of liquidity, both anticipated and unanticipated, are maintained through
a portfolio of high quality marketable assets, such as residential mortgage loans, securities available for sale
and federal funds sold. The Company has access to federal funds and Federal Home Loan Bank (“FHLB”)
lines of credit and is able to provide short term financing of its activities by selling, under an agreement to
repurchase, United States Treasury and Government agency securities and mortgage backed securities not
pledged to secure public deposits or trust funds. At December 31, 2006, the Company had available lines of
credit of $140 million. At December 31, 2006, the Company had $189 million of United States Treasury and
Government agency securities and mortgage backed securities not pledged and available for use under
repurchase agreements. At December 31, 2005, the amount of securities available and not pledged was
$342 million.
Liquidity, as measured in the form of cash and cash equivalents (including federal funds sold and interest
bearing deposits), totaled $92,215,000 at December 31, 2006 as compared to $220,493,000 at December 31,
2005. Cash and cash equivalents vary with seasonal deposit movements and are generally higher in the winter
than in the summer, and vary with the level of principal repayments and investment activity occurring in the
Company’s securities portfolio and loan portfolio. At December 31, 2005, cash and cash equivalents were
higher due to the addition of Century; of the $220,493,000 in cash and cash equivalents, $142,900,000 directly
related to Century. The higher liquidity maintained by Century pertains in part to late day settlement
transactions (wire transfers) for certain large commercial customers in the Orlando market.
Off-Balance Sheet Transactions
In the normal course of business, we engage in a variety of financial transactions that, under generally
accepted accounting principles, either are not recorded on the balance sheet or are recorded on the balance
sheet in amounts that differ from the full contract or notional amounts. These transactions involve varying
elements of market, credit and liquidity risk.
The two primary off-balance sheet transactions the Company has engaged in are: 1) to manage exposure
to interest rate risk (derivatives), and 2) 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.
Credit risk of these transactions is managed by establishing a credit limit for each counterparty and
through collateral agreements. The fair value of interest rate swaps recorded in the balance sheet at
December 31, 2006 included derivative product liabilities of $478,000. In comparison, at December 31, 2005
derivative product assets of $19,000 and derivative product liabilities of $515,000 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 us 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.
31
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 $421 million at December 31, 2006, and $398 million at December 31, 2005.
Income Taxes
Income taxes as a percentage of income before taxes were 35.2 percent for 2006, compared to 36.0 percent
in 2005 and 35.1 percent for 2004. Beginning in January 2003 the Company formed a subsidiary and
transferred certain real estate assets to a real estate investment trust (REIT). As a result, the Company’s state
income tax liability was reduced. The rate was slightly higher for 2005, with the addition of Century limiting
utilization of the REIT.
Financial Condition
Total assets increased $257,261,000 or 12.1 percent to $2,389,435,000 in 2006, after increasing
$516,298,000 or 32.0 percent to $2,132,174,000 in 2005.
Capital Resources
Table 8 summarizes the Company’s capital position and selected ratios. The Company’s ratio of
shareholders’ equity to period end total assets was 8.89 percent at December 31, 2006, compared with
7.16 percent one year earlier.
During 2005, the Company formed two wholly owned trust subsidiaries, SBCF Capital Trust I and SBCF
Statutory Trust II. These subsidiaries each issued $20.0 million (a total of $40.0 million) in trust preferred
securities, guaranteed by the Company on a junior subordinated basis. The Company obtained the proceeds
from the trust’s sale of trust preferred securities by issuing junior subordinated debentures to the trust. Under
revised Interpretation No. 46 (FIN 46R) recently promulgated by the Financial Accounting Standards Board
(“FASB”), the trust must be deconsolidated with the Company for accounting purposes. As a result of this
recent accounting pronouncement, the Federal Reserve Board adopted changes to its capital rules with respect
to the regulatory capital treatment afforded to trust preferred securities. The Federal Reserve Board’s rules
permit qualified trust preferred securities and other restricted capital elements to be included as Tier 1 capital
up to 25% of core capital, net of goodwill and intangibles. The Company believes that its trust preferred
securities qualify under these revised regulatory capital rules and expects that it will be able to treat its
$40.0 million of trust preferred securities as Tier 1 capital. For regulatory purposes, the trust preferred
securities are added to the Company’s tangible common shareholders’ equity to calculate Tier 1 capital. At
December 31, 2006, the Company’s risk-based capital ratio was 11.70 percent, a slight decrease from
December 31, 2005’s reported ratio of 11.76 percent.
The Company manages the size of its equity through a program of share repurchases of its outstanding
Common stock. At December 31, 2006, a total of 634,000 stock option shares are outstanding, of which
498,000 are exercisable, and 116,000 in stock settled appreciation rights (“SSARs”) are outstanding, none of
which are exercisable; during 2006, 99,000 shares were exercised (see “Note J — Employee Benefits”). In
treasury stock at December 31, 2006, there were 16,032 shares totaling $310,000, compared to 19,335 shares
or $218,000 a year ago.
Loan Portfolio
Table 9 shows total loans (net of unearned income) by category outstanding.
32
Total loans (net of unearned income and excluding the allowance for loan losses) were $1,733,111,000 at
December 31, 2006, $443,116,000 or 34.4 percent more than at December 31, 2005. Of the $443 million
increase, $195 million is directly attributable to the addition of Big Lake. At December 31, 2005, total loans
of $1,289,995,000 were $390,448,000 or 43.4 percent higher than at December 31, 2004. Of the $390 million
increase, $120 million is directly attributable to the addition of Century.
The Company selectively adds residential loans to its loan portfolio, primarily with adjustable rates. The
proportion of adjustable rate residential mortgages has steadily increased as mortgage rates offered have
increased. As a result, sales of fixed rate residential mortgage loans declined and management expects
prospective sales of fixed rate residential mortgage loans will likely remain lower as a percentage share of
production as long as rates are at their current levels. The Company has reduced the relative size of the
residential loan portfolio over the past few years and increased the size of the Company’s commercial and
consumer loan portfolios, and believes the mix that has been achieved will be maintained.
The response to the Company’s expansion into new markets continues to be very positive. At
December 31, 2006, $355.8 million in loans are outstanding in Palm Beach County with a pipeline of
approximately $51 million pending at year-end 2006. In comparison, $248.4 million in loans were outstanding
with a loan pipeline of approximately $78 million pending at year-end 2005. In Brevard County, entered into
in mid-2004 with the opening of a loan production office, $60.3 million in loans are outstanding at year-end
2006, with a pipeline of $22 million pending. In comparison, $27.9 million in loans were outstanding with a
loan pipeline of approximately $29 million pending at year-end 2005. The addition of Century in Orange and
Seminole County (the Orlando area), another vibrant Florida market, provides the Company with a loan base
of $136.3 million at December 31, 2006, and a pipeline of loans totaling $11 million, compared to
$120.0 million at December 31, 2005, and a pipeline of $14 million. Big Lake, our newest market and
surrounding Lake Okeechobee, has a loan base of $195.3 million at December 31, 2006, and a pipeline of
approximately $11 million pending at year-end 2006.
At December 31, 2006, the Company’s mortgage loan balances secured by residential properties
amounted to $512,375,000 or 29.6 percent of total loans (versus $348,924,000 or 27.0 percent a year ago).
Loans secured by residential properties having fixed rates totaled approximately $184 million at December 31,
2006, of which 15- and 30-year mortgages totaled approximately $38 million and $50 million, respectively.
Remaining fixed rate balances were comprised of home improvement loans, most with maturities of 10 years
or less. In comparison, loans secured by residential properties having fixed rates totaled approximately
$141 million at December 31, 2005, with 15- and 30-year fixed rate residential mortgages totaling
approximately $35 million and $39 million, respectively.
The Company’s loan portfolio secured by commercial real estate increased $240.7 million or 35.6 percent
over the last twelve months. The Company’s commercial real estate lending strategy stresses quality loan
growth from local businesses, professionals, experienced developers and investors. At December 31, 2006, the
Company had commercial real estate loans totaling $917.2 million or 52.9 percent of total loans (versus
33
$676.5 million or 52.4 percent a year ago). At December 31, 2006 and 2005, funded and unfunded
commitments for commercial real estate loans were comprised of the following types of loans:
2006
2005
Funded
Unfunded
Total
Funded
Unfunded
Total
(In millions)
Office buildings . . . . . . . . . . . . . . . . $123.2
67.1
Retail trade . . . . . . . . . . . . . . . . . . .
318.2
Land development . . . . . . . . . . . . . .
70.7
Industrial . . . . . . . . . . . . . . . . . . . . .
42.8
Healthcare . . . . . . . . . . . . . . . . . . . .
34.3
Churches and educational facilities . .
4.4
Recreation . . . . . . . . . . . . . . . . . . . .
54.8
Multifamily . . . . . . . . . . . . . . . . . . .
6.0
Mobile home parks. . . . . . . . . . . . . .
70.3
Land . . . . . . . . . . . . . . . . . . . . . . . .
21.3
Lodging . . . . . . . . . . . . . . . . . . . . . .
11.7
Restaurant . . . . . . . . . . . . . . . . . . . .
26.1
Agriculture. . . . . . . . . . . . . . . . . . . .
66.3
Other . . . . . . . . . . . . . . . . . . . . . . . .
$ 13.9
1.3
133.9
12.6
2.5
5.6
—
36.3
—
14.9
13.0
1.0
5.2
14.7
$ 137.1
68.4
452.1
83.3
45.3
39.9
4.4
91.1
6.0
85.2
34.3
12.7
31.3
81.0
$101.6
52.2
232.0
52.4
27.4
24.4
2.1
30.9
5.4
61.9
10.0
7.3
—
68.9
$ 15.8
11.2
174.3
3.1
4.9
0.2
—
32.6
—
2.2
11.1
0.8
—
3.6
$117.4
63.4
406.3
55.5
32.3
24.6
2.1
63.5
5.4
64.1
21.1
8.1
—
72.5
Total . . . . . . . . . . . . . . . . . . . . . . . . $917.2
$254.9
$1,172.1
$676.5
$259.8
$936.3
Construction and land development loans increased $143.9 or 33.7 percent from a year ago to
$571,133,000 at December 31, 2006. Of this total, $479,788,000 is collateralized by commercial real estate
and $91,345,000 by residential real estate. In comparison, at December 31, 2005, $344,583,000 was
collateralized by commercial real estate and $82,633,000 by residential real estate. All of the commercial real
estate construction and land development loans are included in the table above. Some of the commercial real
estate loans will convert to permanent financing as mortgages, while most of these loans will payoff, the
source of repayment from the sale of completed units. The construction period generally ranges from 18 to
24 months. Demand in the Company’s market area over the past few years and the rate of absorption of new
real estate product have provided the opportunity for growth in these type loans. Production in 2006 has
consisted of more commercial construction projects with end users and less related to residential development.
There has been evidence recently of a slowing in residential real estate activity in most of the Company’s
markets, resulting in increases of inventory for finished new housing units. Moreover, strong growth in sales
prices for both new and existing residential housing over the past few years has started to moderate. The
Company anticipates that the slowing of loan growth evident over the past couple quarters will continue into
2007 due to a slowing demand for housing related construction loans and repayment of existing residential
construction loans.
The Company’s ten largest commercial real estate funded and unfunded loan relationships at December 31,
2006 aggregated to $194.1 million (versus $152.4 million a year ago) and for the top 67 commercial real
estate relationships in excess of $5 million the aggregate funded and unfunded totaled $722.8 million
(compared to 60 relationships aggregating to $505.3 million a year ago).
Loans and commitments for one-to-four family residential properties and commercial real estate are
generally secured with first mortgages on property, with the loan to fair value of the property not exceeding
80 percent on the date the loan is made.
The Company was also a creditor for consumer loans to individual customers (including installment
loans, loans for automobiles, boats, and other personal, family and household purposes, and indirect loans
through dealers to finance automobiles) totaling $83,428,000 (versus $82,942,000 a year ago), real estate
34
construction loans secured by residential properties totaling $50,422,000 (versus $56,957,000 a year ago) and
residential lot loans totaling $40,923,000 (versus $25,676,000 a year ago). Most consumer loans are secured.
Real estate mortgage lending is an important segment of the Company’s lending activities. Exposure to
market interest rate volatility with respect to mortgage loans is managed by attempting to match maturities
and re-pricing opportunities for assets against liabilities and through loan sales. At December 31, 2006,
approximately $278 million or 60 percent of the Company’s residential mortgage loan balances were
adjustable, compared to $166 million or 54 percent a year ago.
The Company’s historical charge-off rates for residential real estate loans have been minimal, with no
charge-offs or recoveries for 2006 or 2005. The Company considers residential mortgages less susceptible to
adverse effects from a downturn in the real estate market.
Fixed rate and adjustable rate loans secured by commercial real estate, excluding construction loans,
totaled approximately $190 million and $247 million, respectively, at December 31, 2006, compared to
$118 million and $214 million, respectively, a year ago.
Commercial lending activities are directed principally towards businesses whose demand for funds are
within the Company’s lending limits, such as small to medium sized professional firms, retail and wholesale
outlets, and light industrial and manufacturing concerns. Such businesses typically are smaller, often have
short operating histories and do not have the sophisticated record keeping systems of larger entities. Most of
such loans are secured by real estate used by such businesses, although certain lines are unsecured. Such loans
are subject to the risks inherent to lending to small to medium sized businesses including the effects of a
sluggish local economy, possible business failure, and insufficient cash flows. The Company’s commercial
loan portfolio totaled $128,101,000 at December 31, 2006, compared to $98,653,000 at December 31, 2005.
Second mortgage loans and home equity lines are extended by the Company. No negative amortization
loans or lines are offered at the present time. Terms of second mortgage loans include fixed rates for up to
10 years on smaller loans of $30,000 or less. Such loans are sometimes made for larger amounts with fixed
rates, but balloon payments upon maturity, not exceeding five years.
At December 31, 2006, the Company had commitments to make loans of $420,968,000, compared to
$398,183,000 at December 31, 2005 (see “Note P — Contingent Liabilities and Commitments with Off-
Balance Sheet Risk”).
Deposits and Borrowings
Total deposits increased $106,799,000 or 6.0 percent to $1,891,018,000 at December 31, 2006, compared
to one year earlier. Of this increase in deposits, $237 million was related to deposits from Big Lake. During
2006, certificates of deposit increased $140,577,000 or 32.8 percent to $569,769,000, lower cost interest
bearing deposits (NOW, savings and money markets deposits) increased $47,413,000 or 5.4 percent to
$929,444,000, and noninterest bearing demand deposits decreased $81,191,000 or 17.2 percent to
$391,805,000. Of the amounts indicated at December 31, 2006, outstanding balances for Big Lake for
certificates of deposit totaled $52 million, lower cost interest bearing deposits totaled $124 million, and
noninterest bearing deposits totaled $61 million (approximately one-half in business demand deposits, the
remainder in personal demand deposits).
Deposit pricing pressure intensified during the third and fourth quarters of 2006 and combined with the
slowdown in Florida housing activity resulted in deposits in the Company’s Treasure Coast and Orlando
markets declining year over year. Deposit mix was unfavorably affected as well, with noninterest bearing
deposits declining $96.7 million since June 30, 2006. With higher interest rates, disintermediation between
lower cost (no cost) products and certificates of deposit has occurred. Local competitors with higher loan to
deposit ratios aggressively increased rates for certificates of deposit throughout the third and fourth quarters of
2006, purposefully maintaining necessary funding for their institutions. Seacoast chose to be more cautious
with regards to the pricing of its certificates of deposit.
35
In comparison to 2004, deposits increased $411,753,000 or 30.0 percent in 2005 to $1,784,219,000. Of
this increase in deposits, $17.7 million was from a branch acquisition in January 2005 and $304 million was
acquired in the Century acquisition. During 2005, CDs increased $70,907,000 or 19.8 percent to $429,192,000,
lower cost interest bearing deposits (NOW, savings and money markets deposits) increased $212,972,000 or
31.8 percent to $882,031,000, and noninterest bearing demand deposits increased $127,874,000 or 37.1 percent
to $472,996,000. Of the amounts indicated at December 31, 2005, outstanding balances for Century for CDs
totaled $25 million, lower cost interest bearing deposits totaled $199 million, and noninterest bearing deposits
totaled $125 million (predominately business demand deposits of $110 million).
The Company’s expects it will continue to be successful generating deposits by marketing desirable
products, in particular its array of money market and NOW product offerings. The Company’s entrance into
new markets, including Palm Beach County, the Orlando market (through Century), and central Florida
(through Big Lake) provide an opportunity to enhance overall deposit growth, including lower cost interest
bearing deposits.
Repurchase agreement balances increased over the past twelve months by $45,690,000 or 47.2 percent to
$142,476,000 at December 31, 2006. In comparison, repurchase agreements increased $9,867,000 or 11.4 per-
cent to $96,786,000 during 2005. Repurchase agreements are offered by the Company’s subsidiary bank to
select customers who wish to sweep excess balances on a daily basis for investment purposes. The number of
sweep repurchase accounts increased from 136 a year ago to 202 at December 31, 2006.
Federal funds purchased outstanding at December 31, 2006 totaled $64 million, versus last year when no
federal funds purchased were outstanding. The Company utilizes federal funds during periods of temporary
gaps between loan funding/repayments and deposit growth. The Company expects to receive investment
maturities in the first 6 months of 2007 in excess of $80 million and for loan growth to range between 8-10%.
The Company’s subordinated debt remained the same year over year, totaling $41,238,000 at Decem-
ber 31, 2006 and 2005. Other borrowed funds decreased $18,963,000 or 41.7 percent to $26,522,000 at
December 31, 2006. A $25.0 million FHLB adjustable rate borrowing originated on January 30, 2003 matured
on January 30, 2006. In addition, the parent company added $12.0 million in funding through a term loan (see
Note I-Borrowings) and no longer has the $6.0 million outstanding on its unsecured revolving line of credit
from year-end 2005.
Effects of Inflation and Changing Prices
The financial statements and related financial data presented herein have been prepared in accordance
with generally accepted accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in the relative purchasing power of
money, over time, due to inflation.
Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s
performance than the general level of inflation. However, inflation affects financial institutions’ increased cost
of goods and services purchased the cost of salaries and benefits, occupancy expense, and similar items.
Inflation and related increases in interest rates generally decrease the market value of investments and loans
held and may adversely affect liquidity, earnings, and shareholders’ equity. Mortgage originations and re-
financings tend to slow as interest rates increase, and likely will reduce the Company’s earnings from such
activities and the income from the sale of residential mortgage loans in the secondary market.
Securities
Information related to yields, maturities, carrying values and unrealized gains (losses) of the Company’s
securities is set forth in Tables 15-18.
At December 31, 2006, the Company had $313,983,000 or 70.7 percent of securities designated available
for sale, compared to $392,952,000 or 72.4 percent at December 31, 2005. Securities held to maturity were
carried at an amortized cost of $129,958,000, representing 29.3 percent of total securities, versus $150,072,000
36
or 27.6 percent a year ago. The Company’s total securities portfolio decreased $99,083,000 or 18.2 percent
year over year. Maturities of securities of $151.1 million, sales of $112.4 million and purchases totaling
$92.6 million were transacted over the last twelve months.
At December 31, 2005, the Company’s total securities portfolio decreased $44,993,000 or 7.7 percent
year over year from 2004. Maturities of securities of $214.9 million, sales of $51.0 million and purchases
totaling $145.3 million were transacted during 2005.
Federal funds sold and interest bearing deposits have declined since year-end 2005, partially due to lower
deposit balances related to a slowing in the residential real estate market and to fund loan growth during 2006.
Most of the sales activity during 2005 and 2006 was related to securities acquired from Century and Big Lake,
with adjustments to fair value as a result of purchase accounting allowing the Company to reposition the
securities. Prospectively, the investment portfolio is expected to continue to provide needed liquidity to fund
expected growth in the loan portfolio.
Management controls the Company’s interest rate risk by maintaining a low average duration for the
securities portfolio through the acquisition of securities returning principal monthly that can be reinvested. The
estimated average life of the investment portfolio at December 31, 2006 was 2.7 years, slightly higher than a
year ago when the average life was 2.1 years.
At December 31, 2006, unrealized net securities losses totaled $6,042,000, compared to net losses of
$8,663,000 at December 31, 2005. Consensus market perception is that the Federal Reserve will pause on
interest rate increases prospectively, at least in the short-term. A shifting Treasury yield curve has affected the
market value of the Company’s securities portfolio since the Federal Reserve began increasing interest rates in
mid-2004.
Company management considers the overall quality of the securities portfolio to be high. No securities
are held which are not traded in liquid markets.
Fourth Quarter Review
While earnings for the entire year improved, results for the last two quarters were affected by a more
challenging interest rate environment and deposit declines as a result of the slowdown in Florida housing
activity and intensified deposit competition that emerged during the second half of 2006. Fourth quarter net
income was $5.7 million or $0.30 diluted earnings per share, compared to $5.9 million or $0.31 diluted
earnings per share in the third quarter of 2006 and $5.8 million or $0.34 diluted earnings per share in the
fourth quarter of 2005. Returns on average assets and equity were 0.95 percent and 10.57 percent for the
fourth quarter of 2006, compared to 0.99 percent and 11.03 percent in the third quarter of 2006, and
1.10 percent and 14.96 percent in the fourth quarter of 2005.
Earnings for the fourth quarter of 2006 were impacted by a substantial increase in the provision for loan
losses. During the quarter, the Company undertook a comprehensive review of all large credits, primarily
construction loans. While no losses or impaired loans were identified, the change in market condition was
partially responsible for an increased provision in the fourth quarter totaling $2,250,000, compared to
$330,000 a year ago and $475,000 in the third quarter of 2006. Also affecting the quarter, the specific loan
loss allowance for a loan placed on nonaccrual in the third quarter, totaling $8.0 million and secured by new
and used boats, was increased from $280,000 to $1.1 million after the borrower sought bankruptcy protection
in December, 2006.
Net interest income on a fully tax equivalent basis for the fourth quarter of 2006 was $21,846,000,
$1,298,000 or 5.6 percent lower than for the third quarter of 2006 and $1,784,000 or 8.9 percent higher than a
year ago for the same quarter. The net interest margin for the fourth quarter was 3.95 percent, a decrease from
the 4.04 percent achieved in last year’s fourth quarter and a 27 basis point decrease from the 4.22 percent in
the third quarter of 2006. The decline in net interest margin resulted from a continued shift in deposit mix
from lower cost deposits to higher cost certificates of deposit, a result of an inverted yield curve, increased
deposit competition, and from seasonal increases in public fund customer balances that result in spreads of
less than 1.0 percent. The cost interest bearing deposits increased to 3.25 percent from 2.95 percent in the
37
third quarter and 2.05 percent in the fourth quarter a year ago. Average noninterest bearing deposit balances
declined $23.6 million and average low cost NOW, savings and money market balances declined 34.6 million,
compared to the third quarter of 2006, while higher cost average certificates of deposit increased $28.9 million.
The pressure on the net interest margin, and net interest income, are likely to carryover into 2007, although
more modestly than in the second half of 2006, provided loan growth targets are achieved. The Company is
reviewing balance sheet strategies to lessen the margin impact of a continued inverted yield curve.
Average loans outstanding increased 35.9 percent for the fourth quarter of 2006, compared to the same
quarter last year. This growth resulted from strong growth in the Company’s markets and the acquisition
completed in the second quarter of 2006. The impact of a slower housing market is impacting the Company’s
loan pipelines and it is believed the slower loan growth will result for 2007. The Company’s expansion into
Palm Beach and Brevard County and its acquisitions over the past two years has allowed for greater loan
opportunities and the Company expects loan growth to range in high single digits in 2007. The recent
acquisition of the Company’s two largest competitors by a large out of state competitor and the associated
problems likely to result from integration and re-branding in early 2007 could improve the Company’s
prospects for loan and deposit growth in 2007.
Noninterest income, excluding securities gains and losses and the gain on sale of a partnership interest of
$1.1 million, increased 12.4 percent in the fourth quarter of 2006 when compared to the same quarter a year
ago. Increased revenue from debit card interchange fees of $149,000, merchant income of $94,000, trust and
investment management fees of $20,000, as well as increased fees from service charges on deposit accounts of
$548,000 (primarily due to the addition of Big Lake), contributed to the increase. For the fourth quarter of
2006, noninterest income related to mortgage loan production was higher by $47,000, but volumes are more
challenging to obtain and more production with adjustable rates is being retained in the loan portfolio. Over
the long term, the Company expects fees from wealth management services will grow at a rate of
approximately 10 percent per year.
Noninterest expenses declined $714,000 or 3.8 percent from the third quarter of 2006, as a result of lower
incentive expense based on the decline in the rate of earnings growth and the Company’s overall performance
compared to expectations. Noninterest expenses for the fourth quarter of 2006 included added spending related
to re-branding the subsidiary bank and costs associated with attracting customers of the acquired local
competitors totaling approximately $314,000. Noninterest expenses for the fourth quarter of 2006 were
$2,435,000 or 15.4 percent greater than for the fourth quarter of 2005.
Table 1 — Condensed Income Statement*
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest income
2004
2005
2006
(Tax equivalent basis)
3.86% 3.73% 3.72%
0.07
0.14
0.07
Securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.01)
1.04
3.16
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes including tax equivalent adjustment. . . . . . . . . . . . . . . . . . .
1.59
0.56
0.01
1.06
3.05
1.68
0.61
—
1.30
3.32
1.63
0.58
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.03% 1.07% 1.05%
* As a Percent of Average Assets
38
Table 2 — Changes in Average Earning Assets
Increase/(Decrease)
2006 vs 2005
Increase/(Decrease)
2005 vs 2004
(Dollars in thousands)
Securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (80,245)
5,447
Nontaxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(42,065)
Federal funds sold and other short term investments . . . . . . . . . . . .
444,566
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13.5)% $ 56,546
(678)
416.1
90,848
(38.4)
316,458
39.8
10.5%
(34.1)
484.2
39.6
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $327,703
18.0
$463,174
34.1
Table 3 — Rate/Volume Analysis (on a Tax Equivalent Basis)
2006 vs 2005
Due to Change in:
Rate
Volume
2005 vs 2004
Due to Change in:
Rate
Total
Total
Volume
(Dollars in thousands)
Amount of increase (decrease)
EARNING ASSETS
Securities
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,177)
386
NonTaxable . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,358
(44)
$
(2,791)
3,314
181
342
523
$ 1,991
(52)
$1,516
(4)
$ 3,507
(56)
1,939
1,512
3,451
Federal funds sold and other short term
investments . . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,694)
30,854
TOTAL EARNING ASSETS . . . . . . . . . .
26,369
1,278
10,608
15,200
(416)
41,462
41,569
2,211
19,949
24,099
INTEREST BEARING LIABILITIES
NOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits. . . . . . . . . . . . . . . . . . . . .
Money market accounts . . . . . . . . . . . . . . .
Time deposits. . . . . . . . . . . . . . . . . . . . . . .
Federal funds purchased and other short
term borrowings . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . .
TOTAL INTEREST BEARING
863
(101)
1,121
4,471
1,492
253
6,461
5,190
2,355
152
7,582
9,661
6,354
13,396
19,750
1,175
525
1,731
1,391
2,906
1,916
228
23
2,220
1,297
3,768
234
768
1,120
4,596
7,228
184
(1)
2,444
2,769
5,396
1,186
585
3,331
24,545
31,327
412
22
4,664
4,066
9,164
1,420
1,353
LIABILITIES . . . . . . . . . . . . . . . . . . . .
8,054
16,518
24,572
4,770
7,167
11,937
NET INTEREST INCOME . . . . . . . . . . . $18,315
$ (1,318)
$16,997
$19,329
$
61
$19,390
(a) Changes attributable to rate/volume are allocated to rate and volume on an equal basis.
39
Table 4 — Changes in Average Interest Bearing Liabilities
Increase/(Decrease)
2006 vs 2005
Increase/(Decrease)
2005 vs 2004
(Dollars in thousands)
NOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 74,945
(17,267)
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57,608
Money market accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
125,127
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,073
Federal funds purchased and other short term borrowings . . . . . . . . . .
9,383
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64.2% $ 39,903
4,478
(10.4)
201,322
10.6
48,828
30.9
12,704
40.1
19,550
15.8
51.9%
2.8
59.2
13.7
17.6
49.0
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $283,869
20.7
$326,785
31.2
Table 5 — Three Year Summary
Average Balances, Interest Income and Expenses, Yields and Rates(1)
2006
2005
2004
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
(Dollars in thousands)
EARNING ASSETS
Securities
Taxable. . . . . . . . . . . . . . . . .
Nontaxable . . . . . . . . . . . . . .
$ 514,692
6,756
$ 21,933
442
4.26% $ 594,937 $21,752
100
1,309
6.54
3.66% $ 538,391
1,987
7.64
$18,245
156
3.39%
7.85
521,448
22,375
4.29
596,246
21,852
3.66
540,378
18,401
3.41
Federal funds sold and other short
term investments . . . . . . . . . .
Loans(2) . . . . . . . . . . . . . . . . .
TOTAL EARNING ASSETS . . . .
Allowance for loan losses . . . . . .
Cash and due from banks . . . . . .
Bank premises and equipment . . .
Other assets . . . . . . . . . . . . . . .
INTEREST BEARING
LIABILITIES
NOW . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . .
Money market accounts . . . . . . .
Time deposits . . . . . . . . . . . . . .
Federal funds purchased and other
short term borrowings . . . . . . .
Other borrowings . . . . . . . . . . . .
TOTAL INTEREST BEARING
LIABILITIES . . . . . . . . . . . .
Demand deposits . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . .
Interest expense as % of earning
assets . . . . . . . . . . . . . . . . . .
Net interest income/yield on
earning assets . . . . . . . . . . . .
67,544
1,560,673
2,149,665
(11,624)
74,280
32,573
69,970
$2,314,864
3,208
114,498
140,081
4.75
7.34
6.52
109,609
1,116,107
1,821,962
(7,957)
65,146
21,095
37,115
$1,937,361
3,624
73,036
98,512
3.31
6.54
5.41
18,761
799,649
1,358,788
(6,389)
38,957
17,909
13,727
$1,422,992
293
48,491
67,185
1.56
6.06
4.94
$ 191,720
149,324
599,225
530,147
3,134
993
15,057
21,886
1.63% $ 116,775
166,591
0.66
541,617
2.51
405,020
4.13
779
841
7,475
12,225
0.67% $
0.50
1.38
3.02
76,872
162,113
340,295
356,192
367
819
2,811
8,159
0.48%
0.51
0.83
2.29
119,045
68,858
5,115
4,602
4.30
6.68
84,972
59,475
2,209
2,686
2.60
4.52
72,268
39,925
789
1,333
1.09
3.34
1,658,319
446,471
12,208
2,116,998
197,866
$2,314,864
50,787
3.06
1,374,450
415,416
8,620
1,798,486
138,875
$1,937,361
26,215
1.91
1,047,665
260,229
6,546
1,314,440
108,552
$1,422,992
14,278
1.36
2.36%
1.44%
1.05%
$ 89,294
4.15%
$72,297
3.97%
$52,907
3.89%
(1) The tax equivalent adjustment is based on a 35% tax rate.
(2) Nonaccrual loans are included in loan balances. Fees on loans are included in interest on loans.
40
Table 6 — Noninterest Income
2006
% Change
2004
06/05
05/04
Service charges on deposit accounts . . . . . . . . . . . . . . . . . $ 6,784
2,858
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,131
Mortgage banking fees. . . . . . . . . . . . . . . . . . . . . . . . . . .
3,002
Brokerage commissions and fees . . . . . . . . . . . . . . . . . . .
2,709
Marine finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,149
Debit card income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
421
Other deposit based EFT fees. . . . . . . . . . . . . . . . . . . . . .
2,545
Merchant income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,147
. . . . . . . . . . . . . . . . .
Gain on sale of partnership interest
—
Interest rate swap profits (losses) . . . . . . . . . . . . . . . . . . .
1,514
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
2005
(Dollars in thousands)
$ 5,022
2,573
1,810
2,562
3,068
1,714
417
2,230
—
(267)
1,388
$ 4,479
2,250
1,824
2,442
2,997
1,344
476
1,962
—
(701)
1,389
35.1% 12.1%
11.1
(37.5)
17.2
(11.7)
25.4
1.0
14.1
n/m
(100.0)
9.1
14.4
(0.8)
4.9
2.4
27.5
(12.4)
13.7
n/m
61.9
(0.1)
Securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . .
24,260
(157)
20,517
128
18,462
44
18.2
(222.7)
11.1
190.9
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,103
$20,645
$18,506
16.7
11.6
n/m = not meaningful
Table 7 — NonInterest Expense
2006
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outsourced data processing costs . . . . . . . . . . . . . . . . . . . . .
Telephone /data lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and equipment
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and professional fees . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
2005
(Dollars in thousands)
$23,783
6,313
6,477
1,357
5,126
2,121
3,194
2,595
225
533
7,376
$29,146
7,322
7,443
1,836
7,435
2,523
4,359
2,792
325
1,063
8,801
% Change
2004
06/05
05/04
$19,119
5,031
5,716
1,167
4,229
1,919
2,465
1,843
171
22.5% 24.4%
16.0
14.9
35.3
45.0
19.0
36.5
7.6
44.4
— 99.4
19.3
25.5
13.3
16.3
21.2
10.5
29.6
40.8
31.6
n/m
31.2
5,621
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$73,045
$59,100
$47,281
23.6
25.0
n/m = not meaningful
41
Table 8 — Capital Resources
TIER 1 CAPITAL
2006
December 31
2005
(Dollars in thousands)
2004
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Qualifying trust preferred securities . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,899
88,380
124,811
(310)
40,000
(57,299)
58
$
1,710
42,900
112,182
(218)
40,000
(33,908)
—
$
1,710
23,617
101,501
(16,172)
—
(2,650)
—
TOTAL TIER 1 CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TIER 2 CAPITAL
Allowance for loan losses, as limited . . . . . . . . . . . . . . . . . . . . . .
TOTAL TIER 2 CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
197,539
162,666
108,006
15,039
15,039
9,124
9,124
6,598
6,598
TOTAL RISK-BASED CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . $ 212,578
$ 171,790
$ 114,604
Risk weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,816,705
$1,460,924
$1,041,840
Tier 1 risk based capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk based capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory minium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital to adjusted total assets . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory minium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder’s equity to assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average shareholders’ equity to average total assets. . . . . . . . . . . . .
10.87%
11.70
8.00
8.53
4.00
8.89
8.55
11.13%
11.76
8.00
7.86
4.00
7.16
7.17
10.36%
10.99
8.00
7.10
4.00
6.70
7.63
42
Table 9 — Loans Outstanding
Construction and land development . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate mortgage
$ 571,133
2006
December 31
2005
(In thousands)
$ 427,216
2004
$252,329
Residential real estate
Adjustable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment loans to individuals
Automobiles and trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marine loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
277,649
87,883
95,923
50,920
512,375
437,449
949,824
128,101
22,260
32,531
28,637
83,428
625
166,494
73,675
67,034
41,721
348,924
331,953
680,877
98,653
18,029
39,682
25,231
82,942
307
110,934
61,574
60,090
14,337
246,935
251,757
498,692
66,240
29,789
38,287
13,755
81,831
455
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,733,111
$1,289,995
$899,547
Table 10 — Loan Maturity Distribution
In one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
After one year but within five years:
Interest rates are floating or adjustable . . . . . . . . . . . . . . . . . . . . . .
Interest rates are fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In five years or more:
Interest rates are floating or adjustable . . . . . . . . . . . . . . . . . . . . . .
Interest rates are fixed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial,
Financial &
Agricultural
$ 55,026
December 31, 2006
Construction
and Land
Development
(In thousands)
$317,732
Total
$372,758
12,690
24,902
13,485
21,998
136,689
86,721
149,379
111,623
22,415
7,576
35,900
29,574
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$128,101
$571,133
$699,234
43
Table 11 — Maturity of Certificates of Deposit of $100,000 or More
December 31
2006
% of
Total
2005
% of
Total
(Dollars in thousands)
Maturity Group:
Under 3 Months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97,567
70,677
3 to 6 Months. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,730
6 to 12 Months. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,544
Over 12 Months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39.9% $ 53,665
37,701
28.9
47,783
26.5
33,559
4.7
31.1%
21.8
27.7
19.4
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $244,518
100.0% $172,708
100.0%
Table 12 — Summary of Loan Loss Experience
Beginning balance . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . .
Carryover of allowance for loan losses. . . . .
Charge offs:
$
Commercial and financial . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . .
Residential real estate . . . . . . . . . . . . . . .
TOTAL CHARGE OFFS . . . . . . . . . . . . . . .
Recoveries:
Commercial and financial . . . . . . . . . . . .
Consumer . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . .
Residential real estate . . . . . . . . . . . . . . .
TOTAL RECOVERIES . . . . . . . . . . . . . . . .
16
295
—
—
311
161
256
—
—
417
2006
2005
2004
2003
2002
Year Ended December 31
(Dollars in thousands)
$
9,006
3,285
2,518
6,598
1,317
1,225
$
6,160
1,000
—
$
6,826
—
—
$ 7,034
—
—
254
161
—
—
415
125
151
5
—
281
134
591
162
—
—
753
41
135
15
—
191
562
646
320
78
9
1,053
77
192
108
10
387
666
152
371
6
2
531
36
261
2
24
323
208
Net loan charge offs (recoveries) . . . . . . . . .
(106)
ENDING BALANCE . . . . . . . . . . . . . . . . .
$
14,915
$
9,006
$
6,598
$
6,160
$ 6,826
Loans outstanding at end of year* . . . . . . . .
Ratio of allowance for loan losses to loans
outstanding at end of year . . . . . . . . . . . .
Daily average loans outstanding* . . . . . . . . .
Ratio of net charge offs (recoveries) to
average loans outstanding . . . . . . . . . . . .
* Net of unearned income.
$1,733,111
$1,289,995
$899,547
$708,792
$688,161
0.86%
0.70%
0.73%
0.87%
0.99%
$1,560,673
$1,116,107
$799,649
$678,339
$748,936
(0.01)%
0.01%
0.07%
0.10%
0.03%
44
Table 13 — Allowance for Loan Losses
2006
2005
December 31
2004
(Dollars in thousands)
2003
2002
ALLOCATION BY LOAN TYPE
Commercial and financial loans. . . . . . . . . . . . . . . . . . . . .
Real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,199
11,073
643
$1,794
6,328
884
$1,339
4,395
864
$ 786
4,353
1,021
$ 850
4,745
1,231
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,915
$9,006
$6,598
$6,160
$6,826
YEAR END LOAN TYPES AS A PERCENT OF
TOTAL LOANS
Commercial and financial loans. . . . . . . . . . . . . . . . . . . . .
Real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.4%
87.8
4.8
7.7%
85.9
6.4
7.4%
83.5
9.1
6.6%
81.5
11.9
5.9%
80.8
13.3
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0% 100.0% 100.0% 100.0% 100.0%
Table 14 — Nonperforming Assets
2006
2005
2004
2003
2002
December 31
Nonaccrual loans (1) . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . .
$
12,465
—
TOTAL NONPERFORMING ASSETS. . .
$
12,465
$
$
(Dollars in thousands)
372
—
1,447
—
$
$
1,091
1,954
$ 2,241
8
372
$
1,447
$
3,045
$ 2,249
Amount of loans outstanding at end of
year (2) . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio of total nonperforming assets to loans
outstanding and other real estate owned at
end of period. . . . . . . . . . . . . . . . . . . . . .
Accruing loans past due 90 days or more . . .
$1,733,111
$1,289,995
$899,547
$708,792
$688,161
0.72%
64
$
0.03%
465
$
0.16%
32
$
0.43%
8
$
0.33%
—
$
(1) Interest income that could have been recorded during 2006 and 2005 related to nonaccrual loans was
$371,000 and $42,000, respectively, none of which was included in interest income or net income. All non-
accrual loans are secured.
(2) Net of unearned income.
45
Table 15 — Securities Available For Sale
December 31
Amortized
Cost
Fair
Value
Unrealized
Gains
Unrealized
Losses
(In thousands)
U.S. Treasury securities and obligations of U.S. Government
Sponsored Entities
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95,003
71,955
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 94,676
71,189
$ 21
—
$ (348)
(766)
Mortgage-backed securities of Government Sponsored
Entities
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized mortgage obligations of Government
Sponsored Entities
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations
11,393
2,073
11,340
2,083
155,977
234,025
153,560
229,748
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50,472
88,763
49,761
88,075
Obligations of state and political subdivisions
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Securities Held For Sale
2,020
—
2,597
1,857
2,049
—
2,597
1,857
—
10
193
—
—
3
29
—
—
—
(53)
—
(2,610)
(4,277)
(711)
(691)
—
—
—
—
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $317,462
398,673
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$313,983
392,952
$243
13
$(3,722)
(5,734)
46
Table 16 — Securities Held For Investment
December 31
Amortized
Cost
Fair
Value
Unrealized
Gains
Unrealized
Losses
(In thousands)
U.S. Treasury securities and obligations of U.S. Government
Sponsored Entities
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities of Government Sponsored
Entities
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized mortgage obligations of Government
Sponsored Entities
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51,189
56,981
Obligations of states and political subdivisions
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,371
1,195
Total Securities Held For Investment
— $
5,000
—
4,934
$ —
—
$ —
(66)
—
1,005
—
1,052
72,398
85,891
70,821
83,871
50,138
56,031
6,436
1,242
—
47
46
26
—
—
67
47
—
—
(1,623)
(2,046)
(1,051)
(950)
(2)
—
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $129,958
150,072
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$127,395
147,130
$113
120
$(2,676)
(3,062)
47
Table 17 — Maturity Distribution of Securities Held For Investment
December 31, 2006
1 Year
or Less
1-5
Years
5-10
Years
After 10
Years
No
Contractual
Maturity
Total
Average
Maturity
in Years
(Dollars in thousands)
AMORTIZED COST
Collateralized mortgage
obligations of Government
Sponsored Entities . . . . . . . . . $8,791
$ 63,607
Private collateralized mortgage
obligations . . . . . . . . . . . . . . .
Obligations of state and political
subdivisions . . . . . . . . . . . . . .
Total Securities Held For
—
51,189
—
—
—
—
—
—
$ 72,398
2.16
51,189
3.84
197
312
$3,056
$2,806
$—
6,371
9.06
Investment . . . . . . . . . . . . . . . $8,988
$115,108
$3,056
$2,806
$—
$129,958
3.16
FAIR VALUE
Collateralized mortgage
obligations of Government
Sponsored Entities . . . . . . . . . $8,710
$ 62,111
Private collateralized mortgage
obligations . . . . . . . . . . . . . . .
Obligations of state and political
subdivisions . . . . . . . . . . . . . .
Total Securities Held For
—
50,138
—
—
—
—
—
—
$ 70,821
50,138
199
311
$3,091
$2,835
$—
6,436
Investment . . . . . . . . . . . . . . . $8,909
$112,560
$3,091
$2,835
$—
$127,395
WEIGHTED AVERAGE
YIELD (FTE)
Collateralized mortgage
obligations of Government
Sponsored Entities . . . . . . . . .
Private collateralized mortgage
obligations . . . . . . . . . . . . . . .
Obligations of state and political
subdivisions . . . . . . . . . . . . . .
Total Securities Held For
4.18%
4.04%
—
4.91%
—
—
—
—
8.59%
7.04% 7.19%
6.70%
Investment . . . . . . . . . . . . . . .
4.27%
4.43% 7.19%
6.70%
—
—
—
—
4.06%
4.91%
7.01%
4.54%
48
—
—
—
—
Table 18 — Maturity Distribution of Securities Available For Sale
December 31, 2006
1 Year
or Less
1-5
Years
5-10
Years
After 10
Years
No
Contractual
Maturity
Total
Average
Maturity
in Years
(Dollars in thousands)
AMORTIZED COST
U.S. Treasury securities and
obligations of U.S. Government
Sponsored Entities . . . . . . . . . . . $63,463
$ 31,540
Mortgage-backed securities of
Government Sponsored Entities . .
Collateralized mortgage obligations
of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage
—
11,393
31,093
108,674
$16,210
—
—
—
—
—
—
—
—
$ 95,003
1.02
11,393
4.97
155,977
2.57
50,472
3.73
obligations . . . . . . . . . . . . . . . . .
4,120
32,050
14,302
Obligations of state and political
subdivisions . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
— $2,020
—
—
Total Securities Held For Sale . . . . . $98,676
$183,657
$30,512
$2,020
—
$2,597
$2,597
2,020
2,597
$317,462
12.31
*
2.44
FAIR VALUE
U.S. Treasury securities and
obligations of U.S. Government
Sponsored Entities . . . . . . . . . . . $63,133
$ 31,543
Mortgage-backed securities of
Government Sponsored Entities . .
Collateralized mortgage obligations
of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage
—
11,340
30,694
106,569
$16,297
obligations . . . . . . . . . . . . . . . . .
4,101
31,533
14,127
Obligations of state and political
subdivisions . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
— $2,049
—
—
Total Securities Held For Sale . . . . . $97,928
$180,985
$30,424
$2,049
—
—
—
—
—
—
—
—
—
$2,597
$2,597
$ 94,676
11,340
153,560
49,761
2,049
2,597
$313,983
WEIGHTED AVERAGE YIELD
(FTE)
U.S. Treasury securities and
obligations of U.S. Government
Sponsored Entities . . . . . . . . . . .
Mortgage-backed securities of
Government Sponsored Entities . .
Collateralized mortgage obligations
of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage
4.05%
5.08%
—
5.49%
—
—
3.16%
4.27%
5.59%
obligations . . . . . . . . . . . . . . . . .
3.98%
4.50%
5.77%
—
—
—
—
—
—
—
—
Obligations of state and political
subdivisions . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . .
Total Securities Held For Sale . . . . .
—
—
3.77%
—
—
4.53%
—
—
5.68%
6.75%
—
6.75%
—
5.07%
5.07%
* Other Securities excluded from calculated average for total securities
4.39%
5.49%
4.19%
4.82%
6.75%
5.07%
4.42%
49
Table 19 — Interest Rate Sensitivity Analysis (1)
0-3
Months
4-12
Months
December 31, 2006
1-5
Years
(Dollars in thousands)
Over
5 Years
Total
Federal funds sold and interest bearing
deposits
. . . . . . . . . . . . . . . . . . . . . . . .
Securities(2) . . . . . . . . . . . . . . . . . . . . . . .
Loans(3) . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Earning assets . . . . . . . . . . . . . . . . . . . . . .
Savings deposits(4) . . . . . . . . . . . . . . . . . .
Certificates of deposit . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . .
2,412
69,123
793,131
864,666
929,444
214,650
259,714
Interest bearing liabilities . . . . . . . . . . . . . .
1,403,808
$
— $
— $
— $
127,757
240,158
367,915
—
314,522
—
314,522
186,236
552,728
738,964
—
40,547
14,522
55,069
14,522
64,304
140,517
204,821
—
50
—
50
—
2,412
447,420
1,726,534
2,176,366
929,444
569,769
274,236
1,773,449
—
Interest rate swaps . . . . . . . . . . . . . . . . . . .
(14,522)
—
Interest sensitivity gap . . . . . . . . . . . . . . . .
$ (553,664)
$ 53,393
$698,417
$204,771
$ 402,917
Cumulative gap . . . . . . . . . . . . . . . . . . . . .
$ (553,664)
$(500,271)
$198,146
$402,917
Cumulative gap to total earning assets(%) . .
Earning assets to interest bearing
liabilities(%) . . . . . . . . . . . . . . . . . . . . .
(25.4)
(23.0)
9.1
61.6
117.0
1,341.9
18.5
N/M
(1) The repricing dates may differ from maturity dates for certain assets due to prepayment assumptions.
(2) Securities are stated at amortized cost.
(3) Excludes nonaccrual loans.
(4) This category is comprised of NOW, savings and money market deposits. If NOW and savings deposits
(totaling $233,589) were deemed repriceable in “4-12 months”, the interest sensitivity gap and cumulative
gap would be ($320,075) indicating 14.7% of earning assets and 73.9% of earning assets to interest bear-
ing liabilities for the “0-3 months” category.
N/M Not meaningful
50
SELECTED QUARTERLY INFORMATION
Consolidated Quarterly Average Balance, Yields and Rates(1)
EARNING ASSETS
Securities
Taxable . . . . . . . . . . . . . . . . . . . . . . .
Nontaxable . . . . . . . . . . . . . . . . . . . . .
TOTAL SECURITIES . . . . . . . . . . . . . . .
Federal funds sold and other short term
investments . . . . . . . . . . . . . . . . . . . . .
Loans(2) . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL EARNING ASSETS . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . . . .
Cash and due from banks . . . . . . . . . . . . .
Bank premises and equipment . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . .
INTEREST BEARING LIABILITIES
NOW . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . .
Money market accounts . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . .
Federal funds purchased and other short
term . . . . . . . . . . . . . . . . . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . .
TOTAL INTEREST BEARING
LIABILITIES . . . . . . . . . . . . . . . . . . .
Demand deposits . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . .
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . .
Interest expense as
% of earning assets . . . . . . . . . . . . . . .
Net interest income as % of earning assets . .
2006 Quarters
Fourth
Third
Second
First
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
(Dollars in thousands)
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
$ 462,628
8,409
471,037
4.37% $ 493,810
8,654
6.47
502,464
4.40
4.35% $ 567,572
6.61
8,666
576,238
4.39
4.31% $ 535,790
1,195
6.42
536,985
4.34
5.32
7.47
6.71
5.33
7.40
6.73
24,872
1,698,552
2,194,461
(12,842)
76,523
36,731
77,911
$2,372,784
38,832
1,634,263
2,175,559
(12,363)
74,680
37,162
75,824
$2,350,862
86,260
1,586,597
2,249,095
(12,059)
74,788
32,771
75,088
$2,419,683
4.73
7.33
6.47
121,592
1,318,291
1,976,868
(9,184)
71,065
23,432
50,695
$2,112,876
$ 198,610
136,410
591,740
581,520
2.10% $ 208,948
149,323
0.71
603,133
2.92
552,589
4.57
1.72% $ 219,871
166,563
0.69
608,601
2.76
533,577
4.23
1.54% $ 138,604
145,094
0.74
593,403
2.43
451,223
3.91
4.68
7.06
3.52
154,065
67,798
1,730,143
415,791
13,496
2,159,430
213,354
$2,372,784
4.12
6.68
2.89
4.42
7.14
3.21
107,401
67,572
1,688,966
439,379
11,493
2,139,838
211,024
$2,350,862
105,140
67,533
1,701,285
496,308
14,535
2,212,128
207,555
$2,419,683
109,206
72,596
1,510,126
434,692
9,271
1,954,089
158,787
$2,112,876
4.03%
7.70
4.04
4.45
7.08
6.11
0.97%
0.51
1.93
3.68
3.80
5.90
2.55
2.78%
3.95
2.49%
4.22
2.18%
4.29
1.95%
4.16
(1) The tax equivalent adjustment is based on a 35% tax rate. All yields/rates are calculated on an annualized
basis.
(2) Nonaccrual loans are included in loan balances. Fees on loans are included in interest on loans.
51
2005 Quarters
Fourth
Third
Second
First
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
(Dollars in thousands)
$ 567,382
1,196
3.86% $ 603,477
1,196
7.69
3.71% $ 633,258
1,423
7.36
3.60% $ 575,626
1,423
7.59
3.45%
7.87
568,578
3.87
604,673
3.71
634,681
3.61
577,049
3.46
154,144
1,249,461
3.94
6.85
107,000
1,175,992
3.33
6.61
106,756
1,091,628
2.91
6.38
69,637
943,326
2.45
6.24
1,972,183
5.76
1,887,665
5.48
1,833,065
5.22
1,590,012
5.08
(8,800)
70,150
21,674
48,771
(8,490)
67,683
21,397
49,266
(7,778)
63,988
21,008
34,796
(6,733)
58,608
20,283
15,125
$2,103,978
$2,017,521
$1,945,079
$1,677,295
$ 137,457
152,807
0.89% $ 125,211
163,675
0.51
0.67% $ 105,678
171,715
0.51
0.57% $
0.50
98,230
178,482
0.46%
0.50
1.45
3.07
2.72
4.57
1.95
1.68
3.41
3.25
5.02
2.27
589,275
449,657
94,719
72,504
1,496,419
442,534
10,344
1,949,297
154,681
585,395
406,813
79,167
64,386
1,424,647
431,476
10,099
1,866,222
151,299
553,134
393,308
81,178
60,505
1,365,518
434,777
8,125
1,808,420
136,659
1.25
2.85
2.36
4.27
1.76
436,504
369,402
84,777
40,094
1,207,489
351,703
5,846
1,565,038
112,257
1.03
2.65
1.97
3.87
1.56
$2,103,978
$2,017,521
$1,945,079
$1,677,295
1.72%
4.04
1.47%
4.01
1.31%
3.91
1.19%
3.90
52
SELECTED QUARTERLY INFORMATION
QUARTERLY CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
2006 Quarters
2005 Quarters
Fourth
Third
Second
Third
(Dollars in thousands, except per share data)
Fourth
First
Second
First
Net interest income:
Interest income. . . . . . . . . . . . . . . . . . . . $37,147
15,366
Interest expense . . . . . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . .
21,781
2,250
$36,714
13,666
23,048
475
$36,208
12,246
23,962
280
$29,758
9,509
20,249
280
$28,592
8,555
20,037
330
$26,067
7,002
19,065
280
$23,847
6,008
17,839
269
$19,894
4,650
15,244
438
Net interest income after provision for loan
losses . . . . . . . . . . . . . . . . . . . . . . . . . .
19,531
22,573
23,682
19,969
19,707
18,785
17,570
14,806
Noninterest income:
Service charges on deposit accounts . . . . . .
Trust fees . . . . . . . . . . . . . . . . . . . . . . .
Mortgage banking fees . . . . . . . . . . . . . . .
Brokerage commissions and fees . . . . . . . .
Marine finance fees . . . . . . . . . . . . . . . . .
Debit card income. . . . . . . . . . . . . . . . . .
Other deposit based EFT fees . . . . . . . . . .
Merchant income . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . .
Interest rate swap profit (losses) . . . . . . . . .
Gain on sale of partnership interest. . . . . . .
Securities gains (losses) . . . . . . . . . . . . . .
Total noninterest income . . . . . . . . . . . . .
Noninterest expenses:
Salaries and wages . . . . . . . . . . . . . . . . .
Employee benefits . . . . . . . . . . . . . . . . .
Outsourced data processing costs . . . . . . . .
Telephone/data lines . . . . . . . . . . . . . . . .
Occupancy . . . . . . . . . . . . . . . . . . . . . .
Furniture and equipment. . . . . . . . . . . . . .
Marketing . . . . . . . . . . . . . . . . . . . . . . .
Legal and professional fees . . . . . . . . . . . .
FDIC assessments . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
1,875
654
337
598
570
565
114
624
382
—
1,147
(73)
6,793
6,479
1,699
1,768
497
1,893
689
1,564
863
121
315
2,285
1,866
691
254
586
478
563
108
623
402
—
—
2
5,573
7,805
2,054
1,746
506
1,947
707
952
693
66
315
2,096
1,801
801
331
1,042
868
558
102
619
397
—
—
(97)
6,422
8,443
1,769
2,180
474
2,062
591
926
699
79
321
2,332
1,242
712
209
776
793
463
97
679
333
—
—
11
5,315
6,419
1,800
1,749
359
1,533
536
917
537
59
119
2,081
1,327
605
290
627
806
416
94
530
394
—
—
50
5,139
6,730
1,575
1,609
351
1,388
525
689
765
56
119
1,931
1,356
701
525
567
728
441
93
525
343
—
—
34
5,313
6,123
1,807
1,629
352
1,346
561
776
650
65
181
1,918
1,246
684
425
634
836
441
109
605
359
249
—
41
5,629
5,640
1,499
1,680
334
1,244
520
853
639
60
222
1,951
1,093
583
570
734
698
416
121
570
292
(516)
—
3
4,564
5,290
1,432
1,559
320
1,148
515
876
541
44
11
1,576
Total noninterest expenses . . . . . . . . . . . .
18,173
18,887
Income before income taxes . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . .
8,151
2,466
9,259
3,390
19,876
10,228
3,794
16,109
15,738
15,408
14,642
13,312
9,175
3,309
9,108
3,275
8,690
3,125
8,557
3,082
6,058
2,172
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 5,685
$ 5,869
$ 6,434
$ 5,866
$ 5,833
$ 5,565
$ 5,475
$ 3,886
PER COMMON SHARE DATA
Net income diluted . . . . . . . . . . . . . . . . . . . $
Net income basic . . . . . . . . . . . . . . . . . . . .
Cash dividends declared:
$
0.30
0.30
Common stock . . . . . . . . . . . . . . . . . . . .
0.16
Market price common stock:
Low close . . . . . . . . . . . . . . . . . . . . . . .
High close . . . . . . . . . . . . . . . . . . . . . . .
Bid price at end of period . . . . . . . . . . . . .
23.98
29.72
24.80
0.31
0.31
0.15
26.61
31.68
30.20
$ 0.34
0.34
$
0.15
25.12
29.60
26.63
0.34
0.35
0.15
23.25
29.11
29.11
$
0.34
0.35
0.15
21.61
25.07
22.95
$ 0.32
0.33
$
0.15
19.91
25.62
23.43
0.33
0.33
0.14
18.03
20.59
19.69
$
0.25
0.25
0.14
19.30
22.58
19.68
53
REPORT OF MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL
OVER FINANCIAL REPORTING
We, as management of Seacoast Banking Corporation of Florida, are responsible for establishing and
maintaining effective internal control over financial reporting that is designed to produce reliable financial
statements in conformity with United States generally accepted accounting principles. The Company’s internal
control over financial reporting is evaluated for effectiveness by management on an annual basis. Internal
control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives
because of its inherent limitations. Internal control over financial reporting is a process that involves human
diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures.
Internal control over financial reporting also can be circumvented by collusion or improper management
override. Because of such limitations, there is a risk that material misstatements may not be prevented or
detected on a timely basis by internal control over financial reporting. However, these inherent limitations are
known features of the financial reporting process. Therefore, it is possible to design into the process safeguards
to reduce, though not eliminate, this risk. Also, because of changes in conditions, the effectiveness of internal
control over financial reporting may vary over time. Accordingly, even effective internal control over financial
reporting will provide only reasonable assurance with respect to financial statement preparation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2006, based on criteria established in “Internal Control — Integrated Framework,” issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management
concluded that, as of December 31, 2006, the Company’s internal control over financial reporting was effective
based on criteria established in “Internal Control — Integrated Framework”. KPMG LLP, an independent
registered public accounting firm, has audited management’s assessment of the Company’s internal control
over financial reporting as of December 31, 2006, and their report is included herein.
Dennis S. Hudson III
Chairman and Chief Executive
Officer
William R. Hahl
Executive Vice President
and Chief Financial Officer
March 9, 2007
54
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Seacoast Banking Corporation of Florida:
We have audited management’s assessment, included in the accompanying Report of Management’s
Assessment of Internal Control over Financial Reporting, that Seacoast Banking Corporation of Florida and
subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31,
2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).The Company’s management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating
management’s assessment, testing and evaluating the design and operating effectiveness of internal control,
and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted accounting principles, and that receipts and expendi-
tures of the company are being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, management’s assessment that the Company maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2006, based on criteria established in
Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of the Company as of December 31, 2006 and 2005,
and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years
in the three-year period ended December 31, 2006, and our report dated March 9, 2007, expressed an
unqualified opinion on those consolidated financial statements.
Miami, Florida
March 9, 2007
Certified Public Accountants
55
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Seacoast Banking Corporation of Florida:
We have audited the accompanying consolidated balance sheets of Seacoast Banking Corporation of
Florida and subsidiaries (the Company) as of December 31, 2006 and 2005, and the related consolidated
statements of income, shareholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2006. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Seacoast Banking Corporation of Florida and subsidiaries as of December 31,
2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
As discussed in Note J to the consolidated financial statements, effective January 1, 2006, the Company
changed its method of accounting for stock-based compensation as required by Statement of Financial
Accounting Standards No. 123(R), Share-Based Payment.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 9,
2007, expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal
control over financial reporting.
Miami, Florida
March 9, 2007
Certified Public Accountants
56
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
INTEREST INCOME
Interest on securities
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nontaxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on federal funds sold and interest bearing deposits . .
$
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTEREST EXPENSE
Interest on savings deposits . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on time certificates . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on short term borrowings. . . . . . . . . . . . . . . . . . . . .
Interest on subordinated debt . . . . . . . . . . . . . . . . . . . . . . . .
Interest on other borrowings . . . . . . . . . . . . . . . . . . . . . . . .
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INTEREST INCOME AFTER PROVISION FOR
For the Year Ended December 31
2006
2004
2005
(Dollars in thousands, except share data)
$
$
21,933
298
114,388
3,208
139,827
19,184
21,886
5,115
2,685
1,917
50,787
89,040
3,285
21,752
66
72,958
3,624
98,400
9,095
12,225
2,209
867
1,819
26,215
72,185
1,317
18,245
103
48,411
293
67,052
3,997
8,159
789
—
1,333
14,278
52,774
1,000
LOAN LOSSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85,755
70,868
51,774
NONINTEREST INCOME
Securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . .
NONINTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . .
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
(157)
24,260
24,103
73,045
36,813
12,959
128
20,517
20,645
59,100
32,413
11,654
44
18,462
18,506
47,281
22,999
8,077
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
23,854
$
20,759
$
14,922
SHARE DATA
Net income per share of common stock
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1.28
1.30
$
1.24
1.27
0.95
0.97
Average shares outstanding
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,671,752
18,305,258
16,749,386
16,361,196
15,745,445
15,335,731
See notes to consolidated financial statements.
57
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31
2006
2005
(Dollars in thousands, except
share data)
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal funds sold and interest bearing deposits . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available for sale (at fair value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities held for investment (fair values:
2006 — $127,395 and 2005 — $147,130) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of unearned income ($2,163 in 2006 and $887 in 2005) . . . . . . . . . . . .
Less: Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
89,803
2,412
92,215
313,983
$
67,373
153,120
220,493
392,952
129,958
443,941
5,888
1,733,111
(14,915)
1,718,196
37,070
57,299
34,826
$2,389,435
150,072
543,024
2,440
1,289,995
(9,006)
1,280,989
22,218
33,901
29,109
$2,132,174
LIABILITIES
Demand deposits (noninterest bearing) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time certificates of $100,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 391,805
929,444
325,251
244,518
1,891,018
Federal funds purchased and securities sold under agreement to repurchase,
maturing within 30 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
206,476
26,522
41,238
11,756
2,177,010
Commitments and Contingencies (Notes K and P)
$ 472,996
882,031
256,484
172,708
1,784,219
96,786
45,485
41,238
11,726
1,979,454
Preferred stock, par value $1.00 per share — authorized 4,000,000 shares, none
issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
SHAREHOLDERS’ EQUITY
Common stock, par value $.10 per share authorized 22,000,000 shares, issued
18,990,327 and outstanding 18,974,295 shares in 2006 and authorized
22,000,000 shares, issued 17,103,650 and outstanding 17,084,315 shares in
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Treasury stock (16,032 shares in 2006 and 19,335 shares in 2005), at cost. . .
Accumulated other comprehensive loss, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL SHAREHOLDERS’ EQUITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . .
1,899
88,380
124,811
(310)
214,780
(2,355)
212,425
$2,389,435
1,710
42,900
112,182
(218)
156,574
(3,854)
152,720
$2,132,174
See notes to consolidated financial statement.
58
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
2006
For the Year Ended December 31
2005
(Dollars in thousands)
2004
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees and commissions received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid to suppliers and employees . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trading securities activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Origination of loans designated held for sale . . . . . . . . . . . . . . . . . . . .
Sale of loans designated held for sale . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 136,952
23,110
(50,300)
(71,624)
(13,886)
—
(200,060)
196,612
(1,903)
$ 98,369
20,810
(25,754)
(56,097)
(12,305)
—
(257,405)
257,311
(1,074)
$ 69,793
19,180
(14,201)
(43,269)
(8,794)
7,365
(230,879)
233,936
(644)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . .
18,901
23,855
32,487
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of securities available for sale . . . . . . . . . . . . . . . . . . . . . . .
Maturities of securities held available for investment . . . . . . . . . . . . . .
Proceeds from sale of securities available for sale . . . . . . . . . . . . . . . .
Purchases of securities available for sale . . . . . . . . . . . . . . . . . . . . . . .
Purchases of securities held for investment. . . . . . . . . . . . . . . . . . . . . .
Net new loans and principal payments . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of other real estate owned . . . . . . . . . . . . . . . .
Proceeds from sale of Federal Home Loan Bank and Federal Reserve
125,392
25,730
112,420
(92,627)
—
(240,763)
151
166,261
48,675
50,974
(143,339)
—
(281,057)
—
85,093
47,170
135,994
(251,080)
(54,933)
(191,625)
2,012
Bank Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,915
—
704
Purchase of Federal Home Loan Bank and Federal Reserve Bank
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to bank premises and equipment
. . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of partnership interest . . . . . . . . . . . . . . . . . . . . . .
Purchase of Century and Big Lake, net of cash and cash equivalents
acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of branch, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . .
(6,329)
(6,991)
1,302
(1,987)
(3,601)
—
48,622
—
121,046
13,538
(2,185)
(4,004)
—
—
—
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . .
(28,178)
(29,490)
(232,854)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase in federal funds purchased and repurchase agreements . . .
Increase (decrease) in borrowings and subordinated debt . . . . . . . . . . .
Stock based employee benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(194,091)
103,555
(19,000)
1,760
(11,225)
Net cash provided by (used in) financing activities . . . . . . . . . . . . . .
(119,001)
Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . .
(128,278)
220,493
89,491
8,009
47,238
1,324
(9,612)
136,450
130,815
89,678
243,026
12,761
—
(2,625)
(8,300)
244,862
44,495
45,183
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . .
$ 92,215
$ 220,493
$ 89,678
See notes to consolidated financial statements.
59
SEACOAST BANKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
Common Stock
Amount
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income, Net
Total
(Dollars in thousands, except share amounts)
BALANCE AT DECEMBER 31, 2003 . . . . . . . 15,504
Comprehensive Income:
Shares
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on securities. . . . . . . . . . .
Net reclassification adjustment . . . . . . . . . . . .
Net unrealized gain on cash flow interest rate
swap . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . .
Cash dividends at $0.54 per share . . . . . . . . . . .
Treasury stock acquired . . . . . . . . . . . . . . . . . .
SFAS No. 123R expense . . . . . . . . . . . . . . . . .
Common stock issued for stock based employee
—
—
—
—
—
—
(210)
—
benefit plans . . . . . . . . . . . . . . . . . . . . . . . .
174
BALANCE AT DECEMBER 31, 2004 . . . . . . . 15,468
Comprehensive Income:
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized loss on securities . . . . . . . . . . .
Net unrealized gain on cash flow interest rate
swap . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . .
Cash dividends at $0.58 per share . . . . . . . . . . .
Treasury stock acquired . . . . . . . . . . . . . . . . . .
SFAS No. 123R expense . . . . . . . . . . . . . . . . .
Common stock issued for stock based employee
—
—
—
—
—
(1)
—
benefit plans . . . . . . . . . . . . . . . . . . . . . . . .
119
Common stock issued for the acquisition of
Century National Bank . . . . . . . . . . . . . . . . .
1,498
BALANCE AT DECEMBER 31, 2005 . . . . . . . 17,084
Comprehensive Income:
Net income . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on securities. . . . . . . . . . .
Net reclassification adjustment . . . . . . . . . . . .
Net unrealized gain on cash flow interest rate
swap . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . .
Cash dividends at $0.61 per share . . . . . . . . . . .
Treasury stock acquired . . . . . . . . . . . . . . . . . .
SFAS No. 123R expense . . . . . . . . . . . . . . . . .
Cash paid to dissenting shareholders of Century
National Bank . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued for stock based employee
—
—
—
—
—
—
(12)
—
(5)
benefit plans . . . . . . . . . . . . . . . . . . . . . . . .
132
Common stock issued for the acquisition of Big
$1,710
$24,964
$ 95,336
$(15,350)
$(2,576)
$104,084
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
78
14,922
—
—
—
—
(8,300)
—
(78)
—
—
—
—
—
—
(4,057)
—
—
1,710
(1,347)
23,695
(457)
101,423
3,235
(16,172)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
153
20,759
—
—
—
(9,612)
—
(153)
—
—
—
—
—
(33)
—
(74)
(235)
1,666
—
1,710
19,126
42,900
—
112,182
14,321
(218)
—
—
—
—
—
—
—
—
(1)
12
—
—
—
—
—
—
—
332
(108)
1,839
23,854
—
—
—
—
(11,225)
—
—
—
—
—
—
—
—
—
—
(298)
—
—
206
—
16
(145)
261
—
—
—
—
—
(2,444)
—
(1,430)
20
—
—
—
—
—
—
(3,854)
—
1,294
217
(12)
—
—
—
—
—
—
14,922
16
(145)
261
15,054
(8,300)
(4,057)
—
1,431
108,212
20,759
(1,430)
20
19,349
(9,612)
(33)
—
—
33,447
152,720
23,854
1,294
217
(12)
25,353
(11,225)
(298)
332
(109)
2,057
Lake National Bank . . . . . . . . . . . . . . . . . . .
1,775
BALANCE AT DECEMBER 31, 2006 . . . . . . . 18,974
178
$1,899
43,417
$88,380
—
$124,811
—
(310)
$
—
$(2,355)
43,595
$212,425
See notes to consolidated financial statements.
60
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A Significant Accounting Policies
General: The Company is a single segment bank holding company with one operating subsidiary bank,
Seacoast National Bank. The bank’s service area includes Okeechobee, Highlands, Hendry, Hardee, Glades,
DeSoto, Palm Beach, Martin, St. Lucie, Brevard, Indian River, Orange and Seminole counties, which are
located in central and southeast Florida. The bank operates 43 full service branches within their markets.
The consolidated financial statements include the accounts of the Parent Company and all its majority-
owned subsidiaries including FNB RE Services, Inc., a real estate investment trust, but exclude two trusts
created for the issuance of trust preferred securities in 2005. In consolidation, all significant intercompany
accounts and transactions are eliminated.
The accounting and reporting policies of the Company are in accordance with accounting principles
generally accepted in the United States of America, and they conform to general practices within the
applicable industries.
Cash and Cash Equivalents: Cash and cash equivalents include cash and due from banks, interest-
bearing bank balances and federal funds sold and securities purchased under resale agreements. Cash and cash
equivalents have original maturities of three months or less, and accordingly, the carrying amount of these
instruments is deemed to be a reasonable estimate of fair value.
Securities Purchased and Sold Agreements: Securities purchased under resale agreements and securities
sold under repurchase agreements are generally accounted for as collateralized financing transactions and are
recorded at the amount at which the securities were acquired or sold plus accrued interest. It is the Company’s
policy to take possession of securities purchased under resale agreements, which are primarily U.S. Government
and Government agency securities. The fair value of securities purchased and sold is monitored and collateral
is obtained from or returned to the counterparty when appropriate.
Use of Estimates: The preparation of these financial statements requires the use of certain estimates by
management in determining the Company’s assets, liabilities, revenues and expenses. Specific areas, among
others, requiring the application of management’s estimates include determination of the allowance for loan
losses, the valuation of investment securities available for sale, contingent liabilities and goodwill. Actual
results could differ from those estimates.
Securities: Securities that may be sold as part of the Company’s asset/liability management or in
response to, or in anticipation of changes in interest rates and resulting prepayment risk, or for other factors
are stated at fair value with unrealized gains or losses reflected as a component of shareholders’ equity net of
tax or included in noninterest income as appropriate. The estimated fair value of a security is determined
based on market quotations when available or, if not available, by using a discounted cash flow approach.
Realized gains and losses, including other than temporary impairments, are included in noninterest income as
investment securities gains (losses). Debt securities that the Company has the ability and intent to hold to
maturity are carried at amortized cost. Interest income on securities, including amortization of premiums and
accretion of discounts, is recognized using the interest method.
On a quarterly basis, the Company makes an assessment to determine whether there have been any events
or economic circumstances to indicate that a security is impaired on an other-than-temporary basis. Manage-
ment considers many factors, including the length of time the security has had a fair value less than the cost
basis; our intent and ability to hold the security for a period of time sufficient for a recovery in value; recent
events specific to the issuer or industry; and for debt securities, external credit ratings and recent downgrades.
Securities on which there is an unrealized loss that is deemed to be other-than temporary are written down to
fair value with the write-down recorded as a realized loss.
The Company anticipates prepayments of principal in the calculation of the effective yield for collateral-
ized mortgage obligations and mortgage backed securities by obtaining estimates of prepayments from
61
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
independent third parties. The adjusted cost of each specific security sold is used to compute gains or losses
on the sale of securities.
For securities which are transferred into held to maturity from available for sale, the unrealized gain or
loss at the date of transfer is reported as a component of shareholders’ equity and is amortized over the
remaining life as an adjustment of yield using the interest method.
Loans: Loans are recognized at the principal amount outstanding, net of unearned income and amounts
charged off. Unearned income includes discounts, premiums and deferred loan origination fees reduced by
loan origination costs. Unearned income on loans is amortized to interest income over the life of the related
loan using the effective interest rate method.
Fees received for providing loan commitments and letters of credit that may result in loans are typically
deferred and amortized to interest income over the life of the related loan, beginning with the initial
borrowing. Fees on commitments and letters of credit are amortized to noninterest income as banking fees and
commissions over the commitment period when funding is not expected.
A loan is considered to be impaired when based on current information, it is probable the Company will
not receive all amounts due in accordance with the contractual terms of a loan agreement. The fair value is
measured based on either the present value of expected future cash flows discounted at the loan’s effective
interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral
dependent. A loan is also considered impaired if its terms are modified in a troubled debt restructuring. When
the ultimate collectibility of the principal balance of an impaired loan is in doubt, all cash receipts are applied
to principal. Once the recorded principal balance has been reduced to zero, future cash receipts are applied to
interest income, to the extent any interest has been forgone, and then they are recorded as recoveries of any
amounts previously charged off.
The accrual of interest is generally discontinued on loans and leases, except consumer loans, that become
90 days past due as to principal or interest unless collection of both principal and interest is assured by way of
collateralization, guarantees or other security. Generally, loans past due 90 days or more are placed on
nonaccrual status regardless of security. Consumer loans that become 120 days past due are generally charged
to the allowance for loan losses. When borrowers demonstrate over an extended period the ability to repay a
loan in accordance with the contractual terms of a loan classified as nonaccrual, the loan is returned to accrual
status.
Derivatives Used for Risk Management: The Company may designate a derivative as either a hedge of
the fair value of a recognized fixed rate asset or liability or an unrecognized firm commitment (“fair value”
hedge), a hedge of a forecasted transaction or of the variability of future cash flows of a floating rate asset or
liability (“cash flow” hedge). All derivatives are recorded as other assets or other liabilities on the balance
sheet at their respective fair values with unrealized gains and losses recorded either in other comprehensive
income or in the results of operations, depending on the purpose for which the derivative is held. Derivatives
that do not meet the criteria for designation as a hedge at inception, or fail to meet the criteria thereafter, are
carried at fair value with unrealized gains and losses recorded in the results of operations.
To the extent of the effectiveness of a cash flow hedge, changes in the fair value of a derivative that is
designated and qualifies as a cash flow hedge are recorded in other comprehensive income. The net periodic
interest settlement on derivatives is treated as an adjustment to the interest income or interest expense of the
hedged assets or liabilities.
At inception of a hedge transaction, the Company formally documents the hedge relationship and the risk
management objective and strategy for undertaking the hedge. This process includes identification of the
hedging instrument, hedged item, risk being hedged and the methodology for measuring ineffectiveness. In
addition, the Company assesses both at the inception of the hedge and on an ongoing quarterly basis, whether
62
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the derivative used in the hedging transaction has been highly effective in offsetting changes in fair value or
cash flows of the hedged item, and whether the derivative as a hedging instrument is no longer appropriate.
The Company discontinues hedge accounting prospectively when either it is determined that the derivative
is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item; the
derivative expires or is sold, terminated or exercised; the derivative is de-designated because it is unlikely that
a forecasted transaction will occur; or management determines that designation of the derivative as a hedging
instrument is no longer appropriate.
When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in
fair value and the existing basis adjustment is amortized or accreted as an adjustment to yield over the
remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or
forecasted transaction are still expected to occur, unrealized gains and losses that are accumulated in other
comprehensive income are included in the results of operations in the same period when the results of
operations are also affected by the hedged cash flow. They are recognized in the results of operations
immediately if the cash flow hedge was discontinued because a forecasted transaction is not expected to occur.
Certain commitments to sell loans are derivatives. These commitments are recorded as a freestanding
derivative and classified as an other asset or liability.
Loans Held for Sale: Loans held for sale and any related unfunded lending commitments are recorded
at the lower of cost (which is the carrying amount net of deferred fees and costs and applicable allowance for
loan losses and reserve for unfunded lending commitments) or market value less costs to sell. At the time of
the transfer to loans held for sale, if the market value is less than cost, the difference is recorded as additional
provision for credit losses in the results of operations. Market value is determined based on quoted market
prices for the same or similar loans, outstanding investor commitments or discounted cash flow analyses using
market assumptions. At December 31, 2006 market value for substantially all the loans in loans held for sale
were obtained by reference to prices for the same or similar loans from recent transactions. For a relationship
that includes an unfunded lending commitment, the cost basis is the outstanding balance of the loan net of the
allowance for loan losses and net of any reserve for unfunded lending commitments. This cost basis is
compared to the market value of the entire relationship including the unfunded lending commitment.
Individual loans or pools of loans are transferred from the loan portfolio to loans held for sale when the
intent to hold the loans has changed and there is a plan to sell the loans within a reasonable period of time.
Loans held for sale are reviewed quarterly. Subsequent declines or recoveries of previous declines in the
market value of loans held for sale are recorded in other fee income in the results of operations. Market value
changes occur due to changes in interest rates, the borrower’s credit, the secondary loan market and the market
for a borrower’s debt. If an unfunded lending commitment expires before a sale occurs, the reserve associated
with the unfunded lending commitment is recognized as a credit to other fee income in the results of
operations.
Other Real Estate Owned: Other real estate owned consists of real estate acquired in lieu of unpaid loan
balances. These assets are carried at an amount equal to the loan balance prior to foreclosure plus costs
incurred for improvements to the property, but no more than the estimated fair value of the property less
estimated selling costs. Any valuation adjustments required at the date of transfer are charged to the allowance
for loan losses. Subsequently, unrealized losses and realized gains and losses are included in other noninterest
income. Operating results from OREO are recorded in other noninterest expense.
Bank Premises and Equipment: Bank premises and equipment are stated at cost, less accumulated
depreciation and amortization. Premises and equipment include certain costs associated with the acquisition of
leasehold improvements. Depreciation is computed principally by the straight-line method, over the estimated
useful lives as follows: buildings — 25-40 years, leasehold improvements — 5-25 years, furniture and
equipment — 3-12 years.
63
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Goodwill and Other Intangible Assets: Effective January 1, 2002, the Company adopted SFAS No. 142,
“Goodwill and Other Intangible Assets” (“SFAS No. 142”). Under SFAS No. 142, goodwill and intangible
assets with indefinite lives are no longer amortized, but are subject to impairment tests at least annually. The
Company’s goodwill evaluation for the year ended December 31, 2006 indicated that none of the goodwill is
impaired. Intangible assets with finite lives continue to be amortized over the period the Company expects to
benefit from such assets and are periodically reviewed for other than temporary impairment.
Revenue Recognition:
Interest on loans is accrued based upon the principal amount outstanding.
Commissions, and Other Fees: Revenue is recognized when the earnings process is complete and
collectibility is assured. Specifically, brokerage commission fees are recognized in income on a trade-date
basis. Asset management fees, measured by assets at a particular time, are accrued as earned. Commission
expenses are recorded when the related revenue is recognized. Transaction-related expenses are recognized as
incurred.
Allowance for Loan Losses and Reserve for Unfunded Lending Commitments:
The Company has
developed policies and procedures for assessing the adequacy of the allowance for loan losses and reserve for
unfunded lending commitments that reflect the evaluation of credit risk after careful consideration of all
available information. Where appropriate this assessment includes monitoring qualitative and quantitative
trends including changes in levels of past due, criticized and nonperforming loans. In developing this
assessment, the Company must necessarily rely on estimates and exercise judgment regarding matters where
the ultimate outcome is unknown such as economic factors, developments affecting companies in specific
industries and issues with respect to single borrowers. Depending on changes in circumstances, future
assessments of credit risk may yield materially different results, which may result in an increase or a decrease
in the allowance for loan losses.
The allowance for loan losses and reserve for unfunded lending commitments is maintained at a level the
Company believes is adequate to absorb probable losses inherent in the loan portfolio and unfunded lending
commitments as of the date of the consolidated financial statements. The Company employs a variety of
modeling and estimation tools in developing the appropriate allowance for loan losses and reserve for
unfunded lending commitments. The allowance for loan losses and reserve for unfunded lending commitments
consists of formula-based components for both commercial and consumer loans, allowance for impaired
commercial loans and allowance related to additional factors that are believed indicative of current trends and
business cycle issues.
The Company monitors qualitative and quantitative trends in the loan portfolio, including changes in the
levels of past due, criticized and nonperforming loans. The distribution of the allowance for loan losses and
reserve for unfunded lending commitments between the various components does not diminish the fact that the
entire allowance for loan losses and reserve for unfunded lending commitments is available to absorb credit
losses in the loan portfolio. The principal focus is, therefore, on the adequacy of the total allowance for loan
losses and reserve for unfunded lending commitments.
In addition, various regulatory agencies, as an integral part of their examination process, periodically
review the Company’s bank subsidiary’s allowance for loan losses and reserve for unfunded lending
commitments. These agencies may require such subsidiaries to recognize changes to the allowance for loan
losses and reserve for unfunded lending commitments based on their judgments about information available to
them at the time of their examination.
Income Taxes: Deferred tax assets and liabilities are determined based on temporary differences between
the carrying amounts of assets and liabilities in the consolidated financial statements and their related tax
bases and are measured using the enacted tax rates and laws that are in effect. The effect on deferred tax
assets and liabilities of a change in rates is recognized as income or expense in the period in which the change
occurs.
64
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Net Income per Share: Net income per share is based upon the weighted average number of shares of
common stock (Basic) and equivalents (Diluted) outstanding during the respective years.
Employee Benefits: The three stock option plans are accounted for under FASB Statement No. 123R
and the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing
model. (See Note J)
For restricted stock awards, which generally vest based on continued service with the Company, the
deferred compensation is measured as the fair value of the shares on the date of grant, and the deferred
compensation is amortized as salaries and employee benefits expense in the results of operations in accordance
with the applicable vesting schedule, generally straight-line over five years. Some shares vest based upon the
Company achieving certain performance goals and salary amortization expense is based on an estimate of the
most likely results on a straight line basis.
Recent Accounting Pronouncements: FASB INTERPRETATION NO. 48, ACCOUNTING FOR
UNCERTAINITY IN INCOME TAXES. The FASB has issued an Interpretation (FIN 48) that will clarify the
criteria for recognizing tax benefits under FASB Statement No. 109, Accounting for Income Taxes. The
interpretation will require additional financial statement disclosures about certain tax positions. The Interpre-
tation is effective for fiscal years beginning after December 15, 2006. When adopted, the Company believes
this Interpretation will not materially impact its consolidated financial position, results of operations or
liquidity.
HYBRID FINANCIAL INSTRUMENTS. SFAS No. 155 amends SFAS No. 133, Accounting for
Derivatives and Hedging Activity, and SFAS No. 140. Hybrid financial instruments contain embedded
derivative within a single instrument, either a debt or equity host contract. SFAS 155 permits entities the
option to record certain hybrid financial instruments at fair value as individual financial instruments, with
corresponding changes in value recorded in earnings. Prior to this amendment, certain hybrid financial
instruments were required to be separated into two instruments, the derivative and host, and generally only the
derivative was recorded at fair value. SFAS 155 also removes an existing exception for evaluating certain
interests in securitized assets for embedded derivatives. SFAS 155 is effective for all financial instruments
acquired or issued after January 1, 2007. The adoption of this standard is not expected to have a material
effect on the Company’s financial condition, results of operations, or liquidity.
FAIR VALUE MEASUREMENTS. SFAS No. 157 establishes a single authoritative definition of fair
value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value
measurements. The statement applies only to fair-value measurements that are already required or permitted
by other accounting standards and is expected to increase the consistency of those measurements. It defines
fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. This is an exit-price definition of fair value.
Although entry prices may be similar to exit prices in some situations, fair value under Statement 157 is based
on an exit price that would result from market participants’ behavior. This statement is effective for years
beginning after November 15, 2007, and interim periods with those fiscal years. The adoption of this standard
is not expected to have a material effect on the Company’s financial condition, results of operations, or
liquidity.
In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial
Liabilities, which permits companies to elect to measure certain eligible items at fair value. Subsequent
unrealized gains and losses on those items will be reported in earnings. Upfront costs and fees related to those
items will be reported in earnings as incurred and not deferred.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. If a company elects to apply
the provisions of the statement to eligible items existing at that date, the effect of the remeasurement to fair
value will be reported as a cumulative effect adjustment to the opening balance of retained earnings.
65
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Retrospective application will not be permitted. The Company is currently assessing whether it will elect to
use the fair value option for any of its eligible items.
FSP AUG AIR-1, ACCOUNTING FOR PLANNED MAJOR MAINTENANCE ACTIVITIES. This staff
position will prohibit Companies from accruing as a liability in annual and interim periods the future costs of
periodic major overhauls and maintenance of plant and equipment. Other previously acceptable methods of
accounting for planned major overhauls and maintenance will continue to be permitted. The prohibition against
accruing future major maintenance costs will affect companies that currently accrue such costs over several
fiscal years and companies that accrue such cost over interim-reporting periods within the annual period in
which the costs are expected to be incurred. The prohibition applies to entities in all industries for fiscal years
beginning after December 15, 2006, and must be retrospectively applied. The adoption of this staff position is
not expected to have a material effect on financial condition, the results of operations, or liquidity.
In September 2006, the Emerging Issues Task Force (EITF) reached a final consensus on Issue 06-4,
Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life
Insurance Arrangements. EITF 06-4 stipulates that an agreement by the employer to share a portion of the
proceeds of a life insurance policy with the employee during the postretirement period is a postretirement
benefit arrangement for which a liability must be recorded. The consensus is effective for fiscal years
beginning after December 15, 2007. Entities will have the option of applying the provisions of EITF 06-4 as a
cumulative effect adjustment to the opening balance of retained earnings or retrospectively to all prior periods.
The adoption of this standard is not expected to have a material effect on the Company’s financial condition,
results of operations, or liquidity.
Note B Business Combinations
On November 22, 2005, the Company announced the signing of a definitive merger agreement with Big
Lake, and the merger was completed on April 1, 2006. The transaction was one hundred percent stock-based
(with the exception of cash paid for fractional shares of common stock) and resulted in the Company issuing
1,775,000 shares of its common stock. Based on the Company’s average of the closing prices for a period
beginning two trading days before November 22, 2005 and ending two days after of $24.56, the transaction
was valued at $45 million.
The Company entered into this business combination to enhance shareholder value by providing more
products and services for customers in existing and key additional markets, by realizing increased economies
of scale and having greater potential for growth following the merger.
Under the purchase method of accounting, the assets and liabilities of Big Lake were recorded at their
respective fair values as of April 1, 2006, and the results of operations in 2006 include nine months of Big
Lake. The fair values are preliminary and subject to refinement as information relative to the fair values as of
April 1, 2006, becomes available.
Based on the ending Big Lake tangible equity of $23.6 million, and an aggregate purchase price of
$45 million, the merger resulted in total intangible assets of $24.7 million ($22.1 million net of deferred
income taxes). Of the total intangible assets, $6.8 million ($4.2 million net of deferred income taxes) was
allocated to deposit base intangible, and $17.9 million to goodwill. Amortization expense using the straight
line method based on the terminal economic life of 104 months related to core deposit intangible is not
deductible for income tax purposes; however, for financial reporting purposes deferred income tax liabilities
were recorded. The deferred income tax liabilities will be reflected as an income tax benefit in the results of
operations in proportion to and over the amortization period of the related intangible asset.
66
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the assets acquired and liabilities assumed as of the date of acquisition:
Cash and Due From Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal Funds Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 1, 2006
(In thousands)
$ 11,569
36,324
Total Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities Available for Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities Held for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, Net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,893
65,670
5,427
201,838
11,072
Total Assets Acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$331,900
Total Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities Sold Under Agreements to Repurchase, Maturing Within 30 Days . . . . . . . .
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$300,882
6,135
1,270
Total Liabilities Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$308,287
The following pro forma financial information for 2006 and 2005 presents the consolidated operations of
the Company as if the acquisitions had been made on January 1, 2005. The unaudited pro forma financial
information is provided for informational purposes only, should not be construed to be indicative of the
Company’s consolidated results of operations had the acquisition been consummated on this earlier date, and
does not project the Company’s results of operations for any future period:
For the Year Ended
December 31,
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2005
2006
(Dollars in thousands,
except for share data)
92,461
3,335
$
84,573
1,589
Net interest income after provision for loan losses. . . . . . . . . . . . . . . .
Noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89,126
24,818
76,040
37,904
13,342
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
24,562
Net Income Per Common Share
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
1.29
1.31
Average Common Shares Outstanding
82,984
23,423
69,336
37,071
13,327
23,744
1.28
1.31
$
$
$
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,109,423
18,742,929
18,524,386
18,136,196
67
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
PRELIMINARY GOODWILL AND OTHER INTANGIBLE ASSETS CREATED BY THE
MERGER
Purchase price less ending tangible stockholders’s equity. . . . . . . . . . . . . . . . . . . . . . .
Fair value purchase accounting adjustments(a):
April 1, 2006
(In thousands)
$21,377
Financial assets, including securities, loans and loans held for sale . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,087
(3,312)
Total pre-tax fair value purchase accounting adjustments . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total after-tax fair value purchase accounting adjustments . . . . . . . . . . . . . . . . . . . .
Total purchase intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposit base intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
775
(49)
726
22,103
(6,787)
2,619
Preliminary goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,935
(a) These adjustments represent fair value adjustments in compliance with business combination accounting
standards and adjusts assets and liabilities of Big Lake to their respective fair values as of April 1, 2006.
Note C Cash, Dividend and Loan Restrictions
In the normal course of business, the Company and its subsidiary bank enter into agreements, or are
subject to regulatory agreements that result in cash, debt and dividend restrictions. A summary of the most
restrictive items follows:
The Company’s subsidiary bank is required to maintain average reserve balances with the Federal Reserve
Bank. The average amount of those reserve balances was approximately $20,340,000 for 2006 and
$21,104,000 for 2005.
Under Federal Reserve regulation, the Company’s subsidiary bank is limited as to the amount it may loan
to their affiliates, including the Company, unless such loans are collateralized by specified obligations. At
December 31, 2006, the maximum amount available for transfer from the subsidiary bank to the Company in
the form of loans approximated 24 percent of consolidated net assets.
The approval of the Comptroller of the Currency is required if the total of all dividends declared by a
national bank in any calendar year exceeds the bank’s profits, as defined, for that year combined with its
retained net profits for the preceding two calendar years. Under this restriction the Company’s subsidiary bank
can distribute $29,774,000 as dividends to the Company as of December 31, 2006, without prior approval of
the Comptroller of the Currency.
Note D Securities
The amortized cost and fair value of securities at December 31, 2006, 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.
68
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Held for Investment
Fair
Value
Amortized
Cost
Available for Sale
Fair
Value
Amortized
Cost
Due in less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Due after one year through five years . . . . . . . . . . . . . . . . . .
Due after five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(In thousands)
199
311
5,926
$ 63,463
31,540
2,020
$ 63,133
31,543
2,049
6,436
97,023
96,725
197
312
5,862
6,371
Mortgage-backed securities of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
11,393
11,340
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . . . . . . . . .
No contractual maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72,398
51,189
—
70,821
50,138
—
155,977
50,472
2,597
153,560
49,761
2,597
$129,958
$127,395
$317,462
$313,983
Proceeds from sales of securities during 2006 were $112,420,000 with gross gains of $32,000 and gross
losses of $189,000. During 2005, proceeds from sales of securities were $50,974,000 with gross gains of
$3,000 and no gross losses. During 2004, proceeds from sales of securities were $135,994,000 with gross
gains of $454,000 and gross losses of $410,000.
Securities with a carrying value of $244,382,000 and a fair value of $243,226,000 at December 31, 2006,
were pledged as collateral for repurchase agreements, United States Treasury deposits, other public deposits
and trust deposits.
Gross
Amortized
Cost
December 31, 2006
Gross
Gross
Unrealized
Unrealized
Losses
Gains
(In thousands)
Fair
Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of U.S.
Government Sponsored Entities. . . . . . . . . . . . . . . . . . . $ 95,003
$ 21
$ (348)
$ 94,676
Mortgage-backed securities of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,393
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155,977
50,472
2,020
2,597
—
193
—
29
—
(53)
11,340
(2,610)
(711)
—
—
153,560
49,761
2,049
2,597
$317,462
$243
$(3,722)
$313,983
SECURITIES HELD FOR INVESTMENT
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,398
51,189
6,371
Private collateralized mortgage obligations . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . .
$129,958
69
$ 46
—
67
$113
$(1,623)
(1,051)
(2)
70,821
50,138
6,436
$(2,676)
$127,395
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Gross
Amortized
Cost
December 31, 2005
Gross
Gross
Unrealized
Unrealized
Gains
Losses
(In thousands)
Fair
Value
SECURITIES AVAILABLE FOR SALE
U.S. Treasury securities and obligations of U.S.
Government Sponsored Entities. . . . . . . . . . . . . . . . . . . $ 71,955
$ —
$ (766)
$ 71,189
Mortgage-backed securities of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,073
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
234,025
88,763
1,857
10
—
3
—
—
2,083
(4,277)
(691)
—
229,748
88,075
1,857
$398,673
$ 13
$(5,734)
$392,952
SECURITIES HELD FOR INVESTMENT
U.S. Treasury securities and obligations of U.S.
Government Sponsored Entities. . . . . . . . . . . . . . . . . . . $
5,000
$ —
$
(66)
$ 4,934
Mortgage-backed securities of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,005
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . .
85,891
56,981
1,195
47
26
—
47
—
1,052
(2,046)
(950)
—
83,871
56,031
1,242
$150,072
$120
$(3,062)
$147,130
All of the Company’s securities which had unrealized losses at December 31, 2006 were obligations of
the U.S. Treasury, U.S. Government agencies or AAA rated mortgage related securities. Management expects
that all principal will be repaid at a par value at the date of maturity. The fair values of the Company’s
securities are based on discounted cash flow models which utilize assumed lives and yields which will vary
over economic cycles producing both unrealized losses and gains. The Company has the intent and ability to
hold these temporarily impaired securities until fair value is recovered.
70
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2006
Less than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
(In thousands)
U.S. Treasury securities and obligations
of U.S. Government Sponsored
Entities . . . . . . . . . . . . . . . . . . . . . . . $15,936
Mortgage-backed securities of
$ (25)
$ 44,668
$ (323)
$ 60,604
$ (348)
Government Sponsored Entities . . . . .
11,337
(53)
—
—
11,337
(53)
Collateralized mortgage obligations of
Government Sponsored Entities . . . . .
—
—
188,119
(4,233)
188,119
(4,233)
Private collateralized mortgage
obligations . . . . . . . . . . . . . . . . . . . .
14,127
(175)
85,772
(1,587)
99,899
(1,762)
Obligations of state and political
subdivisions . . . . . . . . . . . . . . . . . . .
1,012
(2)
—
—
1,012
(2)
Total temporarily impaired securities . . . $42,412
$(255)
$318,559
$(6,143)
$360,971
$(6,398)
The unrealized losses in the U.S. Treasury and U.S. Government agencies and mortgage-backed securities
were caused by interest rate increases. Because the decline in fair value is attributable to changes in interest
rates and not credit quality, these investments are not considered other-than-temporarily impaired.
Note E Loans
An analysis of loans at December 31 are summarized as follows:
2006
2005
(In thousands)
Real estate mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 949,824
571,133
Construction and land development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
128,101
Commercial and financial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83,428
Installment loans to individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
625
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 680,877
427,216
98,653
82,942
307
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,733,111
$1,289,995
One of the sources of the Company’s business is loans to directors and executive officers. The aggregate
dollar amount of these loans was approximately $11,210,000 and $8,515,000 at December 31, 2006 and 2005,
respectively. The acquisition of Big Lake resulted in $6,511,000 in new loans to directors and executive
officers as of April 1, 2006. During 2006, $2,773,000 of new loans were made and repayments totaled
$1,256,000.
Participations of loans sold total $16,002,000 while loans purchased totaled $44,622,000 at December 31,
2006. Total participations at December 31, 2005 were not material.
71
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note F Impaired Loans and Allowance for Loan Losses
At December 31, 2006 and 2005, the Company’s recorded investment in impaired loans and related
valuation allowance was as follows:
Impaired loans:
Valuation allowance required . . . . . . . . . . .
2006
Recorded
Investment
2005
Valuation
Allowance
Recorded
Investment
( In thousands )
Valuation
Allowance
$8,055
$8,055
$1,192
$1,192
$—
$—
$—
$—
The valuation allowance is included in the allowance for loan losses. The average recorded investment in
impaired loans for the years ended December 31, 2006, 2005 and 2004 was $2,119,000, $174,000 and $1,000,
respectively. The impaired loans were measured for impairment based primarily on the value of underlying
collateral.
Interest payments received on impaired loans are recorded as interest income unless collection of the
remaining recorded investment is doubtful at which time payments received are recorded as reductions to
principal. For the years ended December 31, 2006, 2005 and 2004, the Company did not record any interest
income on impaired loans.
The nonaccrual loans and accruing loans past due 90 days or more for the year ended December 31, 2006
were $12,465,000 and $64,000, respectively, and were $372,000 and $465,000, respectively, at the end of
2005.
Transactions in the allowance for loan losses for the three years ended December 31, are summarized as
follows:
2006
2005
2004
( In thousands )
Balance, beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,006
3,285
Provision charged to operating expense . . . . . . . . . . . . . . . . . . . .
2,518
Carryover of allowance for loan losses . . . . . . . . . . . . . . . . . . . . .
(311)
Charge offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
417
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,598
1,317
1,225
(415)
281
$6,160
1,000
—
(753)
191
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,915
$9,006
$6,598
72
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note G Bank Premises and Equipment
Bank premises and equipment are summarized as follows:
Cost
Accumulated
Depreciation &
Amortization
(In thousands)
Net
Carrying
Value
December 31, 2006
Premises (including land of $10,260) . . . . . . . . . . . . . . . . $43,292
17,837
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
$(13,026)
(11,033)
$30,266
6,804
$61,129
$(24,059)
$37,070
December 31, 2005
Premises (including land of $4,617) . . . . . . . . . . . . . . . . . $30,347
14,482
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
$(12,012)
(10,599)
$18,335
3,883
$44,829
$(22,611)
$22,218
Note H Goodwill and Other Intangible Assets
Changes in the carrying amount of goodwill for each of the years in the two-year period ended
December 31, 2006, are presented below.
Balance, December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2006
and 2005
(In thousands)
$ 2,639
29,088
Balance, December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,727
17,674
Balance, December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$49,401
Included in additions to goodwill during 2006 are $261,000 related to fair value refinements made in
relation to the acquisition of Century National Bank in 2005.
The gross carrying amount and accumulated amortization for each of the Company’s identified intangible
assets subject to amortization at December 31, 2006 and 2005, are presented below.
December 31, 2006
December 31, 2005
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Deposit base intangible . . . . . . . . . . . . . . . . . . . .
$9,494
$9,494
(In thousands)
$(1,596)
$(1,596)
$2,707
$2,707
$(533)
$(533)
The Company recorded a deposit base intangible of $2.7 million related to acquisitions in 2005. These
intangibles have a weighted average amortization period of 5 years. In 2006, the Company recorded a deposit
based intangible of $6.8 million related to the acquisition of Big Lake. This intangible has a weighted average
amortization period of 8.7 years.
73
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Intangible amortization expense related to identified intangible assets for each of the years in the three-
year period ended December 31, 2006, is presented below.
Year Ended December 31
2006
2005
(In thousands)
2004
Intangible Amortization
Identified intangible assets Deposit base . . . . . . . . . . . . . . . . . . . .
$1,063
$533
$—
The estimated annual identified intangible assets amortization expense in each of the five years
subsequent to December 31, 2006, is as follows (in thousands): 2007, $1,259; 2008, $1,259; 2009, $1,259;
2010, $985 and 2011, $847.
Note I Borrowings
All of the Company’s short-term borrowings were comprised of federal funds purchased and securities
sold under agreements to repurchase with maturities primarily from overnight to seven days:
Maximum amount outstanding at any month end . . . . . . . . . . $206,476
Weighted average interest rate at end of year . . . . . . . . . . . . .
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . $119,045
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . .
4.79%
4.30%
2006
2005
(In thousands)
$107,073
2004
$98,464
3.56%
1.89%
$ 84,972
$72,268
2.60%
1.09%
On July 31, 1998, the Company acquired $15,000,000 in other borrowings from the Federal Home
Loan Bank (FHLB), principal payable on November 12, 2009 with interest payable quarterly at a fixed rate of
6.10%. On January 30, 2003, the Company acquired $25,000,000 from the FHLB, with interest payable
quarterly under a floating rate agreement that reset quarterly based on the London Interbank Offered Rate
(LIBOR); the borrowing was repaid on January 30, 2006.
The Company’s subsidiary bank has unused lines of credit of $140,051,000 at December 31, 2006.
At December 31, 2006, no balance was outstanding on the Company’s unsecured revolving line of credit
of $8,000,000. On February 2, 2006, the Company entered into an unsecured 3-year term loan totaling
$12,000,000. Both the line and the 3-year term loan have a floating rate that resets quarterly based on LIBOR
plus 130 basis points and have certain financial covenants that must be maintained by the Company. The rate
which adjusts every three months, is currently 6.67 percent, per annum. At December 31, 2006, the Company
was in compliance with all the terms of the agreements.
The Company issued $20,619,000 in junior subordinated debentures on March 31 and December 16,
2005, an aggregate of $41,238,000. These debentures were issued in conjunction with the formation of a
Delaware and Connecticut trust subsidiary, SBCF Capital Trust I, and II (“Trusts”) which each completed a
private sale of $20.0 million of floating rate preferred securities. The rates on the trust preferred securities are
the 3-month LIBOR rate plus 175 basis points and 3-month LIBOR rate plus 133 basis points, respectively.
The rates, which adjust every three months, are currently 7.12 percent and 6.72 percent, respectively, per
annum. The trust preferred securities mature in thirty years, and may be redeemed without penalty on or after
June 10, 2010 and March 15, 2011, respectively, upon approval of the Federal Reserve Board or upon
occurrence of certain events affecting their tax or regulatory capital treatment. Distributions on the trust
preferred securities are payable quarterly in March, June, September and December of each year. The Trusts
also each issued $619,000 of common equity securities to the Company. The proceeds of the offering of trust
preferred securities and common equity securities were used to purchase the $41.2 million junior subordinated
74
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
deferrable interest notes issued by the Company, which have terms substantially similar to the trust preferred
securities.
The Company has the right to defer payments of interest on the notes at any time or from time to time
for a period of up to twenty consecutive quarterly interest payment periods. Under the terms of the notes, in
the event that under certain circumstances there is an event of default under the notes or the Company has
elected to defer interest on the notes, the Company may not, with certain exceptions, declare or pay any
dividends or distributions on its capital stock or purchase or acquire any of its capital stock. The Company is
current on the interest payment obligations and has not executed the right to defer interest payments on the
notes.
The Company has entered into agreements to guarantee the payments of distributions on the trust
preferred securities and payments of redemption of the trust preferred securities. Under these agreements, the
Company also agrees, on a subordinated basis, to pay expenses and liabilities of the Trusts other than those
arising under the trust preferred securities. The obligations of the Company under the junior subordinated
notes, the trust agreement establishing the Trusts, the guarantees and agreements as to expenses and liabilities,
in aggregate, constitute a full and conditional guarantee by the Company of the Trusts’ obligations under the
trust preferred securities.
Despite the fact that the accounts of the Trusts are not included in the Company’s consolidated financial
statements, the $40.0 million in trust preferred securities issued by the Trusts are included in the Tier 1 capital
of the Company as allowed by Federal Reserve Board guidelines.
The proceeds from the sale of the trust preferred securities and borrowed funds were used to support the
Company’s acquisitions, to maintain capital, and for general corporate purposes.
Note J Employee Benefits and Stock Compensation
The Company’s profit sharing plan which covers substantially all employees after one year of service
includes a matching benefit feature for employees electing to defer the elective portion of their profit sharing
compensation. In addition, amounts of compensation contributed by employees are matched on a percentage
basis under the plan. The profit sharing contributions charged to operations were $2,041,000 in 2006,
$2,196,000 in 2005, and $1,690,000 in 2004.
The Company adopted Statement of Financial Accounting Standards No. 123R during the first quarter of
2006 using the modified retrospective application method. Therefore, the beginning balances of additional
paid-in capital and retained earnings have been adjusted to reflect the adoption. The adjustments did not have
a material effect on the Company’s financial condition, the results of operations or liquidity.
The Company’s stock option and stock appreciation rights plans were approved by the Company’s
shareholders on April 25, 1991, April 25, 1996, and April 20, 2000. The number of shares of common stock
that may be granted pursuant to the 1991 and 1996 plans shall not exceed 990,000 shares for each plan and
pursuant to the 2000 plan shall not exceed 1,320,000 shares. The Company has granted options and stock
appreciation rights on 826,000, 933,000 and 460,000 shares for the 1991, 1996 and 2000 plans, respectively,
through December 31, 2006. Under the 2000 plan the Company granted stock settled appreciation rights
(“SSARs”) of 116,000 shares and issued 21,000 shares of restricted stock awards during 2006, granted options
on 56,000 shares, issued 28,000 shares of restricted stock awards during 2005 and granted options on
99,000 shares and issued 52,000 shares of restricted stock awards during 2004. Under the plans, the option or
SSARs exercise price equals the common stock’s market price on the date of the grant. All options issued
prior to December 31, 2002 have a vesting period of four years and a contractual life of ten years. All options
or SSARs issued after that have a vesting period of five years and a contractual life of ten years. To the extent
the Company has treasury shares available, stock options exercised or stock grants awarded may be issued
from treasury shares or, if treasury shares are insufficient, the Company can issue new shares. The Company
75
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
has a single share repurchase program in place, approved on September 18, 2001, authorizing the repurchase
of up to 825,000 shares; the maximum number of shares that may yet be purchased under this program is
334,000.
Stock option fair value is measured on the date of grant using the Black-Scholes option pricing model
with market assumptions. Option pricing models require the use of highly subjective assumptions, including
expected price volatility, which when changed can materially affect fair value estimates. Accordingly, the
model does not necessarily provide a reliable single measure of the fair value of the Company’s stock options
or SSARs. The more significant assumptions used in estimating the fair value of stock options and SSARs
include risk-free interest rates ranging from 5.10 percent to 5.18 percent in 2006, 3.90 percent to 4.50 percent
in 2005, and 4.22 percent in 2004; dividend yields of 2.19 percent to 2.25 percent in 2006, 2.36 percent in
2005, and 2.52 percent in 2004; weighted average expected lives of the stock options of 5 years and 7 years in
2006, 7 years in 2005 and 5 years in 2004; and volatility of the Company’s common stock of 18 percent in
2006 and 2005, and 13 percent in 2004. Additionally, the estimated fair value of stock options and SSARs is
reduced, as applicable, by an estimate of forfeiture experience of 22 percent for 2006, and was 13 percent for
2005 and 2004.
On approximately one-half of the restricted stock awards the restriction expiration is dependent upon the
Company achieving minimum earnings per share growth during a five-year vesting period. The following table
presents a summary of stock option and SSARs activity for the year ended December 31, 2006:
Option or
SSAR Price
per Share
Weighted Average
Exercise Price
Aggregate
Intrinsic
Value
Dec. 30, 2003 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . .
Dec. 30, 2004 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . .
Dec. 30, 2005 . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . .
Number of
Shares
796,000
99,000
(113,000)
(4,000)
778,000
56,000
(80,000)
(17,000)
737,000
116,000
(99,000)
(4,000)
$ 5.30 — $17.08
19.87 — 22.40
5.30 — 8.79
17.08
5.30 — 22.40
18.46 — 22.92
5.30 — 17.08
17.08 — 22.40
6.59 — 22.92
26.72 — 27.36
6.59 — 22.40
17.08 — 22.40
Dec. 30, 2006 . . . . . . . . . . . . . . . .
750,000
6.59 — 27.36
$10.56
22.34
7.93
17.08
12.41
18.89
8.11
18.92
13.22
26.74
7.59
19.74
16.03
$7,656,000
$7,171,000
$6,577,000
Cash received for stock options exercised during 2006 totaled $756,000; the intrinsic value of options
exercised totaled $1,931,000 based on market price at the date of exercise. No windfall tax benefits were
realized from the exercise of the stock options and no cash was utilized to settle equity instruments granted
under stock option awards.
76
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes information about stock options outstanding and exercisable at Decem-
ber 31, 2006:
Options / SSARs Outstanding
Options / SSARs Exercisable (Vested)
Number of
Shares
Outstanding
750,000
Weighted Average
Remaining
Contractual Life
in Years
Number of Shares
Exercisable
Weighted
Average
Exercise Price
Weighted Average
Remaining
Contractual Life
in Years
Aggregate
Intrinsic
Value
5.42
498,000
12.64
3.96
$6,056,000
Since December 31, 2005, SSARs for 116,000 shares have been granted, stock options for 115,000 shares
have vested and stock options for 4,000 shares were forfeited. Non-vested stock options and SSARs for
252,000 shares were outstanding at December 31, 2006 and are as follows:
Number of
Non-Vested Stock
Options and SSARs
252,000
Weighted Average
Remaining
Contractual Life in
Years
Weighted Average
Fair Value
Remaining
Unrecognized
Compensation Cost
Weighted Average
Remaining
Recognition Period
in Years
8.30
4.02
$844,000
3.69
Since December 31, 2005, restricted stock awards on 21,000 shares have been issued, 44,000 awards have
vested and no awards were forfeited. Non-vested restricted stock awards for a total of 161,000 shares were
outstanding at December 31, 2006, 23,000 less than at December 31, 2005, and are as follows:
Number of
Non-Vested Restricted
Stock Award Shares
161,000
Remaining Unrecognized
Compensation Cost
Weighted Average
Remaining Recognition
Period in Years
$1,429,000
3.08
In 2006, 2005 and 2004 the Company recognized $1,046,000 ($742,000 after tax), $965,000 ($658,000
after tax) and $424,000 ($309,000 after tax), respectively of non-cash compensation expense.
No cash was utilized to settle equity instruments granted under restricted stock awards. No compensation
cost has been capitalized and no modifications have occurred with regard to the contractual terms for stock
options, SSARs or restricted stock awards.
Note K Lease Commitments
The Company is obligated under various noncancellable operating leases for equipment, buildings, and
land. Minimum rent payments under operating leases were recognized on a straight-line basis over the term of
the lease. At December 31, 2006, future minimum lease payments under leases with initial or remaining terms
in excess of one year are as follows:
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
$ 3,818
3,560
2,981
2,206
2,116
27,593
$42,274
Rent expense charged to operations was $3,463,000 for 2006, $2,539,000 for 2005 and $2,077,000 for
2004. Certain leases contain provisions for renewal and change with the consumer price index.
77
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Certain property is leased from related parties of the Company. Lease payment to these individuals were
$285,000 in 2006, $270,000 in 2005 and $262,000 in 2004.
Note L Income Taxes
The provision (benefit) for income taxes are as follows:
Year Ended December 31
2005
2006
2004
(In thousands)
Current
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,760
744
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,642
564
$8,524
281
Deferred
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,327)
(218)
(469)
(83)
(619)
(109)
$12,959
$11,654
$8,077
Temporary differences in the recognition of revenue and expense for tax and financial reporting purposes
resulted in deferred income taxes as follows:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . .
Deposit base intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31
2006
2005
2004
(In thousands)
$ 110
(457)
54
—
271
(183)
(158)
(167)
(22)
$ 25
(169)
(319)
32
(271)
—
—
(66)
40
$ (232)
(1,330)
748
—
—
(407)
(6)
(270)
(48)
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,545)
$(552)
$(728)
78
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The difference between the total expected tax expense (computed by applying the U.S. Federal tax rate
of 35% to pretax income in 2006, 2005 and 2004) and the reported income tax expense relating to income
before income taxes is as follows:
Tax rate applied to income before income taxes . . . . . . . . . . . . . . . . $12,885
Increase (decrease) resulting from the effects of:
2006
Year Ended December 31
2005
(In thousands)
$11,345
2004
$8,050
Tax exempt interest on obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(165)
(184)
75
(178)
(73)
(168)
—
69
(86)
(60)
—
1
Federal tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,433
526
11,173
481
7,905
172
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,959
$11,654
$8,077
The net deferred tax assets (liabilities) are comprised of the following:
December 31
2006
2005
(In thousands)
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized securities losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,679
1,389
1,435
165
713
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposit base intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,381
(1,995)
(2,901)
—
(21)
(4,917)
—
$ 3,142
849
2,347
158
443
6,939
(525)
(688)
(7)
(108)
(1,328)
—
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,464
$ 5,611
The Big Lake acquisition increased the tax deferred income tax assets by $2,550,000 and deferred income
tax liabilities by $4,277,000 in 2006. The Century acquisition increased deferred income tax assets by
$876,000 and deferred income tax liabilities by $931,000 in 2005. The realization of deferred income tax
assets may be based on the utilization of carrybacks to prior taxable periods, the anticipation of future taxable
income in certain periods and the utilization of tax planning strategies. The Company has determined it is
more likely than not that the deferred income tax assets can be supported by carrybacks to federal taxable
income in the two-year federal carryback period and by expected future taxable income that will exceed
amounts necessary to fully realize remaining deferred income tax assets resulting from the the scheduling of
temporary differences. The Company’s taxable income for the last two years exceeded $72 million, an amount
in excess of the net deferred tax assets.
79
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Income tax expense related to securities transactions was $(60,000), $49,000 and $17,000 in 2006, 2005
and 2004, respectively. The IRS examined the federal income tax return for the year 2003. The IRS did not
propose any material adjustments related to this examination.
Note M Noninterest Income and Expenses
Details of noninterest income and expense follow:
2006
Year Ended December 31
2005
(In thousands)
2004
Noninterest income
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . $ 6,784
2,858
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,131
Mortgage banking fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,002
Brokerage commissions and fees . . . . . . . . . . . . . . . . . . . . . . . .
2,709
Marine finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,149
Debit card income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
421
Other deposit based EFT fees . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,545
Merchant income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,147
Gain on sale of partnership interest. . . . . . . . . . . . . . . . . . . . . . .
—
Interest rate swap losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,514
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,022
2,573
1,810
2,562
3,068
1,714
417
2,230
—
(267)
1,388
Securities gains (losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,260
(157)
20,517
128
$ 4,479
2,250
1,824
2,442
2,997
1,344
476
1,962
—
(701)
1,389
18,462
44
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,103
$20,645
$18,506
Noninterest expense
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,146
7,322
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,443
Outsourced data processing costs . . . . . . . . . . . . . . . . . . . . . . . .
1,836
Telephone / data lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,435
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,523
Furniture and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,359
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,792
Legal and professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
325
FDIC assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,063
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,801
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$23,783
6,313
6,477
1,357
5,126
2,121
3,194
2,595
225
533
7,376
$19,119
5,031
5,716
1,167
4,229
1,919
2,465
1,843
171
—
5,621
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $73,045
$59,100
$47,281
Note N Shareholders’ Equity
The Company has reserved 330,000 common shares for issuance in connection with an employee stock
purchase plan and 495,000 common shares for issuance in connection with an employee profit sharing plan.
80
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2006 an aggregate of 116,279 shares and 172,949 shares, respectively, have been issued as a
result of employee participation in these plans.
Holders of common stock are entitled to one vote per share on all matters presented to shareholders as
provided in the Company’s Articles of Incorporation.
Required Regulatory Capital
Minimum for Capital
Adequacy Purpose
Minimum To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousand)
assets) . . . . . . . . . . . . . . . . . . . . . . . .
197,539
8.53
92,619 (cid:2)4.00%
assets) . . . . . . . . . . . . . . . . . . . . . . . .
162,666
7.86
82,803 (cid:2)4.00%
11.70% $145,336 (cid:2)8.00%
72,668 (cid:2)4.00%
10.87
11.76% $116,874 (cid:2)8.00%
58,437 (cid:2)4.00%
11.13
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
SEACOAST BANKING CORP
(CONSOLIDATED)
At December 31, 2006:
Total Capital (to risk-weighted assets) . . $212,578
Tier 1 Capital (to risk-weighted assets) . .
197,539
Tier 1 Capital (to adjusted average
At December 31, 2005:
Total Capital (to risk-weighted assets) . . $171,790
162,666
Tier 1 Capital (to risk-weighted assets) . .
Tier 1 Capital (to adjusted average
SEACOAST NATIONAL BANK
(A WHOLLY OWNED BANK
SUBSIDIARY)
At December 31, 2006:
Total Capital (to risk-weighted assets) . . $220,173
Tier 1 Capital (to risk-weighted assets) . .
205,134
Tier 1 Capital (to adjusted average
12.12% $145,235 (cid:2)8.00% $181,543 (cid:2)10.00%
(cid:2)6.00%
72,617 (cid:2)4.00% 108,926
11.30
assets) . . . . . . . . . . . . . . . . . . . . . . . .
205,134
8.86
92,568 (cid:2)4.00% 115,710
(cid:2)5.00%
At December 31, 2005:
Total Capital (to risk-weighted assets) . . $174,649
Tier 1 Capital (to risk-weighted assets) . .
165,525
Tier 1 Capital (to adjusted average
assets) . . . . . . . . . . . . . . . . . . . . . . . .
165,525
8.01
N/A — Not applicable.
11.98% $116,807 (cid:2)8.00% $146,009 (cid:2)10.00%
(cid:2)6.00%
58,403 (cid:2)4.00% 87,605
11.35
82,772 (cid:2)4.00% 103,465
(cid:2)5.00%
The Company is subject to various regulatory capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s
financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s
assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The
Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
81
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Quantitative measures established by regulation to ensure capital adequacy require the Company to
maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-
weighted assets (as defined) and of Tier 1 capital to average assets (as defined). Management believes, as of
December 31, 2006, that the Company meets all capital adequacy requirements to which it is subject.
The Company is well capitalized under the regulatory framework for prompt corrective action. 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 above. At December 31, 2006, the Company’s deposit-taking bank subsidiary
met the capital and leverage ratio requirements for well capitalized banks. The Company does not anticipate
or foresee any conditions that would reduce these ratios to levels at or below minimum or that would cause its
deposit-taking bank subsidiary to be less than well capitalized.
Note O Seacoast Banking Corporation of Florida (Parent Company Only) Financial Information
Balance Sheets
December 31
2006
2005
(In thousands)
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Securities purchased under agreement to resell with subsidiary bank, maturing within
10
$
10
30 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,502
261,257
254
3,015
196,818
616
$266,023
$200,459
LIABILITIES AND SHAREHOLDERS’ EQUITY
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,000
41,238
360
212,425
6,000
41,238
501
152,720
$266,023
$200,459
82
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Statements of Income
Income
2006
Year Ended December 31
2005
(In thousands)
2004
Dividends
Bank subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest/other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,705
451
$ 8,600
316
$11,920
64
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax benefit and equity in undistributed income of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before equity in undistributed income of subsidiaries. . . . . . . . . . . . .
Equity in undistributed income of subsidiaries. . . . . . . . . . . . . . . . . . . . . . . .
13,156
3,508
580
9,068
1,274
10,342
13,512
8,916
1,063
549
7,304
454
7,758
13,001
11,984
—
463
11,521
140
11,661
3,261
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$23,854
$20,759
$14,922
83
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Statement of Cash Flows
2006
Year Ended December 31
2005
(In thousands)
2004
Cash flows from operating activities
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities
Decrease (increase) in securities purchased under agreement to resell,
maturing within 30 days, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment to dissenting shareholders of Century National Bank . . . . . . . .
Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investment activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities
Proceeds from borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock based employee benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . .
Net change in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
310
(3,492)
12,705
1,706
137
(328)
11,038
$
134
(978)
8,600
177
156
(131)
7,958
$
64
—
11,920
248
—
(655)
11,577
(1,487)
(109)
(5,977)
2,666
—
(49,574)
(7,573)
(46,908)
6,000
—
1,760
(11,225)
(3,465)
—
10
6,000
41,238
1,324
(9,612)
38,950
—
10
(652)
—
—
(652)
—
—
(2,625)
(8,300)
(10,925)
—
10
Cash at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
10
$
10
$
10
RECONCILIATION OF INCOME TO CASH PROVIDED BY
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
$ 23,854
$ 20,759
$ 14,922
activities:
Equity in undistributed income of subsidiaries . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(13,512)
697
(13,001)
200
(3,261)
(84)
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . .
$ 11,039
$ 7,958
$ 11,577
Note P Contingent Liabilities and Commitments with Off-Balance Sheet Risk
The Company and its subsidiaries, because of the nature of their business, 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 Company’s consolidated financial
condition, or operating results or cash flows, although no assurance can be given with respect to the ultimate
outcome of any such claim or litigation.
84
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company’s subsidiary bank is party to financial instruments with off balance sheet risk in the normal
course of business to meet the financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit.
The subsidiary bank’s exposure to credit loss in the event of non-performance by the other party to the
financial instrument for commitments to extend credit and standby letters of credit is represented by the
contract or notional amount of those instruments. The subsidiary bank uses the same credit policies in making
commitments and standby letters of credit as they do for on balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily represent future cash require-
ments. The subsidiary bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the bank upon extension of credit, is based on management’s credit
evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory,
equipment, and commercial and residential real estate. Of the $420,968,000 in commitments to extend credit
outstanding at December 31, 2006, $99,179,000 is secured by 1-4 family residential properties with
approximately $73,112,000 at fixed interest rates ranging from 5.00% to 8.50%.
Standby letters of credit are conditional commitments issued by the subsidiary bank to guarantee the
performance of a customer to a third party. These instruments have fixed termination dates and most end
without being drawn; therefore, they do not represent a significant liquidation risk. Those guarantees are
primarily issued to support public and private borrowing arrangements, including commercial paper, bond
financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan facilities to customers. The subsidiary bank holds collateral supporting these
commitments for which collateral is deemed necessary. The extent of collateral held for secured standby letters
of credit at December 31, 2006 and 2005 amounted to $9,016,000 and $9,146,000 respectively.
December 31
2006
2005
(In thousands)
Contract or Notional Amount
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$420,968
$398,183
Standby letters of credit and financial guarantees written:
Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,176
1,021
6,890
112
85
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note Q Supplemental Disclosures for Consolidated Statements of Cash Flows
Reconciliation of Net Income to Net Cash Provided by Operating Activities for the three years ended:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of premiums and discounts on securities . . . . . . . .
Other amortization and accretion . . . . . . . . . . . . . . . . . . . . . . .
Trading securities activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in loans held for sale, net . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of partnership interest . . . . . . . . . . . . . . . . . . . . . .
Deferred tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on sale on securities . . . . . . . . . . . . . . . . . . . . . . . .
Loss on fair value of interest rate swap . . . . . . . . . . . . . . . . . . .
Gain on sale of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale or write down of foreclosed assets . . . . . . . . . . . .
Loss on disposition of equipment . . . . . . . . . . . . . . . . . . . . . . .
Change in interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006
Year Ended December 31
2005
(In thousands)
$20,759
2004
$ 14,922
$23,854
2,839
(54)
(11)
—
(3,448)
3,285
(1,147)
(1,545)
157
—
(44)
(12)
181
(1,687)
461
(2,311)
654
(1,903)
(368)
2,150
1,405
165
—
(94)
1,317
—
(552)
(128)
267
(36)
—
—
(1,005)
461
(657)
(72)
(1,074)
949
1,863
2,923
418
7,365
3,057
1,000
—
(728)
(44)
701
(35)
(58)
23
(489)
77
320
2
(644)
1,814
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . .
$18,901
$23,855
$ 32,487
Supplemental disclosure of non cash investing activities
Fair value adjustment to securities . . . . . . . . . . . . . . . . . . . . . . . .
Transfers from loans to other real estate owned. . . . . . . . . . . . . . .
Transfers from securities available for sale to held for
investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers from securities available for sale to trading securities . . .
$ 2,242
139
$ (2,532)
—
$
(213)
—
—
—
— 110,474
7,412
—
Note R Fair Value of Financial Instruments
The Company is required to disclose the estimated fair value of its financial instruments. These
disclosures do not attempt to estimate or represent the Company’s fair value as a whole. The disclosure
excludes assets and liabilities that are not financial instruments as well as the significant unrecognized value
associated with core deposits.
Fair value amounts disclosed represent point-in-time estimates that may change in subsequent reporting
periods due to market conditions or other factors. Estimated fair value amounts in theory represent the
amounts at which financial instruments could be exchanged or settled in a current transaction between willing
86
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
parties. In practice, however, this may not be the case due to inherent limitations in the methodologies and
assumptions used to estimate fair value. For example, quoted market prices may not be realized because the
financial instrument may be traded in a market that lacks liquidity; or a fair value derived using a discounted
cash flow approach may not be the amount realized because of the subjectivity involved in selecting the
underlying assumptions, such as projecting cash flows or selecting a discount rate. The fair value amount also
may not be realized because it ignores transaction costs and does not include potential tax effects. The
Company does not plan to dispose of, either through sale or settlement, the majority of its financial
instruments at these estimated fair values.
2006
Carrying
Amount
At December 31
Fair
Value
Carrying
Amount
(In thousands)
2005
Fair
Value
Financial Assets
Cash and cash equivalents. . . . . . . . . . . . $
Securities . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . .
Derivative product assets . . . . . . . . . . . .
92,215
443,941
1,718,196
5,888
19
$
92,215
441,378
1,707,458
6,006
19
$ 220,493
543,024
1,280,989
2,440
50
$ 220,493
540,082
1,274,722
2,489
50
Financial Liabilities
Deposits . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . .
Derivative product liabilities . . . . . . . . . .
1,891,018
232,998
41,238
478
1,889,343
232,998
41,238
478
1,784,219
142,271
41,238
515
1,780,426
142,271
41,238
515
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 December 31:
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
risk inherent in the loan. For residential mortgage loans, fair value is estimated by discounting contractual
cash flows adjusting for prepayment assumptions using discount rates based on secondary market sources.
Loans Available 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 deposits of similar remaining maturities.
87
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 the amount payable on
demand at the reporting date.
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 S Earnings Per Share
Basic earnings per common share were computed by dividing net income by the weighted average
number of shares of common stock outstanding during the year. Diluted earnings per common share were
determined by including assumptions of stock option conversions.
Year Ended December 31
Net Income
Shares
(Dollars in thousands,
except per share data)
Per Share
Amount
2006
Basic Earnings Per Share
Income available to common shareholders . . . . . . . . . . . . . . . . . . . . . .
$23,854
18,305,258
$1.30
Options issued to executives (see Note J) . . . . . . . . . . . . . . . . . . . . . .
366,494
Diluted Earnings Per Share
Income available to common shareholders plus assumed conversions . . .
$23,854
18,671,752
$1.28
2005
Basic Earnings Per Share
Income available to common shareholders . . . . . . . . . . . . . . . . . . . . . .
$20,759
16,361,196
$1.27
Options issued to executives (see Note J) . . . . . . . . . . . . . . . . . . . . . .
388,190
Diluted Earnings Per Share
Income available to common shareholders plus assumed conversions . . .
$20,759
16,749,386
$1.24
2004
Basic Earnings Per Share
Income available to common shareholders . . . . . . . . . . . . . . . . . . . . . .
$14,922
15,335,731
$0.97
Options issued to executives (see Note J) . . . . . . . . . . . . . . . . . . . . . .
409,714
Diluted Earnings Per Share
Income available to common shareholders plus assumed conversions . . .
$14,922
15,745,445
$0.95
88
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE T Accumulated Other Comprehensive Income, Net
Comprehensive income is defined as the change in equity from all transactions other than those with
stockholders, and it includes net income and other comprehensive income. Accumulated other comprehensive
income, net, for each of the years in the three-year period ended December 31, 2006, is presented below.
ACCUMULATED OTHER COMPREHENSIVE INCOME,
NET
Accumulated other comprehensive income, net, December 31,
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized net holding loss on securities . . . . . . . . . . . . . . . . . . .
Net gain on cash flow hedge derivatives . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for realized gains and losses on
Pre-tax
Amount
Income Tax
(Expense)
Benefit
After-tax
Amount
$(4,208)
25
426
1,632
(9)
(165)
(2,576)
16
261
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(225)
80
(145)
Accumulated other comprehensive income, net, December 31,
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized net holding loss on securities . . . . . . . . . . . . . . . . . . .
Net gain on cash flow hedge derivatives . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income, net, December 31,
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized net holding gain on securities . . . . . . . . . . . . . . . . . . .
Net loss on cash flow hedge derivatives . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for realized gains and losses on
(3,982)
(2,244)
32
(6,194)
2,087
(19)
1,538
814
(12)
2,340
(793)
7
(2,444)
(1,430)
20
(3,854)
1,294
(12)
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
336
(119)
217
Accumulated other comprehensive income, net, December 31,
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(3,790)
1,435
(2,355)
89
Notes
Corporate
Directory
2006 Annual Report
I
Seacoast Banking Corporation of Florida Officers
Dennis S. Hudson III
Chairman and Chief
Executive Officer
A. Douglas Gilbert
President and Chief
Operating Officer
C. William Curtis, Jr.
Senior Executive
Vice President
Charles A. Olsson
Senior Vice President
Human Resource Director
Dale M. Hudson
Vice Chairman
Jean Strickland
Senior Executive
Vice President
William R. Hahl
Executive Vice President
and Chief Financial Officer
Richard A. Yanke
Executive Vice President
Chief Information Officer
Sharon Mehl
Corporate Secretary
Left to right:
Dennis S. Hudson III
Jean Strickland
A. Douglas Gilbert
C. William Curtis, Jr.
Seacoast National Bank Executive Management Group
Local Market Presidents
Left to right:
Michael W. Sheffey
President, Orlando Bank
Jasper W. Hart
President, Indian River County
Thomas H. Wilkinson
President, Treasure Coast
Gregory E. Leach
President, Palm Beach County
Thomas G. Jones
President, St. Lucie County
Joseph Mullins
President, Big Lake Bank
II
Seacoast Banking Corporation of Florida
Seacoast National Bank Executive Management Group
Line of Business Managers
Left to right:
Lang B. Ryder
Senior Vice President,
Seacoast Marine Finance
Thomas L. Hall
Executive Vice President,
Retail Banking and
Consumer Lending
Harry (Russ) Holland
Executive Vice President,
Commercial Lending
Leonard J. Hoag
President, FNB Brokerage
Services, Inc, FNB Insurance
Services and Executive Vice
President, Wealth Management
Seacoast National Bank Executive Management Group
Support Areas
Left to right:
Susan Bergstrom
Senior Vice President,
Marketing Services
Richard A. Yanke
Executive Vice President,
Chief Information Officer
Kathleen M. Cavicchioli
Senior Vice President,
Retail Operations Support,
Cash Management &
Merchant Services
Left to right:
William R. Hahl
Executive Vice President
and Chief Financial
Officer
Teresa Idzior
Senior Vice President,
Credit Administration
and CRA Officer
Charles A. Olsson
Senior Vice President,
Human Resources
John R. Turgeon
Senior Vice President,
Director of Finance
2006 Annual Report
III
Seacoast National Bank Officers
Dennis S. Hudson III
Chairman and Chief
Executive Officer
Jasper W. Hart
President, Indian River
County
A. Douglas Gilbert
Vice Chairman and Chief
Credit Officer
Jean Strickland
President and Chief
Operating Officer
C. William Curtis, Jr.
Senior Executive Vice
President and Chief
Banking Officer &
Chairman, Indian River
County
Leonard J. Hoag
President, FNB Brokerage
Services, Inc, FNB
Insurance Services and
Executive Vice President,
Wealth Management
Harry (Russ) Holland
Executive Vice President,
Commercial Lending
Teresa Idzior
Senior Vice President,
Credit Administration
and CRA Officer
William R. Hahl
Executive Vice President
and Chief Financial Officer
Thomas G. Jones
President, St. Lucie County
Senior Officers
David Balongue
Senior Vice President,
Commercial Banking,
Martin County
Sidney Cash
Executive Vice President
and Senior Business
Development Officer,
Orlando Bank
David Dotherow
Executive Vice President
and Senior Loan Officer,
Orlando Bank
Michael C. Nowlin
Senior Vice President, Trust
Administration
Richard R. O’Brien
Senior Vice President and
Senior Commercial Loan
Officer, Orlando Bank
David Osgood
Senior Vice President,
Wealth Management
Director
Lang B. Ryder
Senior Vice President,
Seacoast Marine Finance
Joseph L. Dousi
Senior Vice President,
Commercial Banking,
St. Lucie County
Robert D. Thompson
Senior Vice President and
Senior Commercial Loan
Officer, Big Lake Bank
Susan Bergstrom
Senior Vice President,
Marketing Services
Gregory E. Leach
President, Palm Beach
County
Maria Frias
Senior Vice President,
Compliance & Auditing
John R. Turgeon
Senior Vice President,
Director of Finance
Kathleen M. Cavicchioli
Senior Vice President,
Retail Operations Support,
Cash Management &
Merchant Services
Thomas L. Hall
Executive Vice President,
Retail Banking and
Consumer Lending
Joseph Mullins
President, Big Lake Bank
Charles A. Olsson
Senior Vice President,
Human Resources
Michael W. Sheffey
President, Orlando Bank
Jon Geitner
Senior Vice President and
Regional Retail Manager,
Big Lake Bank
Jeffrey Jenkins
Senior Vice President,
Finance and Operations,
Orlando Bank
Susan L. Johnson
Senior Vice President,
Commercial Banking,
Martin County
Thomas H. Wilkinson
President, Treasure Coast
Richard A. Yanke
Executive Vice President
and Chief Information
Officer
Jenny Yingling
Senior Vice President,
Mortgage Banking
Nominating/Governance Committee
Jeffrey S. Furst
Chairman
Stephen E. Bohner
Thomas E. Rossin
John R. Santarsiero, Jr.
Salary/Benefits Committee
Thomas E. Rossin
Chairman
Audit Committee
Christopher E. Fogal
Chairman
Stephen E. Bohner
John R. Santarsiero, Jr.
Edwin E. Walpole, III
John H. Crane
T. Michael Crook
Jeffrey S. Furst
IV
Seacoast Banking Corporation of Florida
Seacoast Banking Corporation of Florida Board of Directors
Thomas H. Thurlow, Jr., Dennis S. Hudson, Jr.,
A. Douglas Gilbert
Marian B. Monroe, Jeffrey C. Bruner,
Dennis S. Hudson, III
Steve E. Bohner, Dale M. Hudson,
H. Gilbert Culbreth, Jr.
Christopher E. Fogal, Jeffrey S. Furst,
T. Michael Crook, John H. Crane
Dennis S. Hudson, III
Chairman and Chief
Executive Officer, Seacoast
Banking Corporation
of Florida and Seacoast
National Bank
Dale M. Hudson
Vice Chairman, Seacoast
Banking Corporation of
Florida
Dennis S. Hudson, Jr.
Retired Chairman of the
Board, Seacoast Banking
Corporation of Florida
A. Douglas Gilbert
President and Chief
Operating Officer, Seacoast
Banking Corporation of
Florida and Vice Chairman
and Chief Credit Officer,
Seacoast National Bank
Jean Strickland
Senior Executive Vice
President, Seacoast Banking
Corporation of Florida
and President and Chief
Operating Officer, Seacoast
National Bank; serves on the
board of the bank only
Stephen E. Bohner
Premier Realty Group
Jeffrey C. Bruner
Self-employed Real
Estate Investor
John H. Crane
Retired, C&W Fish
T. Michael Crook
Proctor, Crook & Crowder,
Certified Public Accountants
H. Gilbert Culbreth, Jr.
Gilbert Chevrolet; serves on
the board of the bank only
Christopher E. Fogal
Fogal and Associates,
Certified Public Accountants
Jeffrey S. Furst
Property Appraiser,
St. Lucie County
Marian B. Monroe
Past President and Member
of the Board, Martin
Memorial Hospital; serves on
the board of the bank only
Thomas E. Rossin
Attorney at Law
John R. Santarsiero, Jr.
President, CEO and Director,
Suncepts, Inc.
Thomas H. Thurlow, Jr.
Retired, Thurlow & Thurlow,
P.A., a law firm
Edwin E. Walpole, III
Walpole, Inc.
Directors Emeritus
Evans Crary, Jr.
Archie A. Hendry III
Frederick P. Stein
Thank you to Evans Crary, Jr.
for your commitment to Seacoast
Evans Crary, Jr. retired from the Board of Directors in
June 2006. His service to the bank can be counted back
46 years when he began serving on the bank’s Board of
Directors in 1960. He served on the Board of Seacoast
Banking Corporation of Florida since its inception in
1983. Mr. Crary is a retired partner of Crary, Buchanan,
Bowdish, Bovie, Beres, Elder & Thomas, Chartered
(Crary-Buchanan), a law firm located in Stuart, Florida.
Crary practiced law in Stuart, Florida since 1952.
Edwin E. Walpole, III, John R. Santarsiero, Jr.,
Jean Strickland, Thomas E. Rossin
2006 Annual Report
V
Community Boards of Directors
Big Lake Bank
Martin County
John W. Abney, Sr.
Abney & Abney
Construction, Inc.
Don Anderson
Don Anderson
Construction
John B. Boy, Jr.
Boy, Miller, Kisker,
& Perry, P.A.
Mary Beth Cooper
Homemaker
Curtis S. Fry
Retired
Randall A. Jones
T.S. Marketing, Inc.
Ted Astolfi
Business Development
Board of Martin County
Jack Daner,
Director Emeritus
Retired, Co Bon Plastic
Corp.
Robert C. Johnson
RV Johnson Insurance
Agency
Bobby H. Tucker
The Tucker Group
Sue Kinane
Kinane Corporation
Robert L. Lord, Jr.
Martin Memorial Health
Systems, Inc.
James C. Morgan
Treasure Coast Commercial
Real Estate, Inc.
David Satur
Commercial Property
Manager/Developer/Real
Estate Broker
Indian River County
Jim Beckley
Rivergold Citrus
Kathy Burke
Sebastian River
Medical Center
Ross Cotherman, CPA
Harris & Cotherman
Tony Donadio
Donadio & Associates,
Architects
Daniel G. Downey, Jr.
Marquette Lumber
John J. Jennings
Chairman and Chief
Executive Officer, Waste
Pro USA, Inc.
Dennis S. Hudson III
Chairman and Chief
Executive Officer, Seacoast
Banking Corporation of
Florida
John W. McCutechen, MD
President and Chief
Executive Officer, Jewett
Orthopaedic Clinic, P.A.
Stanley T. Pietkiewicz
President, Titan Properties
Bert E. Roper
President, Roper
Growers, Inc.
Michael W. Sheffey
President, Orlando Bank
Jean Strickland
Senior Executive Vice
President, Seacoast
Banking Corporation
of Florida
Mark Klaine
Business Real Estate, Inc.
Rubye Mate
Philanthropist
William J. Romanos, Jr.,
M.D., P.A.
Psychiatrist
Wayne Sanders, CPA
Proctor, Crook & Crowder
CPA’s
Marc S. Seagrave,
Florida Public Utilities
Company
St. Lucie County
John Auld
SLC Commercial, Inc.
Sam Beller
Retired President of St.
Lucie County for Seacoast
National Bank
Michelle Lee Berger
Councilwoman, District II,
City of Port St. Lucie
Palm Beach County
John Donahue
P.E., LBFH, Inc.
Karl Thomas
Riverwatch Boat Sales
Dr. Stephen W. Bradford
Orthodontist
William Wade
NuCo2
Robert L. Crane, Esq.
Boose, Casey, Ciklin,
Lubitz, Martens,
McBane & O’Connell, P.A.
Christine English
Custom Air Systems, Inc.
Rudy Howard
R.V. Howard & Associates,
Inc.
Bob McNally
Palm Coast Development
Orlando Bank
Merry Parent
Parent Construction, Inc.
Jane Schwiering
Norris & Company
Real Estate
Willliam H. Sullivan
Retired Partner,
DeCordova, Cooper & Co.
Douglas C. Foreman
Chief Executive Officer,
Fringe Benefit Plans, Inc.
Stephen F. Foreman
President, Fringe Benefit
Plans, Inc.
A. Douglas Gilbert
President and Chief
Operating Officer, Seacoast
Banking Corporation of
Florida
Robert Friedman, AIA
Consultant to Florida
Atlantic University
Gerri McPherson
Florida Atlantic University,
Treasure Coast campus
George Gentile, FASLA
Gentile, Holloway,
O’Mahoney & Associates, Inc.
R. Duke Nelson
Ft. Pierce City
Commissioner
James Helm
Sundown Development &
Realty, Inc.
Steven Talerico
Hanover Homes, Inc.
VI
Seacoast Banking Corporation of Florida
Investor
Information
Form 10-K
The Seacoast Banking Corporation of Florida’s Annual Report to the Securities and
Exchange Commission on Form 10-K is available at the headquarters upon request and at
www.seacoastbanking.net under Financials/Regulatory filings. Requests may be directed to:
William R. Hahl
P.O. Box 9012
Stuart, FL 34995-9012
772-221-2825
Transfer Agent
Continental Stock Transfer and Trust Co.
17 Battery Place, 8th Floor
New York, NY 10004
800-509-5586
Independent Auditors
KPMG LLP
Stock Listing
The Common Stock of Seacoast Banking Corporation of Florida is traded on The NASDAQ Global
Select MarketSM under the symbol SBCF. The abbreviation in most newspaper stock listings is
“SeacBK” or “Seacst BKFL.”
Internet
www.seacoastbanking.net
e-mail: information@seacoastbanking.net
Information
For further information on Seacoast Banking Corporation of Florida, contact:
Dennis S. Hudson III, CEO, at 772-288-6085 or
William R. Hahl, CFO, at 772-221-2825.
As a service to our shareholders and prospective investors,
copies of the company’s recent news releases can be transmitted
at no charge via fax by calling “Company News On Call” at
800-758-5804, extension 105663.
Designed by DHI Advertising and Design, Vero Beach, Florida.
2006 Annual Report
VII
Seacoast Banking Cor po ration of Flo r ida
U.S. 1 and Colorado Avenue
P.O. Box 9012
Stuart, Florida 34995-9012