L o o k i n g F o r w a r d
S e a c o a s t B a n k i n g C o r p o r a t i o n o f F l o r i d a 2 0 0 7 A n n u a l R e p o r t
S e a c o a s t B a n k i n g C o r p o r a t i o n o f F l o r i d a 2 0 0 7 A n n u a l R e p o r t
M a r k e t O v e r v i e w
Seacoast Banking Corporation of Florida’s subsidiary bank
was originally chartered in 1926, and in the 80 years since,
has grown along Florida’s southeast coastal region, becoming
the second largest publicly traded bank holding company
headquartered in Florida. Seacoast’s market area is bounded
by Orlando in north central Florida, Viera on the Space Coast,
Palm Beach and Ft. Lauderdale to the south and the Big Lake
Region in south central Florida. In recent years, Seacoast
expanded into new markets through de novo growth and
successfully completed two bank integrations in 2006,
bringing its total branch locations to 43 in some of Florida’s
wealthiest counties.
Our markets have experienced signifi cant growth over the
past decade. This growth is expected to be aided in the coming
years by the country’s aging baby boomer population which
will reach retirement age. Moreover, our Florida markets
will also benefi t from the entry of several biomedical fi rms
recruited by the State of Florida to position Florida as a
biotechnology hub. The community of Tradition in St. Lucie
County is the site for the Torrey Pines Institute for Molecular
Studies facility. The Scripps Research Institute, the world’s
largest, private non-profi t biomedical research facility, expanded
to Palm Beach County with Scripps Florida, and the Burnham
Institute and University of Central Florida College of Medicine
broke ground in October 2007 at the Lake Nona Science and
Technology Park in Orlando. In addition to world class research
and educational outreach, these biomedical research institutions
provide potential for additional spin-off companies that will
spur economic growth, establish thriving life science clusters
and ultimately redefi ne our region.
Financial Hi ghli ghts
L et t e r to S h a r e h o l d e r s
Economic O verview
Financial Section
Corp orate D irectory
2
3
5
8
I
Communit y Board
I I
Investor Information
II I
F i n a n c i a l H i g h l i g h t s
(Dollars in thousands, except per share data)
2007
2006
2005
2004
2003
FOR THE YEAR
Net interest income
Provision for loan losses
Noninterest income:
$84,469
12,745
$89,040
3,285
$72,185
1,317
$52,774
1,000
Securities restructuring losses
(5,118)
$44,165
0
0
(1,172)
20,987
42,463
21,427
7,411
14,016
22,781
0.89
0.91
0.46
6.71
70
24,910
77,423
14,163
4,398
9,765
32,189
0.51
0.52
0.64
11.22
124.80%
0
(157)
24,260
73,045
36,813
12,959
23,854
39,168
1.28
1.30
0.61
11.20
47.10%
0
128
20,517
59,100
32,413
11,654
20,759
33,624
1.24
1.27
0.58
8.94
0
44
18,462
47,281
22,999
8,077
14,922
23,941
0.95
0.97
0.54
7.00
46.30%
55.60%
50.60%
$2,419,874
$2,389,435
$2,132,174
$1,615,876
$1,353,823
300,729
1,876,487
1,987,333
214,381
443,941
1,718,196
1,891,018
212,425
543,024
1,280,989
1,784,219
152,720
588,017
892,949
1,372,466
108,212
560,829
702,632
1,129,642
104,084
0.42%
1.03%
1.07%
1.05%
1.07%
4.46
3.92
9.41
12.06
4.15
8.55
14.95
3.97
7.17
13.75
3.89
7.63
13.73
3.57
7.82
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
Shareholders’ equity
Performance ratios:
Return on average assets
Return on average equity
Net interest margin2
Average equity to average assets
1. Income before taxes excluding the provision for loan losses, securities restructuring 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.
2 0 0 7 A n n u a l R e p o r t
2
L e t t e r To S h a r e h o l d e r s
$2000
$1500
$1000
$500
392
473
328
271
345
244
1,388
1,255
173
1,138
120
907
233
106
790
2003 2004 2005 2006 2007
Core Interest
Bearing
Deposits
Time
>$100K
DDA
TOTAL DEPOSITS
$ in millions
$2100
$1800
$1500
$1200
$900
$600
2003 2004 2005 2006 2007
TOTAL LOANS
$ in millions
The year 2007 brought together a host of dramatic and challenging
market conditions for fi nancial companies of all shapes and sizes.
As the year ended, it was clear that the national economy and most
signifi cantly, the consumer, had begun to feel the effects of both a
remarkable slowdown of activity in residential markets and
unprecedented disruptions in debt markets.
Beginning in the second half of 2006 it was clear to us that robust
residential home building activity in South Florida had peaked
and was likely to slow. As a result, we increased the frequency and
intensity of our ongoing credit monitoring activities with particular
focus on commercial borrowers likely to be impacted by the changing
market conditions. Frequent communication with borrowers and
a close monitoring of conditions in each Seacoast market helped
to promote honest assessments of evolving credit risk in our
portfolios, as well as timely development of strategies designed
to either improve borrower performance or move credits more
quickly to liquidation. Seacoast was among the fi rst banks to
recognize increasing credit risk with reserve building beginning in
the fi nal quarter of 2006. We continued to build our allowance for
loan losses during 2007 and this, along with higher levels of non-
performing assets, reduced earnings for the year to $ 9.8 million.
Although disappointed with our overall results, we are pleased
to have remained profi table and confi dent that our strong capital
position and limited exposure to distressed market sectors will
provide unique opportunities for growth in 2008 and beyond.
We are proud of a number of accomplishments in 2007. For many
years, Seacoast has enjoyed a strong and diverse core deposit base
that has been built through our relationship focused growth strategy.
Wholesale funding to leverage loan and balance sheet growth has
never had a place in our strategic plan. As a result, our funding
costs have consistently remained among the best in the industry,
our market share remains unparalleled among community banks in
Florida, and our deposit franchise contributes signifi cantly to our
profi tability. This past year we brought renewed focus to retail and
small business deposit growth and refocused our existing branch
2 0 0 7 A n n u a l R e p o r t
3
The manager of the Capital Markets Group realigned
responsibilities to help coach and mentor commercial
lenders in the structuring of new commercial loans, and
a new senior management panel was established to help
strengthen the screening process of prospective new
loans. All of these functions enhance the depth and
reliability of commercial underwriting, strengthen
controls and enhance our overall credit quality as we
work through a diffi cult economic environment and look
forward to renewed growth.
This past year proved to be a challenging one for Florida
and for Seacoast, and we thank all Seacoast associates
for their dedication and hard work. We were among
the fi rst to respond aggressively to the challenges of
the last 18 months with an overriding goal to promptly
and effectively face marketplace realities head on, and
bring about improvements in performance as quickly as
possible. A challenging environment will likely continue
in the coming year as markets begin to stabilize, and
with continued hard work, discipline and consistency
Seacoast will be among the fi rst to report improvement.
network to bring greater exposure to newer growth areas,
while consolidating other mature offi ces.
In the second quarter of 2007, Seacoast added a Capital
Markets Group to serve customer fi nancing needs generally
greater than $15 million. The Group has the ability to
originate larger loans and then sell interests to other
fi nancial institutions. Conversely, they may purchase
interests in loans from other institutions. This creative
approach allows Seacoast to originate loans it might not
otherwise fund internally. It also serves to help manage
both credit risk and loan concentration by spreading
the risk. In its fi rst partial year of operation, the Capital
Markets Group originated $140 million in new loans.
To round out our menu of commercial loan products,
Seacoast also introduced Seacoast Solutions to serve the
lending and depository needs of small business customers
in our communities. Seacoast Solutions serves borrowing
needs up to $1.5 million through a streamlined process
resulting in an accelerated decision time. Launched in
April 2007 in St. Lucie County, and expanded to include
Martin and Indian River counties, this new business unit
will expand into all Seacoast markets in 2008.
With the growth in our menu of loan services comes the
need for enhanced credit administration, and that too
was a major Seacoast initiative in 2007. Loan servicing,
closing and funding managers have been added, all of
whom helped to strengthen the credit culture at Seacoast
through more oversight and management of our loan
portfolio. Additionally, a real estate economist now
supports many bank and real estate functions with timely
economic analyses, reporting and forecasting as well as
real estate risk and valuation guidance. Our commercial
underwriting function was realigned with senior
underwriters assigned to all major Seacoast markets.
Dennis S. Hudson III
Chairman & Chief Executive Offi cer
A. Douglas Gilbert
President & Chief Operating Offi cer
2 0 0 7 A n n u a l R e p o r t
4
E c o n o m i c & R e a l E s t a t e O v e r v i e w
It was a year of widespread economic challenges for
banks nationwide and Seacoast was not immune. It was
the second year of the residential real estate downturn
and the effects began spilling into the broader economy
in the form of slower economic growth, slower spending
growth and waning consumer confi dence. The downward
trend accelerated during the summer when the sub-prime
mortgage market collapsed. Moreover, the impairment in
the residential sector began to be felt in the commercial
real estate sector as vacancy rates climbed modestly, rents
stabilized and leasing activity slowed.
Seacoast made a conscious decision not to compete in
what was fast becoming an irrationally exuberant market
and did not engage in sub-prime lending or exotic mortgage
loan products, which were untested in times of economic
stress. Seacoast sold traditional loan products, limited
investor loans and maintained prudent underwriting
standards. By sticking to what we do best, we also
avoided the high number of foreclosures and resultant
loan losses so many other residential mortgage banking
entities experienced. Mortgage loan production was
modest in 2007 with $135 million in new loans.
Seacoast also focused on enhancing its mortgage banking
operation from people to policies, systems and product
types. Policies and procedures were upgraded, and the
company will soon originate FHA and VA loans.
Technology will be enhanced with a new loan origination
system in 2008. These improvements will allow us to
operate faster and more effi ciently, serve a broader market
and to be more competitive when the market returns to
growth mode.
Helping Affordable Housing
On the Treasure Coast, Seacoast was assigned to administer
and manage more than $1.25 million in funds for two
non-profi t housing programs. Habitat for Humanity in
Martin County received $255,000 in 2006 to build 34
single-family homes in the Booker Park neighborhood
of Indiantown. In addition to the grant monies, Seacoast
National Bank contributed another $15,000 to the
Build Homeownership Together, an initiative to build
58 homes in the same neighborhood. Further, Seacoast
administered a $500,000 Affordable Housing Program
grant to build 52 Habitat for Humanity homes.
Seacoast was assigned another $500,000 Affordable
Housing Program grant for Indiantown Non-Profi t
Housing, Inc. from the FHL Bank Atlanta. The
organization will use the grant to provide 125 low-income
families with emergency home repairs and to mitigate
future storm damage. Affordable housing is, and will
remain a diffi cult challenge for our region, and we are
pleased to take a leadership role in helping low and
moderate income residents achieve home ownership.
Building Retail Momentum
Since its original charter in 1926, Seacoast National
Bank has been committed to serving the residents and
businesses in our markets. We strive to offer fi nancial
services to meet our customers’ evolving needs, and as
technology has emerged, we have continued with our
“bricks and clicks” strategy of offering technology-based
fi nancial services combined with a convenient branch
network and professional employees who provide high
quality customer service and local market decisions.
The unprecedented growth we have experienced in our
markets, combined with the rapid advances in technology
have impacted how customers transact business and
Seacoast continues to respond to these evolving dynamics.
2 0 0 7 A n n u a l R e p o r t
5
Our mergers with Big Lake National Bank in south
central Florida and Century National Bank in Orlando
added eleven branches to our retail network, creating
even greater convenience for our mobile workforce and
travelers in the state. In February 2007 we expanded
north into Brevard County, opening our fi rst full service
branch in Viera, with a second one slated to open by mid
2008. We also branched south into Broward County,
opening a commercial loan production offi ce in Boca
Raton, and later opened our fi rst full service branch in
Ft. Lauderdale, bringing our total branch network to
43 locations in 14 Florida counties.
In addition to our expansion into contiguous markets,
Seacoast identifi ed changes to better serve our customers
on the Treasure Coast. With the growing population
in St. Lucie County, we will open a branch in the fi rst
quarter of 2008 near the Tradition community. We will
also move our storefront location at Rivergate Plaza in
Port St. Lucie to a free standing building with greater
visibility, offering our customers easier access and egress.
In light of these planned expansions of steadily growing
branches, and the close proximity of other Seacoast
branches, our Port St. Lucie Wal-Mart location closed
on December 31, 2007 with easy access to six other
locations in St. Lucie County as well as our Jensen
West location just one half mile south.
Our Fort Pierce Wal-Mart in-store location closed in
February 2008 in anticipation of the relocation of our
Delaware Avenue branch in Fort Pierce to a more
convenient location on US 1 with much higher visibility
and easier access.
Unlike our neighbors to the north and south, Martin
County has continued with more controlled growth.
Today, we have eleven branch locations serving Martin
County. Our high volume Wedgewood offi ce in Stuart
will relocate to a new facility just south of its current
location in 2008, providing greater convenience, access
and egress for our customers. Our Mariner Square
branch, just one mile south of our Cove Road offi ce,
will close in March 2008.
Seacoast expanded south into Palm Beach County with
the opening of a loan production offi ce in 2002, followed
by the Tequesta office in 2003. As we continued to
expand our footprint into northern Palm Beach County,
Seacoast sought additional branch locations, some
considered temporary. We found a location immediately
available in Juno Beach to service clients along the eastern
corridor between Tequesta and Lake Park. With the
completion of our Palm Beach County headquarters
on PGA Boulevard just two miles away, the Juno Beach
offi ce will close in March 2008. We will continue to look
for additional locations to service businesses and residents
in Palm Beach in the future.
Continuing our strategy of bringing the latest technology-
based services to our customers, Seacoast began offering
remote deposit capture to our business clients in December
2007. This provides the convenience to image-capture
check payments at a business location and electronically
deliver the images over a secure internet connection
to Seacoast for deposit into a business checking account
without leaving the offi ce. In addition, image capture was
implemented throughout Seacoast’s retail network in
2007. Image Capture enables checks to be deposited
electronically at the branch instead of being transported
to a central processing area. This technology enabled
Seacoast to dramatically reduce its courier expense,
extend banking hours in the Big Lake market and
streamline backroom processing.
2 0 0 7 A n n u a l R e p o r t
6
than 90% of our calling offi cers have professional
certifi cations or designations including Certifi ed
Financial Planner (CFP) and Certifi ed Trust Financial
Advisor (CTFA).
We are committing the resources to leverage our competitive
advantages and to position Seacoast as the premier provider
of banking and wealth management services.
Seacoast will remain guided by our mission to be the
premier fi nancial services provider in our markets, and
committed to our value statement of taking personal
responsibility for service, relationships and profi tability.
We entered contiguous new markets and bolstered our
position in existing markets with new talent which is
now showing promising results. We worked toward
consolidating our fi nancial services and pricing across
markets, resulting in a simplifi ed sales process for our
associates and our customers. Finally, Seacoast embarked
on a very focused initiative to identify, communicate
and execute a clearly defi ned value proposition. These
initiatives, combined with other sales strategies, will be
key in building our strong retail franchise and positioning
Seacoast as the premier fi nancial services institution in
our markets.
Wealth Management
An unprecedented opportunity exists in our markets
today to gain signifi cant market share of the wealth
management business and create additional revenues for
the company. The Seacoast wealth management team
provides high net worth clients with fi nancial planning,
private banking, brokerage and fi duciary services through
a single point of contact and access to a team of specialists.
Our client-centered culture allows us to provide the highest
level of service, and to tailor solutions that are aligned with
our clients’ fi nancial goals and visions for the future.
We are relationship focused - not product focused. Since
Seacoast has no proprietary products, our advisors are
able to provide objective advice, guidance and solutions.
Consistent with Seacoast’s local market strategy, our
clients have local access to their wealth management
representatives.
The stability and longevity of our wealth management
professionals are impressive, with an average of twenty
years in the industry and nine years at Seacoast. More
2 0 0 7 A n n u a l R e p o r t
7
FINANCIAL SECTION
CONTENTS
Management’s Discussion & Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
34
49
51
8
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 Broward County and north to Brevard County) as well as Florida’s interior around Lake
Okeechobee and up to and including Orlando. The Company has 43 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. De novo branches were opened in Palm
Beach County in May 2006, Brevard County in February, 2007 and Broward County in October, 2007. The
Company closed its Port St. Lucie WalMart location on December 31, 2007.
The Company plans to open five new branches over the next year, and will close offices in another
WalMart location (in St. Lucie County) in early 2008 as well as five other branch locations (in Martin, St.
Lucie and Palm Beach County), several of which are adjacent to the new branches and will close
simultaneously with their openings prospectively. 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
The Company operates both a full retail banking strategy in its core markets which are some of Florida’s
fastest growing and wealthiest, as well as, a complete commercial banking strategy. The markets are comprised
of Martin, St. Lucie and Indian River counties located on Florida’s southeast coast and contain 26 of the 43
retail branch locations including 3 private banking centers. Because of the significant branch coverage in these
markets, the Company ranks number 2 in deposit market share. The Company’s deposit mix is very favorable
with over 70 percent of deposit balances comprised of NOW, savings, money market and noninterest bearing
transaction customer accounts. Therefore, the cost of deposits averaged 2.90 percent for 2007 which ranks
among the lowest when compared to the Company’s peer group similar asset size. As part of the Company’s
complete retail product and service offerings, customers are provided wealth management services through its
full service broker dealer and trust wealth management divisions.
Over the past five years the Company has improved its revenues by expanding its commercial/commercial
real estate and consumer lending capabilities. This has included de novo market expansion into Palm Beach,
Broward and Brevard Counties with added loan officers, loan production offices and retail branches. The
Company continues to explore acquisitions and de novo expansion into other markets to further enhance its
loan production capabilities and increase its revenues
The added lending capabilities resulted in the largest commercial and commercial real estate production
in the Company’s history in 2007, 2006 and 2005. A total of $445 million was originated in 2007, compared
to $443 million in 2006 and $465 million in 2005. In 2007 the Company closed $135 million in residential
loans, lower than the $172 million and $195 million in closed production in 2006 and 2005. The slower
residential real estate market and uncertain economic conditions dampened residential sales and as a result
residential loan production. However, with better market penetration, expanded coverage and the expectation
of lower interest rates, the Company seeks improved residential loan production in 2008.
9
The net interest margin improved from 3.57 percent in 2003 to 4.15 percent in 2006, but declined to
3.92 percent in 2007. An inverted interest rate curve early in 2007 and disintermediation resulted in a less
favorable deposit mix, along with higher average nonaccrual loan balances in the last six months of 2007,
resulted in lower net interest margin. The net interest margin for the fourth quarter of 2007 was 3.71 percent
and it is likely to remain under pressure until economic conditions stabilize and nonaccrual loans are resolved.
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, we
believe it provides high value customer relationships and a much lower overall cost of funds when compared
to peers. The net interest margin improved from 3.57 percent in 2003 to 4.15 percent in 2006, but declined to
3.92 percent in 2007. An inverted interest rate curve early in 2007 and disintermediation resulted in a less
favorable deposit mix, along with higher average nonaccrual loan balances in the last six months of 2007,
resulted in lower net interest margin. The net interest margin for the fourth quarter of 2007 was 3.71 percent
and it is likely to remain under pressure until economic conditions stabilize and nonaccrual loans are resolved.
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. During late 2006 and 2007, the
economic environment in Florida began to weaken so the Company increased its focus and monitoring of the
Company’s exposure to residential land, acquisition and development loans. These increased activities have
resulted in greater loan pay-downs, guarantor performance, and the obtaining of additional collateral. We
believe these practices have helped and will continue to help us manage our risks resulting from economic and
real estate conditions in our markets.
During 2005 and 2006 loan portfolio growth totaled 43.4 percent and 34.4 percent, respectively. For
2007, loan growth totaled 9.5 percent, in line with expectations for 8 to 10 percent growth for the year. Higher
mortgage rates and a slow down in new and existing home sales in the Company’s markets have reduced
demand for residential mortgages and construction lending for new homes in 2007 and is expected to remain
soft into 2008. Anticipated pay-downs in 2008 are likely to further limit loan growth. However, over the long
term, the Company’s expansion into Palm Beach, Brevard, and Broward Counties, and acquisitions in 2005
and 2006 will positively contribute to overall loan growth and the Company’s lending capacity. Total loans
outstanding in these new markets totaled $346 million, $38 million, $65 million, $168 million and $188 mil-
lion, respectively, at December 31, 2007.
Deposit Growth, Mix and Costs
While the Company benefited in 2005 from low interest rates and increases in low cost and no cost
deposits, this trend reversed in 2006 and 2007. The Federal Reserve decreased interest rates 50 basis points in
September 2007 for the first time since increasing rates 425 basis points beginning in June 2004, with the last
50 basis point increases occurring during the first and second quarter of 2006. As a result, the Company
experienced disintermediation (customers desiring higher cost certificates of deposit) during 2006 and 2007. In
addition, a deteriorating residential real estate market translated to lower escrow deposits held by title
companies, attorneys, etc. over the last two years, and remaining FEMA and insurance related deposits from
the 2004-05 hurricanes were mostly disbursed in 2006. The Company is confident of its continued emphasis
on its brand of banking with high quality customer service and convenient branch locations that will provide
stable low cost deposit funding growth over the long term. Prospectively, the Company plans to build its retail
deposit franchise using new strategies and product offerings while maintaining its focus on building customer
10
relationships. More of management’s time and efforts will be devoted to this effort ranking as the second
highest priority to problem loan resolutions. 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 two years, noninterest bearing demand deposits decreased 16.4 percent and 17.2 percent,
respectively, and low cost NOW, savings and money market deposits increased 13.6 percent and 5.4 percent,
respectively while interest rates increased during 2006 and remained higher during much of 2007, 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 2007 increased 74 basis points over
the prior year to 2.88 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 Palm Beach County and
Broward County where noninterest bearing deposits and low cost interest bearing deposits represent 21.5 per-
cent and 53.3 percent of total deposits and 28.3 percent and 56.4 percent of total deposits, respectively, in
those markets at December 31, 2007.
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 2007 and 2006, the Company collected approximately 23 percent and 21 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 U.S. 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:
• the allowance and the provision for loan losses;
• the fair value of securities;
• goodwill impairment; and
• 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 continually analyzing and
monitoring delinquencies, nonperforming loans and the level of outstanding balances for each loan category,
11
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 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”.)
Loan growth over the past year totaled approximately 9.5 percent. While loan growth is expected to be
slower in 2008, the Company’s loan loss provisioning may increase as problem loans related to the slow
residential real estate market negatively impacts borrowers and valuations. The last time the Company
experienced higher 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.
Nonperforming assets increased in the third and fourth quarter of 2007 as several loans to developers of
residential real estate projects experienced cash flow difficulties and were placed on nonaccrual status (see
“Note F — Impaired Loans and Allowance for Loan Losses” and “Nonperforming Assets”). Between June 30,
2007 and December 31, 2007, nonaccrual loans increased $52.5 million to $67.8 million. The Company’s land
and acquisition and development loans related to the residential market totals approximately $295 million or
15.7 percent of total loans at December 31, 2007. All of these lending relationships have been monitored on a
monthly basis for the last year and half. More recently, the value of the underlying real estate has been
currently evaluated using a discounted cash flow approach using estimated holding periods and prospective
future sales values discounted at rates we believe are appropriate.
These collateral evaluations (including the potential effects of existing sales contract cancellations) in
response to the changes in the market values for residential real estate resulted in the establishment of
valuation allowances and increases in provision for loan losses of $8,375,000 and $3,813,000 in the third and
fourth quarter of 2007, respectively. A total provision of $12,745,000 was recorded for the year in 2007. In
comparison, 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 an acquisition. A $1,317,000
provision was recorded during 2005, when loans increased $390 million or 43 percent (including $107 million
in loans from an acquisition). Net charge-offs totaled $5,758,000 or 0.31 percent of average loans in 2007,
compared to net recoveries of $(106,000) or (0.01) percent of average loans for 2006 and net charge-offs of
$134,000 or 0.01 percent of average loans for 2005. Net charge-offs were nominal in prior years at $562,000
or 0.07 percent of average loans for 2004, $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.
A historically favorable credit loss experience limited the need to provide large additions to the allowance
for loan losses in 2006 and 2005. However, during the fourth quarter of 2006 provisioning was increased to
$2,250,000. During the fourth quarter of 2006, 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 resulted in increased loan loss provisioning during the
fourth quarter of 2006 and for the year.
Table 12 provides certain information concerning the Company’s allowance for loan losses for the years
indicated.
The allowance for loan losses totaled $21,902,000 at December 31, 2007, $6,987,000 greater than one
year earlier. At December 31, 2006, the allowance for loan losses totaled $14,915,000. 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 estimated values of loan collateral. Commercial
12
and commercial real estate loans are assigned internal risk ratings reflecting our estimate of the probability of
the borrower defaulting on any obligation and the estimated probable loss in the event of default. Retail credit
risk is 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 increased from 0.70 percent to 0.86 percent during
2006 and increased to 1.15 percent during 2007. 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 may involve loans to one borrower, an affiliated group of borrowers, borrowers
engaged in or dependent upon the same industry, or a group of borrowers whose loans are predicated on the
same type of collateral. The Company’s significant concentration of credit is a collateral concentration of loans
secured by real estate. At December 31, 2007, the Company had $1,684 million in loans secured by real
estate, representing 88.7 percent of total loans, up slightly from 87.8 percent at December 31, 2006. 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 28.3 percent of
total loans at year-end 2007, versus 27.7 percent at year-end 2006. Generally, the Company’s exposure to these
credits is secured by project assets and personal guarantees. Levels of exposure to this industry group, together
with an assessment of current trends and expected future financial performance, are carefully analyzed in order
in our evaluation of the allowance’s 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.
Our bank regulators have generally agreed with our credit assessments, however the regulators could seek
additional provisions to our allowance for loan losses and additional capital in light of the risks of our markets
and credits. As a result of economic conditions in our markets and our real estate exposure the bank regulators
could, based on their evaluations of our credit quality, impose regulatory enforcement actions to implement
such actions.
Nonperforming Assets
Table 14 provides certain information concerning nonperforming assets for the years indicated.
13
Nonperforming assets at December 31, 2007 totaled $68,569,000 and are comprised of $67,834,000 of
nonaccrual loans and $735,000 of other real estate owned (foreclosed property), compared to $12,465,000 at
December 31, 2006 (comprised entirely of nonaccrual loans). At December 31, 2007, virtually all nonaccrual
loans were secured with real estate, compared with $4.4 million at December 31, 2006. 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. This loan was repaid during the first quarter of 2007. At December 31, 2007, the majority
of nonaccrual loans are land and acquisition and development loans related to the residential market which are
being monitored monthly and are in the process of collection through foreclosure, refinancing or sale. Current
residential real estate sales volumes are low compared to levels in years before 2007, and market prices have
been declining over the last 12-18 months.
At December 31, 2007, $67,762,000 of the $67,834,000 of nonaccrual loan balances are considered
impaired and $4,183,000 of the allowance for loan losses has been allocated for potential losses on these
loans. During the third and fourth quarter of 2007, loans to several different developers secured with property
for development of single family residential units were added to nonaccrual loans. Management believes that
nonperforming loans will experience variability over the next few quarters that could result in increased net
charge offs and loan loss provisioning. 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.
Fair Value of Securities Classified as Trading and Available for Sale
The Company elected to early adopt Statement of Financial Accounting Standards (SFAS) No. 157 and
159 in the first quarter of 2007. The use of fair value accounting for financial instruments enables the
Company to better align the financial results of those items with their economic value.
At December 31, 2007, trading securities totaled $13,913,000 and available for sale securities totaled
$254,916,000. The fair value of the available for sale portfolio at December 31, 2007 was more than historical
amortized cost, producing net unrealized gains of $500,000 that have been included in other comprehensive
income as a component of shareholders’ equity. The fair value of each security available for sale or trading
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 that can, and often
do, vary from these reported values. Furthermore, significant changes in recorded values due to changes in
actual and perceived economic conditions can occur rapidly, producing greater unrealized losses in the
available for sale portfolio.
The credit quality of the Company’s security holdings is investment grade and higher and are traded in
highly liquid markets. 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 portfolio, 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, 2007 totaled $49.8 million, and results from the acquisitions of three separate
community banks whose operations have been fully integrated into one operating subsidiary bank of the
Company. The Company operates as a single segment bank holding company.
The assessment as to the continued value for goodwill involves judgments, assumptions and estimates
regarding the future. At December 31, 2007, the Company’s closing price per share in the open market
approximated 92 percent of book value per share which was considered as a possible indication of impairment.
The Company updated its annual impairment analysis, after January 1, 2008 using the assistance of an
independent third party. In performing the analysis, management considered the make-up of assets and
liabilities (loan and deposit composition), scarcity value, capital ratios, market share, credit quality, control
14
premiums, the type of financial institution, its overall size, the various markets in which the institution
conducts business, as well as, profitability. Based upon the results of this analysis, management concluded that
goodwill had suffered no impairment at December 31, 2007. Management anticipates that goodwill will need
to be tested more frequently for impairment during this period of economic stress and uncertainty, which could
result in future impairment.
Our highly visible local market orientation, combined with a wide range of products and services and
favorable demographics, provides the Company with a wide range of opportunities to increase sales volumes,
both to existing and prospective customers, resulting in increasing profitability in these markets over the long
term.
Contingent Liabilities
The Company is subject to contingent liabilities, including judicial, regulatory and arbitration proceed-
ings, tax and other claims arising from the conduct of our business activities. These proceedings include
actions brought against the Company and/or our subsidiaries with respect to transactions in which the
Company and/or our subsidiaries acted as a lender, a financial advisor, a broker or acted in a related activity.
Accruals are established for legal and other claims when it becomes probable the Company will incur an
expense and the amount can be reasonably estimated. The Company involves 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, the Company or our experts 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. The
Company took a $275,000 charge as of December 31, 2007 for its portion of VISA credit card litigation and
settlement costs. We expect that if VISA’s initial public offering is successfully completed, we will realize net
proceeds greater than this contingent liability. Management is not aware of any other probable losses.
Results of Operations
Net Interest Income Net interest income (on a fully taxable equivalent basis) for 2007 totaled
$84,771,000, $4,523,000 or 5.1 percent less than for 2006. During 2007, unrecognized interest on loans placed
on nonaccrual of $2,206,000 contributed to the decline from prior year (see “Table 14 — Nonperforming
Assets”). The Company has operated in a more challenging interest rate environment, with unfavorable
changes occurring in deposit mix over the past year due to an inverted yield curve.
Partially offsetting negative deposit matters, 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
84.5 percent for 2007, compared to 72.6 percent a year ago. Average securities as a percent of average earning
assets have decreased from 24.3 percent a year ago to 14.1 during 2007 and federal funds sold and other
investments decreased to 1.4 percent from 3.1 percent over the same period in 2006. In addition to increasing
total loans as a percentage of earning assets, the mix of loans improved, with commercial and commercial real
estate volumes representing 62.2 percent of total loans at December 31, 2007 (compared to 60.3 percent a year
ago at December 31, 2006) and lower yielding residential loan balances (including home equity loans and
lines, and construction loans) representing 33.2 percent of total loans (versus 34.9 percent a year ago) (see
“Loan Portfolio”).
Net interest margin on a tax equivalent basis decreased 23 basis points over the last twelve months to
3.92 percent for 2007. The net interest margin was improved in the second quarter of 2007, up 17 basis points
from 3.92 percent in the first quarter of 2007, in part reflecting the effect of a restructuring of our investment
15
portfolio during April 2007. The following table details net interest income and margin results (on a tax
equivalent basis) for the past five quarters:
Net Interest
Net Interest
Income
Margin
(Dollars in thousands)
Fourth quarter 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,846
21,432
21,468
21,147
20,724
3.95%
3.92
4.09
3.94
3.71
The yield on earning assets for 2007 was 6.95 percent, 43 basis points higher than for results in 2006,
reflecting an improving earning assets mix over 2006 and into 2007. Between September 2007 and the end of
2007, the Federal Reserve decreased interest rates 100 basis points, the first time it has done so since
increasing rates 425 basis points beginning in June 2004, with the last 50 basis point increases occurring
during the first and second quarter of 2006. The following table details the yield on earning assets (on a tax
equivalent basis) for the past five quarters:
4th Quarter
2007
3rd Quarter
2007
2nd Quarter
2007
1st Quarter
2007
4th Quarter
2006
Yield . . . . . . . . . . . . . . . . . . . . .
6.71%
7.05%
7.10%
6.92%
6.73%
Improving loan yields year over year due to loan growth and a greater percent of the portfolio in floating
rate loans were partially offset by additions to nonaccrual loans that reduced the yield on loans by
approximately 12 basis points. The yield on investment securities was improved, increasing 73 basis points
year over year to 5.02 percent. The improvement was due primarily to the restructuring of the investment
portfolio, with approximately $225 million in securities with an average yield of 3.87 percent sold at the
beginning of the second quarter of 2007.
Average earning assets for 2007 increased $14.4 million or 0.7 percent compared to 2006. Average loan
balances grew $267.9 million or 17.2 percent to $1,828.5 million, average federal funds sold and other
investments decreased $37.7 million to $29.8 million, and average investment securities were $215.7 million
or 41.4 percent lower, totaling $305.8 million. Funds derived from securities sold in April 2007 were either
reinvested in securities at current rates, utilized to reduce federal funds purchased or invested in federal funds
sold. Overall, total average assets remained about the same year over year, growing by $9.3 million or
0.4 percent during 2007.
The increase in loans year over year was principally in income producing commercial real estate loans, in
part reflecting the Company’s successful expansion with the addition of full service branch locations in
Broward and Brevard County, and loan officer additions in the Treasure Coast, Big Lake and Orlando regions.
At December 31, 2007, commercial lenders in the Company’s newer markets (Palm Beach County, Brevard
County, Broward County, Orlando, and the Big Lake region) have new loan pipelines totaling $249 million
and total outstanding loans of $805 million. At December 31, 2007 the Company’s total commercial and
commercial real estate loan pipeline was $381 million.
Total commercial and commercial real estate loan production for 2007 totaled $445 million, with
$72 million in the fourth quarter, $146 million in the third quarter, $151 million in the second quarter, and
first quarter production of $76 million. The Company expects annual loan growth to slow in 2008 due to
expected pay-downs and reduced loan production.
Closed residential loan production for 2007 totaled $135 million, with production by quarter as follows:
fourth quarter 2007 production of $27 million, of which $9 million was sold servicing released, third quarter
2007 production of $31 million, of which $11 million was sold servicing released, second quarter 2007
production of $42 million, with $22 million sold servicing released, and first quarter 2007 production of
$35 million, with $15 million sold servicing released. Higher mortgage rates and a slow down in existing
16
home sales in the Company’s markets have reduced demand for residential mortgages and demand for new
homes is expected to remain soft into 2008.
During 2007, maturities of securities totaled $77.7 million (including $40.4 million in pay-downs),
securities sales totaling $253.8 million were transacted (principally due to the portfolio restructuring in April
2007), and security purchases totaled $219.0 million. Due to the ongoing inverted yield curve and other
economic challenges, the Company determined it was in the best interest of shareholders to restructure its
balance sheet by selling low yielding securities and paying off overnight borrowings. As a result, management
identified approximately $225 million in securities which had an average yield of approximately 3.87 percent
and sold them in April 2007. This was after the Company had recognized losses for other-than-temporary
impairment of $5.1 million ($3.7 million net of income taxes) at March 31, 2007. Subsequent purchases of
securities during the second quarter of 2007 reflected management’s intent to improve the overall yield of the
securities portfolio. 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 in 2006 totaled $112.4 mil-
lion. The more unfavorable deposit mix that existed during the second and third quarter improved in the fourth
quarter of 2007. Lower cost interest bearing deposits during the fourth quarter of 2007 were 60.6 percent of
average interest bearing deposits, compared to 58.3 percent for the third quarter of 2007, 58.8 percent for the
second quarter of 2007, and 60.8 percent for the first quarter of 2007. The percentage for the fourth quarter of
2006 was 61.4 percent and for all of 2006 was 63.9 percent. Average CDs (a higher cost component of interest
bearing deposits) over the past 12 months were 40.4 percent of average interest bearing deposits compared to
36.1 percent for all of 2006, reflecting the higher rate environment and disintermediation.
Average short-term borrowings were higher for 2007, increasing $29,565,000 or 24.8 percent to
$148,610,000. Because of expected loan payoffs and cash flow from investment securities during 2007, the
Company chose to temporarily rely on short-term borrowings during the first quarter of 2007. Average federal
funds purchased increased to 5.6 percent of average interest bearing liabilities for the first quarter of 2007,
with overall short-term borrowings (including federal funds purchased and sweep repurchase agreements with
customers of the Company’s subsidiary) higher at 12.9 percent of interest bearing liabilities. In comparison,
average federal funds purchased averaged only 0.4 percent, 1.6 percent and 1.7 percent of interest bearing
liabilities during the second, third and fourth quarters of 2007, respectively, and average short-term borrowings
were 6.6 percent, 7.4 percent and 7.4 percent of interest bearing liabilities, respectively, reflecting reductions
using funds from securities sales in April 2007.
Average other borrowings including subordinated debt increased by $8.3 million or 12.1 percent to
$77.2 million. On June 29, 2007, the Company issued $12,372,000 in subordinated debentures, and
simultaneously paid off a 3-year term loan for $12,000,000 originated on February 16, 2006. The rate on the
term loan adjusted quarterly and was based on the 3-month LIBOR plus 130 basis points. The subordinated
debt was issued in conjunction with the formation of a Delaware trust subsidiary, SBCF Statutory Trust III,
which completed a private sale of $12.0 million of floating rate trust preferred securities. The Company has
two prior subordinated debt issuances, similarly done in conjunction with trust subsidiaries issuing $40.0 mil-
lion in floating rate trust preferred securities. The rate on the Company’s newest subordinated debt issuance
adjusts quarterly, based on the 3-month LIBOR plus 135 basis points. The Company also added two advances
from the Federal Home Loan Bank (FHLB) of $25 million each on September 25, 2007 and November 27,
2007, respectively, with fixed rates of 3.64 percent and 2.70 percent. The borrowings are convertible to a
variable rate on a quarterly basis at the discretion of the FHLB and the Company has the option to repay the
borrowing if the FHLB elects to convert (see Note I-Borrowings).
The cost of interest-bearing liabilities in 2007 increased 72 basis points to 3.78 percent from 2006, in part
due to the Federal Reserve increasing short-term interest rates by 50 basis points during the first and second
quarter of 2006. The Federal Reserve lowered rates 50 basis points in September 2007, 25 basis points at the
end of October 2007 and 25 basis points in December 2007 and the cost of interest bearing liabilities declined
in the fourth quarter 2007. In January 2008, the Federal Reserve lowered rates an additional 125 basis points.
With many of the Company’s deposit products re-pricing, the future cost for interest bearing liabilities should
improve. During 2007, approximately $529 million of the Company’s certificates of deposit matured and
17
$529 million will mature in 2008. The following table details the cost of interest bearing liabilities for the past
five quarters:
4th Quarter
2007
3rd Quarter
2007
2nd Quarter
2007
1st Quarter
2007
4th Quarter
2006
Rate . . . . . . . . . . . . . . . . . . . . .
3.71%
3.88%
3.79%
3.74%
3.52%
The average aggregated balance for NOW, savings and money market balances decreased $38.5 million
or 4.1 percent to $901.8 million for 2007 compared to 2006, noninterest bearing deposits decreased
$87.9 million or 19.7 percent to $358.6 million, and average CDs increased by $80.3 million or 15.1 percent
to $610.4 million. Slowing activity in the residential real estate market (resulting in declining title company
and escrow deposits), as well as completed commercial real estate construction projects (and associated escrow
deposits depleting at end of construction), have contributed to the decline in noninterest bearing deposits.
Company management believes its market expansion and marketing will result in new relationships and growth
in low-cost/no cost funding sources over time. However, economic factors are likely to continue to challenge
growth, and with the Company’s loan to deposit ratio at 95.6 percent at December 31, 2007 will likely make
margin expansion challenging. Pressure on the net interest margin is expected to continue in 2008 and may
increase if deposit mix improves as a result of management’s strategies to around retail deposit growth is
successful.
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.
Compared to 2005, the mix of earning assets improved during 2006. 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 for 2005, 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).
Net interest margin on a tax equivalent basis increased 18 basis points to 4.15 percent for 2006, compared
to 2005. 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 100 basis points during 2006 as a result of Federal Reserve actions. The yield on loans
improved 80 basis points to 7.34 percent during 2006 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 increase in loans was principally in commercial real estate loans. The addition of Big Lake increased
average loan balances $201 million during 2006. At December 31, 2006, commercial lenders in the Company’s
newer 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, 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.
18
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.
While still a significant component favorably affecting the Company’s net interest margin, lower cost
interest bearing deposits declined as a percentage of deposits in 2006. Consistent with prior periods where
interest rates increased, customers 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 deposits for 2006, versus 60.0 percent for
2005. Average certificates of deposit for 2006 increased to 32.0 percent of interest bearing deposits from
29.5 percent for 2005. The trend worsened as 2006 progressed evidenced by fourth quarter 2006 average
balance results, with lower cost deposits making up 53.6 percent of average interest bearing deposits 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.
For 2006, average deposits were higher compared to 2005, increasing 16.5 percent, 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 differed somewhat from the year over year
comparisons. From the second quarter of 2006 (which included the Big Lake acquisition) to year-end 2006,
average NOW, savings and money 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 mil-
lion or 9.0 percent. Some of the decline in low-cost/no cost funding was caused by interest rate disintermedi-
ation as customers migrated to higher paying certificates of deposit and, in some instances, to repurchase
agreements. Growth in certificates of deposit during 2006 was intentionally limited, with the Company
remaining cautious in the pricing of its certificates of deposit as it believed 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 during the last two quarters of 2006.
Average other borrowings increased $9.4 million or 15.8 percent during 2006, compared to 2005. 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. 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).
Noninterest Income
Noninterest income, excluding gains and losses from the sale of securities and a partnership interest,
totaled $24,910,000, $1,797,000 or 7.8 percent higher than for 2006. For 2006, noninterest income of
$23,113,000 was $2,596,000 or 12.7 percent higher than for 2005. Noninterest income, as defined above,
accounted for 22.8 percent of total revenue (net interest income plus noninterest income, excluding securities
gains or losses, and the gain on sale of partnership interest) in 2007 compared to 20.6 percent a year ago.
For 2007, revenues from the Company’s wealth management services decreased year over year, by
$350,000 or 6.0 percent, compared to an increase of $725,000 or 14.1 percent for 2006 versus 2005. Trust
revenue was lower by $283,000 or 9.9 percent and brokerage commissions and fees were lower by $67,000 or
2.2 percent during 2007. Included in the $67,000 decrease in brokerage commissions and fees were increases
in brokerage commissions of $77,000 and commissions from life insurance sales and other management fees
of $23,000, with revenue from mutual fund sales more than offsetting, down $167,000 year over year. During
the second quarter of 2006, brokerage commissions and fees totaled an unusually strong $1,042,000, with a
19
commission of $168,000 collected from a single customer on an insurance annuity sale, and boosting overall
performance for 2006. Lower estate fees were the primary cause for the decline in trust income for 2007,
decreasing by $412,000 from 2006. While revenues from wealth management services generally improved
during 2006 as customers returned to the equity markets, revenue generation was challenging in 2007 due to
higher interest rate deposit products offered as an alternative and an uncertain economic environment. The
Company believes it can be successful and expand its customer relationships through sales of investment
management and brokerage products, including insurance.
Service charges on deposits in 2007 were $930,000 or 13.7 percent higher year over year versus 2006. In
comparison, 2006’s service charges on deposits were $1,762,000 or 35.1 percent higher compared to 2005.
Service charges on deposits from an acquisition comprised $1,501,000 of 2006’s overall increase. Overdraft
fees were higher during 2007 and 2006, increasing $959,000 or 18.9 percent in 2007, versus 2006, and
$1,410,000 or 38.6 percent higher in 2006, versus 2005. Of the $1,410,000 increase in overdraft fees in 2006,
$1,183,000 was related to the acquisition. 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 increased $156,000 or 5.8 percent
compared to 2006’s results, after decreasing $359,000 or 11.7 percent in 2006 versus 2005. The Company’s
marine finance division (Seacoast Marine Finance) produced $186 million in marine loans during 2007,
compared to $153 million in 2006 and $189 million in 2005. Of the $186 million of production during 2007,
$160 million was sold. In comparison, for 2006 marine loans totaling $148 million were sold. Marine loan
production was very good during 2007, considering higher oil prices have dampened demand during the past
couple years, along with higher insurance costs after 2004’s and 2005’s hurricanes. While fewer finance
opportunities were available in 2006, production improved in 2007 and the Company chose to retain more
loans in its portfolio during 2007, versus prior year. Seacoast Marine Finance is headquartered in Ft. Lauder-
dale, Florida with lending professionals in Florida, and California. 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. For 2007, debit card income increased $157,000 or
7.3 percent from a year ago, and was $435,000 or 25.4 percent higher in 2006 than 2005. Contributing to the
increase in 2006 was the addition of approximately $330,000 in revenue from an acquisition. Other deposit
based electronic funds transfer (“EFT”) income increased $30,000 or 7.1 percent in 2007 compared to 2006,
after increasing $4,000 in 2006 versus 2005. 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. While higher in 2007,
mortgage banking revenue as a component of overall noninterest income has diminished, from 8.8 percent for
2005 to 4.9 percent for 2006 and 5.7 percent for 2007. 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. With
the Company’s expanded market presence and some improvement on pricing regarding products sold,
mortgage banking revenue improved in 2007. Year over year, mortgage banking fees increased $278,000 or
24.6 percent in 2007 compared to 2006, after decreasing $679,000 or 37.5 percent in 2006 versus 2005. Sales
of residential loans in 2007 totaled $56 million, versus $49 million in 2006 and $80 million in 2005. Fee
income from mortgage banking activities remained challenging in 2007 due to a slower housing market, with
some of this weakness offset by higher production related to refinance activities and expanded market share.
Mortgage revenues are dependent upon favorable interest rates, as well as, good overall economic conditions,
including the values of new and used sales. Mortgage rates and origination fees remain high, not withstanding
the general reduction in interest rates effected by the Federal Reserve. The secondary market for residential
mortgage loans sales remains limited and continues to be disrupted.
20
Merchant income for 2007 was $296,000 or 11.6 percent higher than in 2006, and was $315,000 or
14.1 percent higher in 2006 compared to 2005. 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, contributing to the increases for 2007 and 2006.
After signing a lease for banking facilities in 2002, the Company invested in a partnership to construct a
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 recorded 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 2005’s ratio of 63.7 percent. However, lower earnings in 2007 resulted in
this ratio increasing to 69.4 percent. When compared to 2006, noninterest expenses for 2007 increased by
$4,378,000 or 6.0 percent to $77,423,000, compared to an increase of $13,945,000 or 23.6 percent in 2006. Of
the $4,378,000 increase, noninterest expenses for the acquired bank totaled $1,480,000 during the first quarter
of 2007, compared to zero for the prior year; excluding this, noninterest expenses increased 4.0 percent year
over year for 2007 versus 2006. Of the $13,945,000 increase in 2006, $5,658,000 was due to the acquired
bank In addition, one-time merger costs of $582,000 and $304,000 for the Company’s banking subsidiary
name change were incurred in 2006. After the acquisition, the Company chose to align its banking subsidiary’s
name more closely with its corporate identity, renaming its banking subsidiary Seacoast National Bank. Also
impacting overhead in 2006 were marketing expenses associated with the Company’s new markets.
Noninterest expenses in the first quarter of 2007 were in line with management guidance provided of
$18.7 million. Noninterest expenses for the first quarter of 2007 included additional spending related to the
opening of a loan production office in Broward County and a new branch in Brevard County, as well as
several loan officer hires in the Treasure Coast, Palm Beach, and Big Lake markets. During the second quarter
of 2007, further investment for the future was made in the Ft. Lauderdale/Broward County, Florida market,
with the acquisition of a team of bankers from a successful nonpublic depository institution. This overhead
added a total of approximately $260,000 in expenses in the second quarter of 2007. Other lending personnel
acquisitions increased salaries and wages by approximately $100,000 more in the second quarter. During the
third quarter of 2007, the Company lowered incentive payouts for senior officers and reduced profit sharing
compensation by approximately $1.5 million as a result of lower than expected earnings performance; these
savings reduced compensation expense by approximately $500,000 in the fourth quarter, and will remain in
effect in 2008 until the Company produces meaningful earnings improvements.
The Company engaged a nationally recognized bank consulting firm in 2007 to assist the Company’s
board and management with strategic planning and overhead improvement through revenue generation.
Consulting fees added approximately $1 million to 2007’s professional fees. Prospectively, additional savings
totaling approximately $3.5 million annually is being implemented involving the consolidation of four branch
offices, with reductions in staff and a reduction in marketing costs and other professional fees. If successful,
we expect the Company’s overhead ratio will be lower in 2008 as a result of these improvements in overhead
and expected revenue growth.
For 2007 versus 2006, salaries and wages increased $2,429,000 or 8.3 percent to $31,575,000. Included in
the increase year over year were additional salaries of $678,000 for the acquired bank (during the first quarter
of 2007), $215,000 in salaries for Brevard County (including the new branch office opened during the first
quarter of 2007), and $630,000 in salaries and wages for personnel in Broward County. Full-time equivalent
employees totaled 464 at December 31, 2007, compared to 534 at December 31, 2006 and 426 at December 31,
2005. Salaries and wages increased $5,363,000 or 22.5 percent in 2006, compared to prior year. Included in
the year-over-year increase for 2006 compared to 2005 was $2,445,000 related to the addition of Big Lake.
21
Commissions and incentives were $201,000 greater in 2006 versus 2005, including $374,000 for Big Lake.
Base salaries increased $5,568,000 or 28.6 percent from 2005 to 2006, with additional salaries of $2,514,000
and $530,000, respectively, for the acquired companies comprising most of the increase compared to 2005.
Employee benefit costs for 2007 increased only $15,000 to $7,337,000 from 2006. During 2007, a
decrease of $854,000 in profit sharing compensation (eliminated for 2007) was partially offset by higher health
claims experience during the year, resulting in a $739,000 increase in group health insurance costs compared
to 2006. In addition, payroll taxes and unemployment compensation costs were $130,000 greater for 2007. For
2006, employee benefits increased $1,009,000 or 16.0 percent compared to 2005. 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 after the acquisitions.
Outsourced data processing costs totaled $7,581,000 for 2007, an increase of $138,000 or 1.9 percent
from a year ago versus a $966,000 or 14.9 percent increase in 2006. 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
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 2007, on an aggregate basis, increased $582,000
or 5.8 percent year over year, versus a $2,711,000 or 37.4 percent increase in 2006. Included in results for
2007 were additional costs for the acquired bank of $249,000 for the first quarter of 2007 (versus 2006). Costs
related to new locations also impacted 2006. Of the $2,711,000 increase for 2006, $1,067,000 was related to
the acquired banks, $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.
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, decreased by $1,284,000 or 29.5 percent in 2007, and compared to a $1,165,000 or
36.5 percent increase in 2006 versus 2005. Contributing to the decrease in 2007 was a reduction in donations
of $210,000, as well as ad agency costs related to production and printing, newspaper and radio advertising,
direct mail campaigns, and public relations totaling $767,000. In addition, sales promotions, market research,
and business meals and entertainment were lower by $123,000, $80,000 and $95,000, respectively. Further
reductions in marketing costs are anticipated for 2008. For 2006, increases occurred in ad agency costs totaling
$588,000, 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. Marketing costs in
2007 were focused on advertising and promotion spending to attract customers of the Company’s two largest
community bank competitors that were acquired and integrated in the first quarter 2007. For 2006,
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 $1,278,000 or 45.8 percent to $4,070,000 for 2007, compared to a
$197,000 or 7.6 percent increase in 2006 compared to 2005. Comprising the $1,278,000 increase, $1,078,000
was related to other professional fees, including consulting fees previously mentioned, and $319,000 to legal
fees, partially offset by lower examination fees for activities of the Office of the Comptroller of the Currency
(“OCC”) of $60,000 and lower certified public accountant fees of $59,000. Other professional fees were higher
due to costs related to third party vendors assisting the Company with its review of processes, operations and
costs, as well as strategic planning. 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”). Prospectively, legal fees may increase as the Company resolves matters
pertaining to credit quality (see “Nonperforming Assets”).
The acquisitions in the second quarter of 2006 and 2005 resulted in core deposit intangibles, which at
December 31, 2007 totaled $6.6 million. The intangible assets for were assigned estimated lives of 8.7 years
22
and 5.0 years, respectively. For total year 2007, amortization of intangibles totaled $1,259,000, compared to
$1,070,000 for 2006, and $533,000 for 2005.
Remaining noninterest expenses increased $1,031,000 in 2007 or 9.4 percent to $11,986,000 and
$2,004,000 in 2006 or 22.4 percent to $10,962,000. Larger increases year over year for 2007 compared to
2006 were costs for postage, courier and delivery (up $147,000 on an aggregate basis), employee placement
fees (up $325,000, headhunter fees), bank paid closing costs (up $320,000), subcontractor/broker fees related
to marine loan production (up $173,000), and foreclosed and repossessed asset management costs (up
$174,000). 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 general 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).
Federal Deposit Insurance Corporation (“FDIC”) insurance premiums were reformulated for 2007 and
increased as much as $1 million but were more than offset under the FDIC’s new rules by a one-time credit
for premiums previously paid that totaled $1,240,000. Any credit not used in 2007 will be applied to reduce
up to 90 percent of insurance assessments in future years. The Company anticipates it will have utilized the
full benefit of this one-time credit early in 2008, therefore, expense will be higher than 2007.
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 increase 2.9 percent if interest rates gradually rise 200 basis
points over the next twelve months and 1.1 percent if interest rates gradually rise 100 basis points The model
simulation indicates net interest income would declined by 0.4 percent over the next twelve months given a
gradual decline in interest rates of 100 basis points and 1.6 percent if interest rates gradually decline 200 basis
points
On December 31, 2007, 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 20.3 percent (see “Table 19 — Interest Rate Sensitivity Analysis”), compared to a
negative gap of 23.0 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
23
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
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 decrease the EVE
1.9 percent versus the EVE in a stable rate environment. An instantaneous 100 basis point decrease in rates is
estimated to decrease the EVE 5.3 percent versus the EVE in a stable rate environment.
While an instantaneous and severe shift in interest rates is used in this analysis to provide an estimate of
exposure under an extremely adverse scenario, a gradual shift in interest rates would have a much more
modest impact. Since EVE measures the discounted present value of cash flows over the estimated lives of
instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over
a shorter time horizon, i.e., the next fiscal year. Further, EVE does not take into account factors such as future
balance sheet growth, changes in product mix, change in yield curve relationships, and changing product
spreads that could mitigate the adverse impact of changes in interest rates.
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, 2007
Total
One Year
or Less
Over
One Year
through
Five Years
(In thousands)
Deposit maturities . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings . . . . . . . . . . . . . . . . . . .
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . .
Operating leases. . . . . . . . . . . . . . . . . . . . . . . .
$1,987,333
88,100
65,030
53,610
34,542
$1,912,417
88,100
0
0
3,519
$74,916
0
15,030
0
8,729
Over Five
Years
$
0
0
50,000
53,610
22,294
$2,228,615
$2,004,036
$98,675
$125,904
24
Funding sources primarily include customer-based core deposits, purchased funds, collateralized borrow-
ings, 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.
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 not pledged to secure public deposits or
trust funds. At December 31, 2007, the Company had available lines of credit of $335 million. At
December 31, 2007, the Company had $47 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, 2006, the amount of securities available and not pledged was $189 million.
Liquidity, as measured in the form of cash and cash equivalents (including federal funds sold and interest
bearing deposits), totaled $98,475,000 at December 31, 2007 as compared to $92,215,000 at December 31,
2006. Over the past twelve months cash and due from banks declined $39,313,000 or 43.8 percent while
federal funds sold and interest bearing deposits increased $45,573,000 to $47,985,000. Cash and cash
equivalents vary with seasonal deposit movements and are generally higher in the winter than in the summer,
and vary with the level of principal repayments and investment activity occurring in the Company’s securities
portfolio and loan portfolio.
The Company, on a parent-only basis, depends upon dividends from Seacoast National for funds to pay
its obligations on its junior subordinated debentures, its other obligations and dividends to the Company’s
shareholders. At December 31, 2007, the Company held cash and short term securities of $1,878 million
compared to $4.512 million at year end 2006. Seacoast National is limited in the amount of dividends it can
pay to the Company without prior regulatory approval to not more than current year’s earnings plus the prior
two years’ earnings, less any previously paid dividends, provided the Bank maintains its capital adequacy. In
2007, Seacoast National paid dividends to the Company of 116% of Seacoast National’s 2007 net income.
Additional provisions to Seacoast National’s allowance for loan losses, as well as any other losses or
impairments to goodwill, will reduce the amount of dividends available to the parent Company and will reduce
parent company liquidity. See “Supervision and Regulation — page 5.
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
25
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, 2007 included derivative product assets of $30,000. In comparison, at December 31, 2006
derivative product liabilities of $478,000 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.
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 $351 million at December 31, 2007, and $421 million at December 31, 2006.
Income Taxes
Income taxes for 2007 were 31.1 percent of income before taxes, compared to 35.2 percent for 2006 and
36.0 percent in 2005. A state income tax benefit of $1,173,000 was recorded during 2007 (see “Note L —
Income Taxes”). This benefit included $178,000 in enterprise zone tax incentives provided by the State of
Florida to promote business activity, specifically in the Big Lake region. In addition, a state income tax credit
was recorded during 2007 on the Company’s bank subsidiary, a result of lower earnings performance in
conjunction with a real estate investment trust (“REIT”) structure originated in 2003.
Financial Condition
Total assets increased $30,439,000 or 1.3 percent to $2,419,874,000 in 2007, after increasing
$257,261,000 or 12.1 percent to $2,389,435,000 in 2006.
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 8.86 percent at December 31, 2007, compared with
8.89 percent one year earlier.
During 2005, the Company formed two wholly owned trust subsidiaries, SBCF Capital Trust I and SBCF
Statutory Trust II, and during 2007 formed an additional wholly owned trust subsidiary, SBCF Statutory
Trust III. The subsidiaries in 2005 each issued $20.0 million (a total of $40.0 million) in trust preferred
securities and the 2007 subsidiary issued an additional $12.0 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) promulgated by the Financial Accounting Standards Board (“FASB”), the trust must be
deconsolidated with the Company for accounting purposes. As a result of this accounting pronouncement, the
Federal Reserve Board adopted changes to its capital rules with respect to the regulatory capital treatment
26
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 $52.0 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 I capital. At December 31, 2007, the Company’s risk-
based capital ratio was 12.17 percent, a slight increase from December 31, 2006’s reported ratio of
11.70 percent.
The Company manages the size of its equity through a program of share repurchases of its outstanding
Common stock. At December 31, 2007, a total of 441,000 stock option shares are outstanding, of which
368,000 are exercisable, and 403,000 in stock settled appreciation rights (“SSARs”) are outstanding, none of
which are exercisable; during 2007, 178,000 shares were exercised (see “Note J — Employee Benefits”). In
treasury stock at December 31, 2007, there were 84,085 shares totaling $1,193,000, compared to 16,032 shares
or $310,000 a year ago.
Loan Portfolio
Table 9 shows total loans (net of unearned income) by category outstanding.
Total loans (net of unearned income and excluding the allowance for loan losses) were $1,898,389,000 at
December 31, 2007, and grew by $165,278,000 or 9.5 percent compared to December 31, 2006. At
December 31, 2006, total loans of $1,733,111,000 were $443,116,000 or 34.4 percent higher than at
December 31, 2005 with $195 million of the increase attributable to an acquisition.
Loan growth in 2007 was largely centered in commercial real estate mortgage loans and commercial
development loans offset by declines in residential development and residential construction loans. As shown
in Table 9 commercial construction and land development loans increased $102,635,000 to $242,448,000 at
year end 2007 and commercial real estate mortgages increased $79,900,000 to $517,332,000. Residential
mortgage loans and home equity lines combined, increased by approximately $45,107,000 during 2007 to
$557,482,000. Offsetting the increases were declines in residential construction and land development loans of
$44,893,000 to $295,082,000 at year end 2007 and residential construction and lot loans to individuals which
declined by $19,308,000 to $72,037,000.
Residential mortgage lending is an important segment of the Company’s lending activities. The Company
has never originated sub-prime, Alt A, Option ARM or any negative amortizing residential loans. Substantially
all residential originations have been underwritten to conventional loan agency standards including loans
having balances that exceed agency value limitations. Residential mortgage loans are generally secured with
first mortgages on property, with a loan to value not exceeding 80 percent of appraised value on the date of
origination. The Company generally sells a substantial portion of its fixed rate residential originations and
retains substantially all of its adjustable rate residential originations. As interest rates increased over the past
year more adjustable rate loans have been added to the portfolio.
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, 2007, approximately $319 million or 64 percent of the Company’s residential mortgage loan
balances were adjustable, compared to $278 million or 60 percent a year ago. Loans secured by residential
properties having fixed rates totaled approximately $179 million at December 31, 2007, of which 15- and
30-year mortgages totaled approximately $36 million and $51 million, respectively. The remaining fixed rate
balances were comprised of home improvement loans, most with maturities of 10 years or less. Also included
in residential mortgage loans is a small home equity line portfolio totaling approximately $59 million at
December 31, 2007. In comparison, loans secured by residential properties having fixed rates totaled
approximately $184 million at December 31, 2006, with 15- and 30-year fixed rate residential mortgages
totaling approximately $38 million and $50 million, respectively.
27
Second mortgage loans (home equity mortgages) and home equity lines are extended by the Company
(see Table 9). 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. While past due payments have increased modestly for the residential
portfolio, they remain lower than national averages. The total of all first and second mortgage residential loans
on nonaccrual at year end totaled approximately $2.9 million.
Construction and land development loans, including loans secured by commercial real estate, were
comprised of the following types of loans at December 31, 2007 and 2006:
Funded
2007
Unfunded
Total
Funded
(In millions)
2006
Unfunded
Total
Construction and land development
Residential:
Condominiums . . . . . . . . . . . . . . . . . . . . $ 60.2
Town homes . . . . . . . . . . . . . . . . . . . . . .
25.0
Single Family
$ 19.0
2.2
$ 79.2
27.2
$ 94.8
10.4
$ 48.3
7.7
$143.1
18.1
Residences . . . . . . . . . . . . . . . . . . . . .
67.4
16.2
83.6
80.3
69.4
149.7
Single Family
Land & Lots . . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . . . . .
Commercial:
Office buildings . . . . . . . . . . . . . . . . . . .
Retail trade . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . . . .
Healthcare . . . . . . . . . . . . . . . . . . . . . . .
Churches & educational facilities . . . . . . .
Lodging . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convenience stores . . . . . . . . . . . . . . . . . . .
Marina . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total residential and commercial
construction and land development
Individuals:
Lot loans . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . .
108.0
34.5
295.1
30.9
69.0
82.6
13.0
1.0
—
11.2
1.7
23.1
9.9
242.4
537.5
39.4
32.7
72.1
7.9
19.3
64.6
7.0
17.8
14.1
11.0
—
0.5
3.9
0.1
14.1
5.7
74.2
138.8
—
15.7
15.7
115.9
53.8
359.7
106.3
48.2
340.0
18.7
8.5
152.6
37.9
86.8
96.7
24.0
1.0
0.5
15.1
1.8
37.2
15.6
14.1
16.1
93.5
6.3
2.0
2.1
2.1
0.5
2.2
0.9
316.6
676.3
139.8
479.8
39.4
48.4
87.8
40.6
50.7
91.3
11.7
0.8
32.5
11.4
1.5
0.7
13.0
0.8
2.8
10.0
85.2
237.8
—
25.4
25.4
125.0
56.7
492.6
25.8
16.9
126.0
17.7
3.5
2.8
15.1
1.3
5.0
10.9
225.0
717.6
40.6
76.1
116.7
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $609.6
$154.5
$764.1
$571.1
$263.2
$834.3
28
The following is the geographic location of the Company’s construction and land development loans
(excluding loans to individuals) totaling $537,530,000 at December 31, 2007:
Florida County
Palm Beach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian River . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
St Lucie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brevard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Orange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volusia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Osceola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Highlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miami-Dade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Okeechobee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Broward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charlotte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bradford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
% of Total Construction and Land
Development Loans
19.4%
18.9
15.0
13.3
7.3
5.5
4.0
3.4
2.9
2.7
1.7
1.1
1.0
1.0
0.9
0.6
0.4
0.4
0.4
0.1
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0
The construction period for commercial real estate generally ranges from 18-24 months. Demand in the
Company’s market area over the past few years provided the opportunity for growth in these type loans.
There has been a slowing in residential real estate activity in most of the Company’s markets, resulting in
increases of inventory for finished new housing units. Sales prices for both new and existing residential
housing have moderated, declining from their market highs. The Company anticipates that the slowing of loan
growth evident over the past couple quarters will continue in 2008, in part due to slowing demand but also to
repayments of existing construction loans.
29
Commercial real estate mortgage loans were comprised of the following loan types at December 31, 2007
and 2006:
Office buildings . . . . . . . . . . . . . . . . .
Retail trade . . . . . . . . . . . . . . . . . . . . .
Land. . . . . . . . . . . . . . . . . . . . . . . . . .
Industrial . . . . . . . . . . . . . . . . . . . . . .
Healthcare . . . . . . . . . . . . . . . . . . . . .
Churches and educational
facilities . . . . . . . . . . . . . . . . . . . . . . .
Recreation . . . . . . . . . . . . . . . . . . . . .
Multifamily . . . . . . . . . . . . . . . . . . . . .
Mobile home parks . . . . . . . . . . . . . . .
Lodging . . . . . . . . . . . . . . . . . . . . . . .
Restaurant
. . . . . . . . . . . . . . . . . . . . .
Agriculture . . . . . . . . . . . . . . . . . . . . .
Convenience stores . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . .
2007
2006
Funded
Unfunded
Total
Funded
Unfunded
Total
$131.7
76.2
5.3
105.5
32.4
$ 2.8
0.6
—
1.7
1.0
(In millions)
$134.5
76.8
5.3
107.2
33.4
$109.2
50.9
—
64.3
40.7
$ 2.2
0.5
—
1.2
1.0
$111.4
51.4
—
65.5
41.7
40.2
3.0
13.8
3.9
22.7
8.2
12.9
23.2
38.3
0.2
0.2
1.6
—
0.2
1.2
0.9
—
0.7
40.4
3.2
15.4
3.9
22.9
9.4
13.8
23.2
39.0
32.3
4.4
9.9
6.0
19.1
11.7
26.1
22.0
40.8
4.9
—
—
—
—
1.0
5.2
—
1.1
37.2
4.4
9.9
6.0
19.1
12.7
31.3
22.0
41.9
Total . . . . . . . . . . . . . . . . . . . . . . . .
$517.3
$11.1
$528.4
$437.4
$17.1
$454.5
The Company’s ten largest commercial real estate funded and unfunded loan relationships at December 31,
2007 aggregated to $159.9 million (versus $194.1 million a year ago) and for the top 70 commercial real
estate relationships in excess of $5 million the aggregate funded and unfunded totaled $598.8 million
(compared to 67 relationships aggregating to $722.8 million a year ago).
Overall loan growth is expected to be flat in the year ahead due in part to the dramatic slowing of
residential real estate sales activity. Over the past year the Company has placed increased emphasis on non-
residential mortgage loan growth within its market footprint. The Company’s expansion into new markets over
the past few years has broadened its geographic focus into more metropolitan areas with a focus on selectively
acquiring market share.
Broward County, our newest market in 2007 has loans outstanding of $65.3 million at December 31,
2007, and a pipeline of $93 million. The addition of loan officers in Orange and Seminole County (the
Orlando area), another vibrant Florida market, provides the Company with a loan base of $168.0 million at
December 31, 2007, and a pipeline of loans totaling $39 million, compared to $136.3 million at December 31,
2006, and a pipeline of $11 million. At December 31, 2007, $345.8 million in loans are outstanding in Palm
Beach County with a pipeline of approximately $49 million pending at year-end 2007. In comparison,
$355.8 million in loans were outstanding with a loan pipeline of approximately $51 million pending at year-
end 2006. Finally, in Brevard County, entered into in mid-2004 with the opening of a loan production office,
$38.1 million in loans are outstanding at year-end 2007, with a pipeline of $56 million pending. In
comparison, $60.3 million in loans were outstanding with a loan pipeline of approximately $22 million
pending at year-end 2006. A second full-service branch office will be opening in Brevard County late in the
first quarter of 2008, providing a greater presence in this new market.
Commercial business 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. Such
loans are subject to the risks inherent to lending to small to medium sized businesses including the effects of a
30
sluggish local economy, possible business failure, and insufficient cash flows. The Company’s commercial
loan portfolio totaled $126,695,000 at December 31, 2007, compared to $128,101,000 at December 31, 2006.
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 $86,362,000 at December 31, 2007 (versus $83,428,000 a year
ago), real estate construction loans secured by residential properties totaling $32,718,000 (versus $50,422,000
a year ago) and residential lot loans totaling $39,319,000 (versus $40,923,000 a year ago). Most consumer
loans are secured and net charge offs have been lower than peers. Past due loans have not increased
significantly in 2007 and consumer loans on nonaccrual totaled $621,000 at year end.
At December 31, 2007, the Company had commitments to make loans of $351,053,000, compared to
$420,968,000 at December 31, 2006 (see “Note P — Contingent Liabilities and Commitments with Off-
Balance Sheet Risk”).
Deposits and Borrowings
Total deposits increased $96,315,000 or 5.1 percent to $1,987,333,000 at December 31, 2007 compared to
one year earlier, reflecting the strength of the Company’s core deposit franchise. Certificates of deposit
(“CDs”) increased $33,893,000 or 5.9 percent to $603,662,000 over the past twelve months, lower cost interest
bearing deposits (NOW, savings and money markets deposits) increased $126,581,000 or 13.6 percent to
$1,056,025,000, and noninterest bearing demand deposits decreased $64,159,000 or 16.4 percent to
$327,646,000. Deposits increased significantly during the fourth quarter of 2007, increasing $131.6 million or
7.1 percent, a result of normal seasonal deposit increases and higher average public fund deposit balances due
to credit concerns relating to state run investment fund. It is believed that a portion of the increased public
fund deposits may ultimately be placed in investments other than bank deposits.
In comparison to 2005, total deposits increased $106,799,000 or 6.0 percent to $1,891,018,000 at
December 31, 2006. Of this increase in deposits, $237 million was related to deposits from an acquisition.
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
During the third and fourth quarters of 2006 the slowdown in Florida housing activity resulted in deposits
declining $137,587,000. Deposit mix was unfavorably affected as well, with noninterest bearing deposits
declining $96.7 million from June 30, 2006 to December 31, 2006. With higher interest rates, disintermedia-
tion between lower cost (no cost) products and certificates of deposit occurred. Local competitors with higher
loan to deposit ratios aggressively increased rates for certificates of deposit throughout the third and fourth
quarters of 2006 and into 2007, purposefully maintaining necessary funding for their institutions. During 2007
and 2006, Seacoast chose to be more cautious with regards to the pricing of its certificates of deposit.
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 Broward and Palm Beach Counties, the Orlando market, and central Florida provide
an opportunity to enhance overall deposit growth, including lower cost interest bearing deposits.
Securities sold under repurchases agreement decreased over the past twelve months by $54,376,000 or
38.2 percent to $88,100,000 at December 31, 2007. In comparison, repurchase agreements increased
$45,690,000 or 47.2 percent to $142,476,000 during 2006. 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 202 a year ago to 249 at
December 31, 2007, but balances maintained were lower, impacted by lower public fund amounts versus prior
year.
Federal funds purchased outstanding at December 31, 2006 totaled $64 million, versus no federal funds
purchased outstanding at December 31, 2007. The Company utilizes federal funds during periods of temporary
31
gaps between loan funding/repayments and deposit growth. As previously noted, deposits were lower at the
end of 2006, requiring the use of federal funds purchased as a temporary replacement.
Effects of Inflation and Changing Prices
The consolidated financial statements and related financial data presented herein have been prepared in
accordance with U.S. generally accepted accounting principles, which require the measurement of financial
position and operating results in terms of historical dollars, without considering changes in the relative
purchasing power of money, over time, due to inflation.
Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates have a more significant impact on a financial 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, 2007, the Company had $13,913,000 in trading securities (representing 4.6 percent of
total securities), $254,916,000 in securities available for sale (or 84.8 percent of total securities) and securities
held for investment carried at $31,900,000 (10.6 percent of total securities). The Company’s securities portfolio
decreased $143,212,000 or 32.3 percent from December 31, 2006. Maturities of securities of $77.7 million,
sales of $253.8 million, and purchases totaling $219.0 million were transacted during 2007.
At December 31, 2006, the Company’s total securities portfolio decreased $99,083,000 or 18.2 percent
year over year from 2005. Maturities of securities of $151.1 million, sales of $112.4 million and purchases
totaling $92.6 million were transacted during 2006. Most of the sales activity during 2006 was related to
securities acquired from Big Lake, with adjustments to fair value as a result of purchase accounting allowing
the Company to reposition the securities.
Federal funds sold totaled $47,985,000 at December 31, 2007, versus $2,412,000 at December 31, 2006.
Federal funds sold and interest bearing deposits were lower at year-end 2006, in part due to lower deposit
balances related to a slowing in the residential real estate market in late 2006 and funding of loan growth
during 2006.
Management exercises control over the Company’s interest rate risk by targeting an 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, 2007 was 5.0 years, higher than a year
ago when the average life was 2.7 years. With more adjustable prime based loans in its loan portfolio and the
increased prospects for lower interest rates, the Company chose to lengthen the duration of its securities
portfolio during 2007.
At December 31, 2007, available for sale securities totaling $254,916,000 had gross losses of $995,000
and gross gains of $1,495,000, compared to gross losses of $3,722,000 and gross gains of $243,000 at
December 31, 2006. The Company has the intent and ability to hold the securities with losses until fair value
is recovered. Consensus market perception is that the Federal Reserve will lower interest rate further
prospectively, which is likely to result in an improving fair value for the portfolio.
Company management considers the overall quality of the securities portfolio to be high. No securities
are held which are not traded in liquid markets.
32
Fourth Quarter Review
During the fourth quarter of 2007, the Company’s earnings continued to be impacted by the slowdown in
the Florida real estate market with growth in nonperforming assets and an elevated provision for loan losses.
Fourth quarter net income was $1.9 million or $0.10 diluted earnings per share, compared to $285,000 or
$0.01 diluted earnings per share in the third quarter of 2007 and $5.7 million or $0.30 diluted earnings per
share in the fourth quarter of 2006. Returns on average assets and equity were 0.32 percent and 3.48 percent
for the fourth quarter of 2007, compared to 0.05 percent and 0.51 percent in the third quarter of 2007, and
0.95 percent and 10.57 percent in the fourth quarter of 2006.
Earnings for the fourth quarter of 2007 were impacted by a higher provisioning for loan losses. During
the quarter, the Company’s nonperforming assets increased $22.7 million to $68.6 million or 3.61 percent of
loans and other real estate owned (OREO). Net loan charge-offs in the fourth quarter totaled $4.5 million,
compared to $5.8 million for the total year 2007. The provision in the fourth quarter totaled $3,813,000,
compared to $2,250,000 a year ago and $8,375,000 in the third quarter of 2007. The majority of
nonperforming assets are nonaccrual loans for land and acquisition and development related to the residential
market.
Net interest income on a fully tax equivalent basis for the fourth quarter of 2007 was $20,724,000,
$423,000 or 2.0 percent lower than for the third quarter of 2007 and $1,122,000 or 5.1 percent lower than a
year ago for the same quarter. The net interest margin for the fourth quarter was 3.71 percent, a decrease from
the 3.95 percent achieved in last year’s fourth quarter and a 23 basis point decrease from the 3.94 percent for
the third quarter of 2007. The decline in net interest margin resulted from higher average nonaccrual loan
balances and the repricing of prime based loans as a result of lower interest rates. Competition for deposits
during the fourth quarter of 2007 did not allow for the full benefit to be realized from the Federal Reserve
reducing rates 100 basis points beginning in September 2007. Deposit costs were lower in the fourth quarter
and totaled 2.93 percent compared to 3.01 percent for the third quarter of 2007. The total cost of interest
bearing liabilities declined 17 basis points to 3.71 percent in the fourth quarter from the third quarter of 2007
and compared to 3.52 percent in the fourth quarter a year ago. Net interest income will continue to be
impacted by increased nonaccrual loans and OREO which may continue to grow through the first half of
2008.
In the fourth quarter of 2007 loan growth slowed with a modest growth of $5.3 million from the third
quarter of 2007. The impact of a slower housing market is likely to impact the Company’s loan pipelines
prospectively and it is believed slower loan growth will result for 2008. Deposit growth during the fourth
quarter of 2007 totaled $131.6 million, resulting from normal seasonal deposit increases and higher average
public fund deposit balances. A portion of the public funds may migrate to investments other than deposits
prospectively.
Noninterest income, excluding securities gains and losses and the gain on sale of a partnership interest (a
fourth quarter 2006 event), increased 4.2 percent in the fourth quarter of 2007 when compared to the same
quarter a year ago. Increased revenue from service charges on deposits of $195,000, merchant income of
$52,000, and marine finance fees of $26,000, were partially offset by decreased wealth management fees of
$53,000, as well as decreased mortgage banking revenue of $59,000. Mortgage loan volumes are more
challenging to obtain and more production with adjustable rates is being retained in the loan portfolio.
Noninterest expenses in the fourth quarter of 2007 totaled $19.8 million, in line with guidance provided
at the end of the third quarter of 2007 after excluding one-time costs of $275,000 for VISA litigation and
settlement costs and costs associated with increased problem credits. Noninterest expenses for the quarter were
$500,000 lower as a result of the elimination of executive bonus compensation, lower incentive payouts for
senior officers and reduced profit sharing compensation for 2007. A reduction of $1.5 million was recognized
in the third quarter of 2007 for year to date accruals regarding these same expenses. The effect of these
reductions in compensation will remain in place prospectively until the Company produces meaningful
earnings improvements. Noninterest expenses for the fourth quarter of 2007 were $1,619,000 or 8.9 percent
higher than fourth quarter a year ago and noninterest expenses for the fourth quarter of 2006 were $2,435,000
or 15.4 percent greater than for the fourth quarter of 2005. Noninterest expenses for the fourth quarter of 2006
33
included added spending related to re-branding the subsidiary bank and costs associated with attracting
customers of acquired local competitors totaling approximately $314,000. Overhead is targeted to increase
more modestly in 2008.
Table 1 — Condensed Income Statement*
2007
2005
2006
(Tax equivalent basis)
3.65% 3.86% 3.73%
0.14
0.55
0.07
(0.22)
—
— (0.01)
1.04
3.16
1.07
3.33
—
0.01
1.06
3.05
1.68
0.61
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest income
Securities restructuring losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes including tax equivalent adjustment . . . . . . . . . . . . . . . . . .
0.62
0.20
1.59
0.56
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.42% 1.03% 1.07%
* As a Percent of Average Assets
Table 2 — Changes in Average Earning Assets
Increase/(Decrease)
2007 vs 2006
Increase/(Decrease)
2006 vs 2005
(Dollars in thousands)
Securities:
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(217,212)
1,517
Nontaxable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(37,736)
Federal funds sold and other short term investments . . . . . . . . . . . .
267,864
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(42.2)% $ (80,245)
5,447
22.5
(42,065)
(55.9)
444,566
17.2
(13.5)%
416.1
(38.4)
39.8
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,433
0.7
$327,703
18.0
34
Table 3 — Rate/Volume Analysis (on a Tax Equivalent Basis)
2007 vs 2006
Due to Change in:
Rate
Volume
2006 vs 2005
Due to Change in:
Rate
Total
Volume
(Dollars in thousands)
Amount of increase (decrease)
$(10,036)
99
$ 2,915
(5)
$ (7,121)
94
$ (3,177)
386
$ 3,358
(44)
$
(9,937)
2,910
(7,027)
(2,791)
3,314
Total
181
342
523
(1,929)
19,599
352
(668)
(1,577)
18,931
(1,694)
30,854
7,733
2,594
10,327
26,369
1,278
10,608
15,200
1,492
253
6,461
5,190
(416)
41,462
41,569
2,355
152
7,582
9,661
(1,427)
(219)
1,710
3,601
3,665
1,297
553
50
(161)
5,227
7,694
863
(101)
1,121
4,471
1,477
58
3,517
4,093
9,145
12,810
6,354
13,396
19,750
244
(54)
1,541
499
1,175
525
1,731
1,391
2,906
1,916
EARNING ASSETS
Securities
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . .
NonTaxable . . . . . . . . . . . . . . . . . . . . . . .
Federal funds sold and other short term
investments . . . . . . . . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL EARNING 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 . . . . . . . . . . . . . . . . . . .
5,515
9,335
14,850
8,054
16,518
24,572
NET INTEREST INCOME . . . . . . . . . .
$ 2,218
$(6,741)
$ (4,523)
$18,315
$ (1,318)
$16,997
(a) Changes attributable to rate/volume are allocated to rate and volume on an equal basis.
Table 4 — Changes in Average Interest Bearing Liabilities
Increase/(Decrease)
2007 vs 2006
Increase/(Decrease)
2006 vs 2005
(Dollars in thousands)
NOW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money market accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal funds purchased and other short term borrowings . . . . . . . . .
Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(67,870)
(31,843)
61,251
80,259
29,565
8,327
(35.4)% $ 74,945
(17,267)
(21.3)
57,608
10.2
125,127
15.1
34,073
24.8
9,383
12.1
64.2%
(10.4)
10.6
30.9
40.1
15.8
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 79,689
4.8
$283,869
20.7
35
Table 5 — Three Year Summary
Average Balances, Interest Income and Expenses, Yields and Rates (1)
2006
2007
2005
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
(Dollars in thousands)
EARNING ASSETS
Securities
Taxable . . . . . . . . . . . .
Nontaxable . . . . . . . . . .
$ 297,480 $ 14,812 4.98% $ 514,692 $ 21,933 4.26% $ 594,937 $21,752 3.66%
8,273
536 6.48
6,756
442 6.54
1,309
100 7.64
305,753
15,348 5.02
521,448
22,375 4.29
596,246 21,852 3.66
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 . . . . . . . . . .
29,808
1,828,537
1,631 5.47
133,429 7.30
67,544
1,560,673
3,208 4.75
114,498 7.34
109,609
1,116,107
3,624 3.31
73,036 6.54
140,081 6.52
150,408 6.95
2,164,098
(16,842)
60,322
38,886
77,745
$2,324,209
2,149,665
(11,624)
74,280
32,573
69,970
$2,314,864
98,512 5.41
1,821,962
(7,957)
65,146
21,095
37,115
$1,937,361
$ 123,850
117,481
660,476
610,406
3,184 2.57% $ 191,720
149,324
599,225
530,147
832 0.71
20,284 3.07
29,580 4.85
779 0.67%
3,134 1.63% $ 116,775
841 0.50
166,591
7,475 1.38
541,617
405,020 12,225 3.02
993 0.66
15,057 2.51
21,886 4.13
148,610
77,185
6,656 4.48
5,101 6.61
119,045
68,858
5,115 4.30
4,602 6.68
84,972
59,475
2,209 2.60
2,686 4.52
1,738,008
358,597
8,876
2,105,481
218,728
$2,324,209
65,637 3.78
1,658,319
446,471
12,208
2,116,998
197,866
$2,314,864
50,787 3.06
26,215 1.91
1,374,450
415,416
8,620
1,798,486
138,875
$1,937,361
3.03%
2.36%
1.44%
$ 84,771 3.92%
$ 89,294 4.15%
$72,297 3.97%
(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.
36
Table 6 — Noninterest Income
2007
Year Ended
2006
% Change
2005
07/06
06/05
(Dollars in thousands)
Service charges on deposit accounts . . . . . . . . . . . . . . . . $ 7,714
2,575
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,409
Mortgage banking fees . . . . . . . . . . . . . . . . . . . . . . . . . .
2,935
Brokerage commissions and fees . . . . . . . . . . . . . . . . . . .
2,865
Marine finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,306
Debit card income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
451
Other deposit based EFT fees . . . . . . . . . . . . . . . . . . . . .
2,841
Merchant income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Gain on sale of partnership interest . . . . . . . . . . . . . . . . .
—
Interest rate swap profits (losses) . . . . . . . . . . . . . . . . . .
1,814
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,784
2,858
1,131
3,002
2,709
2,149
421
2,545
1,147
—
1,514
Securities restructuring losses . . . . . . . . . . . . . . . . . . . . .
Securities gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . .
24,910
(5,118)
70
24,260
—
(157)
$ 5,022
2,573
1,810
2,562
3,068
1,714
417
2,230
13.7% 35.1%
(9.9)
24.6
(2.2)
5.8
7.3
7.1
11.6
— (100.0)
11.1
(37.5)
17.2
(11.7)
25.4
1.0
14.1
n/m
— 100.0
9.1
19.8
2.7
n/m
(144.6)
18.2
—
(222.7)
(267)
1,388
20,517
—
128
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,862
$24,103
$20,645
(17.6)
16.7
n/m = not meaningful
Table 7 — NonInterest Expense
2007
Year Ended
2006
% Change
2005
07/06
06/05
(Dollars in thousands)
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,575
7,337
Employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,581
Outsourced data processing costs . . . . . . . . . . . . . . . . . . . . .
1,905
Telephone/data lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,677
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,863
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,075
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,070
Legal and professional fees . . . . . . . . . . . . . . . . . . . . . . . . .
225
FDIC assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,259
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . .
9,856
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$29,146
7,322
7,443
1,836
7,435
2,523
4,359
2,792
325
1,063
8,801
$23,783
6,313
6,477
1,357
5,126
2,121
3,194
2,595
225
533
7,376
8.3% 22.5%
0.2
1.9
3.8
3.3
13.5
(29.5)
45.8
(30.8)
18.4
12.0
16.0
14.9
35.3
45.0
19.0
36.5
7.6
44.4
99.4
19.3
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $77,423
$73,045
$59,100
6.0
23.6
n/m = not meaningful
37
Table 8 — Capital Resources
TIER 1 CAPITAL
2007
December 31
2006
(Dollars in thousands)
2005
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Qualifying trust preferred securities . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,920
90,924
122,396
(1,193)
52,000
(56,452)
60
$
1,899
88,380
124,811
(310)
40,000
(57,299)
58
$
1,710
42,900
112,182
(218)
40,000
(33,908)
—
TOTAL TIER 1 CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TIER 2 CAPITAL
Allowance for loan losses, as limited(1) . . . . . . . . . . . . . . . . . . . . .
TOTAL TIER 2 CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
209,655
197,539
162,666
22,425
22,425
15,039
15,039
9,124
9,124
TOTAL RISK-BASED CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . $ 232,080
$ 212,578
$ 171,790
Risk weighted assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,907,470
$1,816,705
$1,460,924
Tier 1 risk based capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total risk based capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier 1 capital to adjusted total assets . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory minimum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder’s equity to assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average shareholders’ equity to average total assets. . . . . . . . . . . . .
10.99%
12.17
8.00
9.10
4.00
8.86
9.41
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
(1) Includes reserve for unfunded commitments of $523,000, $124,000 and $118,000 at December 31, 2007,
2006 and 2005.
38
Table 9 — Loans Outstanding
Construction and land development
2007
December 31
2006
(In thousands)
2005
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 295,082 $ 339,975 $ 254,113
90,470
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
344,583
82,633
427,216
Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
242,448
537,530
72,037
609,567
139,813
479,788
91,345
571,133
Real estate mortgage
Residential real estate
Adjustable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home equity lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial and financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment loans to individuals
319,470
87,506
91,418
59,088
557,482
517,332
1,074,814
126,695
277,649
87,883
95,923
50,920
512,375
437,449
949,824
128,101
166,494
73,675
67,034
41,721
348,924
331,953
680,877
98,653
Automobiles and trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marine loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,029
39,682
25,231
82,942
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
307
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,898,389 $1,733,111 $1,289,995
22,260
32,531
28,637
83,428
625
24,940
33,185
28,237
86,362
951
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
and Financial
$ 51,005
December 31, 2007
Construction and
Land Development
(In thousands)
$353,860
18,959
23,488
8,258
24,985
135,582
83,468
21,025
15,632
Total
$404,865
154,541
106,956
29,283
40,617
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$126,695
$609,567
$736,262
39
Table 11 — Maturity of Certificates of Deposit of $100,000 or More
December 31
2007
% of
Total
2006
% of
Total
(Dollars in thousands)
Maturity Group:
Under 3 Months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $107,002
97,116
43,566
23,140
3 to 6 Months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6 to 12 Months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over 12 Months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39.5% $ 97,567
70,677
35.9
64,730
16.1
11,544
8.5
39.9%
28.9
26.5
4.7
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $270,824
100.0% $244,518
100.0%
Table 12 — Summary of Loan Loss Experience
2007
2006
2005
2004
2003
Year Ended December 31
(Dollars in thousands)
$
14,915
12,745
—
$
9,006
3,285
2,518
6,598
1,317
1,225
$
6,160
1,000
—
$ 6,826
—
—
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 . . . . . . . . . . . . . .
1,072
858
3,780
240
5,950
57
135
—
—
192
16
295
—
—
311
161
256
—
—
417
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
Net loan charge offs (recoveries). . . . . . . .
5,758
(106)
ENDING BALANCE . . . . . . . . . . . . . . . . $
21,902
$
14,915
$
9,006
$
6,598
$ 6,160
Loans outstanding at end of year*. . . . . . . $1,898,389
Ratio of allowance for loan losses to loans
outstanding at end of year . . . . . . . . . . .
1.15%
Daily average loans outstanding* . . . . . . . $1,828,537
Ratio of net charge offs (recoveries) to
$1,733,111
$1,289,995
$899,547
$708,792
0.86%
0.70%
0.73%
0.87%
$1,560,673
$1,116,107
$799,649
$678,339
average loans outstanding . . . . . . . . . . .
0.31%
(0.01)%
0.01%
0.07%
0.10%
* Net of unearned income.
40
Table 13 — Allowance for Loan Losses
December 31
2007
2006
2005
2004
2003
(Dollars in thousands)
ALLOCATION BY LOAN TYPE
Commercial and financial loans . . . . . . . . . . . . . . . . . . . .
Real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,070
17,942
890
$ 3,199
11,073
643
$1,794
6,328
884
$1,339
4,395
864
$ 786
4,353
1,021
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$21,902
$14,915
$9,006
$6,598
$6,160
YEAR END LOAN TYPES AS A PERCENT OF
TOTAL LOANS
Commercial and financial loans . . . . . . . . . . . . . . . . . . . .
Real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Installment loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.7%
88.7
4.6
7.4%
87.8
4.8
7.7%
85.9
6.4
7.4%
83.5
9.1
6.6%
81.5
11.9
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0%
100.0% 100.0% 100.0% 100.0%
Table 14 — Nonperforming Assets
December 31
2007
2006
2005
2004
2003
(Dollars in thousands)
Nonaccrual loans(1) . . . . . . . . . . . . . . . . . $
Other real estate owned . . . . . . . . . . . . . .
67,834
735
$
12,465
—
$
372
—
$
1,447
—
$ 1,091
1,954
TOTAL NONPERFORMING
ASSETS . . . . . . . . . . . . . . . . . . . . . . . $
68,569
$
12,465
$
372
$
1,447
$ 3,045
Amount of loans outstanding at end of
year(2) . . . . . . . . . . . . . . . . . . . . . . . . . $1,898,389
$1,733,111
$1,289,995
$899,547
$708,792
Ratio of total nonperforming assets to
loans outstanding and other real estate
owned at end of period . . . . . . . . . . . . .
Accruing loans past due 90 days or
3.61%
0.72%
0.03%
0.16%
0.43%
more . . . . . . . . . . . . . . . . . . . . . . . . . . $
25
$
64
$
465
$
32
$
8
(1) Interest income that could have been recorded during 2007 and 2006 related to nonaccrual loans was
$2,206,000 and $371,000, respectively, none of which was included in interest income or net income. All
nonaccrual loans are secured.
(2) Net of unearned income.
41
Table 15 — Securities Available For Sale
U.S. Treasury securities and obligations of U.S.
Government Sponsored Entities
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities of Government Sponsored
Entities
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized mortgage obligations of Government
Sponsored Entities
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations
December 31
Amortized
Cost
Fair
Value
Unrealized
Gains
Unrealized
Losses
(In thousands)
$ 30,071
95,003
$ 30,405
94,676
$ 334
21
$ —
(348)
31,970
11,393
32,303
11,340
156,894
155,977
157,012
153,560
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,945
50,472
29,622
49,761
Obligations of state and political subdivisions
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Securities Held For Sale
2,021
2,020
3,517
2,597
2,057
2,049
3,517
2,597
333
—
792
193
—
—
36
29
—
—
—
(53)
(674)
(2,610)
(323)
(711)
—
—
—
—
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$254,418
317,462
$254,916
313,983
$1,495
243
$ (997)
(3,722)
42
Table 16 — Securities Held For Investment
December 31
Amortized
Cost
Fair
Value
Unrealized
Gains
Unrealized
Losses
(In thousands)
Collateralized mortgage obligations of Government
Sponsored Entities
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations
1,960
72,398
$
1,946
70,821
$ —
46
$
(14)
(1,623)
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,795
51,189
23,546
50,138
Obligations of states and political subdivisions
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,145
6,371
6,190
6,436
—
—
53
67
(249)
(1,051)
(8)
(2)
Total Securities Held For Investment
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,900
129,958
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 31,682
127,395
$ 53
113
$ (271)
(2,676)
Table 17 — Maturity Distribution of Securities Held For Investment
December 31, 2007
1-5
Years
5-10
Years
After 10
Years
Total
(Dollars in thousands)
AMORTIZED COST
Collateralized mortgage obligations of Government Sponsored Entities . . . .
Private collateralized mortgage obligations . . . . . . . . . . . . . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . . . . . . . . . . . . . .
1,960
12,533
—
11,262
584 $ 4,042 $1,519
— $ 1,960
— 23,795
6,145
Total Securities Held For Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,077 $15,304 $1,519 $31,900
Average
Maturity
in Years
1.07
5.25
8.36
5.59
FAIR VALUE
Collateralized mortgage obligations of Government Sponsored Entities . . . . $ 1,947
Private collateralized mortgage obligations . . . . . . . . . . . . . . . . . . . . . . . .
12,368
Obligations of state and political subdivisions . . . . . . . . . . . . . . . . . . . . . .
—
11,178
582 $ 4,068 $1,540
— $ 1,946
— 23,546
6,190
Total Securities Held For Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,896 $15,246 $1,540 $31,682
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 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
5.98%
5.98%
—
5.19% 5.14% —
5.17%
7.00% 6.97% 6.90% 6.96%
5.37% 5.62% 6.90% 5.56%
43
Table 18 — Maturity Distribution of Securities Available For Sale
December 31, 2007
1 Year
or Less
1-5
Years
5-10
Years
After 10
Years
No
Contractual
Maturity
Average
Maturity
in Years
Total
(Dollars in thousands)
AMORTIZED COST
U.S. Treasury securities and obligations of U.S.
Government Sponsored Entities . . . . . . . . . . . . . $7,997 $ 22,074 $ — $ — $ — $ 30,071
0.97
Mortgage-backed securities of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . .
— 11,328
10,099
10,543
—
31,970
7.30
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . .
Obligations of state and political subdivisions . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
—
—
—
96,372
5,246
—
—
60,367
—
— 24,519
1,579
— 156,894
29,945
—
2,021
—
3,517
— 3,517
442
—
4.17
9.62
11.31
*
Total Securities Held For Sale . . . . . . . . . . . . . . . . $8,152 $135,200 $70,908 $36,641
$3,517
$254,418
4.89
FAIR VALUE
U.S. Treasury securities and obligations of U.S.
Government Sponsored Entities . . . . . . . . . . . . . $8,006 $ 22,399 $ — $ — $ — $ 30,405
Mortgage-backed securities of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . .
— 11,474
10,206
10,623
—
32,303
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . .
Obligations of state and political subdivisions . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
155
—
—
—
96,609
5,394
—
—
60,248
—
— 24,228
1,606
— 157,012
29,622
—
2,057
—
3,517
— 3,517
451
—
Total Securities Held For Sale . . . . . . . . . . . . . . . . $8,161 $135,876 $70,905 $36,457
$3,517
$254,916
WEIGHTED AVERAGE YIELD (FTE)
U.S. Treasury securities and obligations of U.S.
Government Sponsored Entities . . . . . . . . . . . . .
5.07%
5.02%
—
—
Mortgage-backed securities of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . .
—
5.83% 5.78% 5.38%
—
—
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . .
Obligations of state and political subdivisions . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Securities Held For Sale . . . . . . . . . . . . . . . .
3.01%
—
—
5.03%
—
5.39
5.10% 5.26%
5.15%
—
—
—
—
—
4.20%
5.15% 5.34% 5.45% 4.20%
6.45% 6.83%
—
—
5.04%
5.66%
5.16%
5.35%
6.75%
4.20%
5.23%
* Other Securities excluded from calculated average for total securities
44
Table 19 — Interest Rate Sensitivity Analysis (1)
0-3
Months
4-12
Months
December 31, 2007
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 . . . . . . . . . . . . . . . . . . . . . . . .
$
47,985
65,173
828,493
941,651
1,056,025
222,020
141,710
Interest bearing liabilities . . . . . . . . . . . . . .
1,419,755
$
— $
— $
— $
21,795
334,728
356,523
—
306,724
—
306,724
93,819
572,924
666,743
—
74,918
15,030
89,948
15,030
119,442
99,063
47,985
300,229
1,835,208
218,505
2,183,422
— 1,056,025
603,662
—
206,740
50,000
50,000
1,866,427
—
—
Interest rate swaps . . . . . . . . . . . . . . . . . . .
(15,030)
—
Interest sensitivity gap . . . . . . . . . . . . . . . .
$ (493,134)
$ 49,799
$591,825
$168,505
$ 316,995
Cumulative gap . . . . . . . . . . . . . . . . . . . . .
$ (493,134)
$(443,335)
$148,490
$316,995
Cumulative gap to total earning assets (%). .
Earning assets to interest bearing
liabilities (%) . . . . . . . . . . . . . . . . . . . . .
(22.6)
(20.3)
6.8
66.3
116.2
741.3
14.5
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 $191,245) were deemed repriceable in “4-12 months”, the interest sensitivity gap and cumulative
gap would be ($301,889) indicating 13.8% of earning assets and 76.6% of earning assets to interest bear-
ing liabilities for the “0-3 months” category.
N/M Not meaningful
45
SELECTED QUARTERLY INFORMATION
Consolidated Quarterly Average Balance, Yields and Rates(1)
2007 Quarters
Fourth
Third
Second
First
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
(Dollars in thousands)
EARNING ASSETS
Securities
Taxable . . . . . . . . . . . . . . . . . . . . . . .
Nontaxable . . . . . . . . . . . . . . . . . . . . .
$ 263,562
8,168
5.22% $ 233,809
8,216
6.46
5.25% $ 267,308
8,323
6.33
5.34% $ 427,743
8,390
6.58
4.43%
6.53
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 . . . . . . . . . . . . . . . .
271,730
5.26
242,025
5.29
275,631
5.37
436,133
4.47
33,351
1,913,991
2,219,072
(22,607)
46,752
40,233
77,636
$2,361,086
$
77,999
105,789
764,200
616,621
132,606
102,987
1,800,202
336,432
7,280
2,143,914
217,172
$2,361,086
5.00
6.95
6.71
5.53
7.30
7.05
21,364
1,866,954
2,130,343
(15,361)
47,633
39,190
77,231
$2,279,036
5.52
7.41
7.10
48,140
1,783,156
2,106,927
(14,358)
70,274
38,445
76,390
$2,277,678
16,284
1,747,797
2,200,214
(14,973)
77,101
37,646
79,751
$2,379,739
2.80% $
0.71
3.01
4.82
53,842
112,323
715,885
629,479
2.78% $ 170,588
121,159
0.71
591,403
3.15
617,905
4.92
2.61% $ 195,025
130,985
0.71
567,647
3.13
576,972
4.88
3.82
5.78
3.71
4.40
7.04
3.79
4.41
7.00
3.88
127,163
69,860
1,708,552
340,462
9,154
2,058,168
220,868
$2,279,036
110,123
67,816
1,678,994
370,953
8,711
2,058,658
219,020
$2,277,678
225,805
67,772
1,764,206
387,299
10,400
2,161,905
217,834
$2,379,739
6.25
7.52
6.92
2.38%
0.71
2.99
4.76
4.95
7.05
3.74
Interest expense as % of earning assets . . . .
Net interest income as % of earning assets . .
3.01%
3.71
3.11%
3.94
3.02%
4.09
3.00%
3.92
(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.
46
2006 Quarters
Fourth
Third
Second
First
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
Average
Balance
Yield/
Rate
(Dollars in thousands)
$ 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
4.03%
7.70
4.04
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
107,401
67,572
1,688,966
439,379
11,493
2,139,838
211,024
$2,350,862
4.42
7.14
3.21
105,140
67,533
1,701,285
496,308
14,535
2,212,128
207,555
$2,419,683
4.12
6.68
2.89
109,206
72,596
1,510,126
434,692
9,271
1,954,089
158,787
$2,112,876
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
47
SELECTED QUARTERLY INFORMATION
QUARTERLY CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
2007 Quarters
2006 Quarters
Fourth
Third
Second
First
Fourth
Third
Second
First
(Dollars in thousands, except per share data)
Net interest income:
Interest income . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . .
Net interest income . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . .
Net interest income after provision for
$37,451
16,813
20,638
3,813
$37,771 $37,251 $37,633 $37,147
15,366
16,712
21,781
21,059
2,250
8,375
16,265
21,368
(550)
15,847
21,404
1,107
$36,714 $36,208 $29,758
9,509
12,246
13,666
20,249
23,962
23,048
280
280
475
losses . . . . . . . . . . . . . . . . . . . . . . .
16,825
12,684
20,297
21,918
19,531
22,573
23,682
19,969
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 . . . . . . . . . . . . . . . . .
Gain on sale of partnership interest . .
Securities restructuring losses . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . .
Total noninterest expenses . . . . . . . .
Income before income taxes . . . . . . . . .
Provision for income taxes . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . .
PER COMMON SHARE DATA
Net income diluted . . . . . . . . . . . . . . .
Net income basic . . . . . . . . . . . . . . . .
Cash dividends declared:
Common stock . . . . . . . . . . . . . . . .
Market price common stock:
Low close . . . . . . . . . . . . . . . . . . . .
High close . . . . . . . . . . . . . . . . . . .
Bid price at end of period . . . . . . . . .
2,070
627
278
572
596
563
103
676
474
—
—
24
5,983
1,983
658
260
620
687
578
101
688
444
—
—
22
6,041
1,733
1,928
627
663
455
416
754
989
726
856
568
597
131
116
756
721
466
430
—
—
— (5,118)
(2)
26
1,096
6,742
1,875
654
337
598
570
565
114
624
382
1,147
—
(73)
6,793
1,866
691
254
586
478
563
108
623
402
—
—
2
5,573
1,801
801
331
1,042
868
558
102
619
397
—
—
(97)
6,422
1,242
712
209
776
793
463
97
679
333
—
—
11
5,315
7,747
1,918
1,884
468
1,956
754
707
1,068
56
315
2,919
19,792
3,016
1,113
$ 1,903
7,479
1,700
1,796
460
1,928
758
875
1,327
55
315
2,334
19,027
(302)
(587)
285
$
8,453
2,032
1,956
494
1,919
699
793
843
56
314
2,342
19,901
7,138
2,330
$ 4,808
7,896
1,687
1,945
483
1,874
652
700
832
58
315
2,261
18,703
4,311
1,542
$ 2,769
6,479
1,699
1,768
497
1,893
689
1,564
863
121
315
2,285
18,173
8,151
2,466
$ 5,685
7,805
2,054
1,746
506
1,947
707
952
693
66
315
2,096
18,887
9,259
3,390
$ 5,869
8,443
1,769
2,180
474
2,062
591
926
699
79
321
2,332
19,876
10,228
3,794
$ 6,434
6,419
1,800
1,749
359
1,533
536
917
537
59
119
2,081
16,109
9,175
3,309
$ 5,866
$ 0.10
0.10
$ 0.01 $
0.02
0.25 $ 0.14
0.15
0.25
$ 0.30
0.30
$ 0.31 $
0.31
0.34 $ 0.34
0.35
0.34
0.16
0.16
0.16
0.16
0.16
0.15
0.15
0.15
10.28
19.57
10.28
15.62
22.30
18.70
20.27
25.36
21.75
22.22
24.65
22.67
23.98
29.72
24.80
26.61
31.68
30.20
25.12
29.60
26.63
23.25
29.11
29.11
48
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Seacoast Banking Corporation of Florida:
We have audited Seacoast Banking Corporation of Florida and subsidiaries’ (the Company’s) internal control
over financial reporting as of December 31, 2007, 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, included in the
accompanying Report of Management’s Assessment of Internal Control over Financial Reporting. Our
responsibility is to express an opinion on 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, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audit also included 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 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 generally accepted accounting principles, and that receipts and expenditures 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, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2007, 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, 2007 and 2006, 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, 2007, and our report dated March 14, 2008, expressed an unqualified
opinion on those consolidated financial statements.
Miami, Florida
March 14, 2008
Certified Public Accountants
49
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, 2007 and 2006, 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,
2007. 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, 2007
and 2006, and the results of their operations and their cash flows for each of the years in the three-year period
ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, the Company adopted the recognition and
disclosure provisions of Statement of Financial Accounting Standard (SFAS) No. 157, Fair Value Measure-
ments, and SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including
an amendment of FASB Statement No. 115, as of January 1, 2007. 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 SFAS No. 123R, Share Based Payment.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of December 31, 2007, 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 14, 2008, expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Miami, Florida
March 14, 2008
Certified Public Accountants
50
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31
2007
2005
2006
(Dollars in thousands, except share data)
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 LOAN
$
14,812
364
133,299
1,631
150,106
24,300
29,580
6,656
3,229
1,872
65,637
84,469
12,745
$
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
LOSSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71,724
85,755
70,868
NONINTEREST INCOME
Securities restructuring losses . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities gains (losses). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NONINTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . .
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,118)
70
24,910
19,862
77,423
14,163
4,398
—
(157)
24,260
24,103
73,045
36,813
12,959
—
128
20,517
20,645
59,100
32,413
11,654
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
9,765
$
23,854
$
20,759
SHARE DATA
Net income per share of common stock
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
0.51
0.52
$
1.28
1.30
1.24
1.27
Average shares outstanding
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,157,597
18,936,541
18,671,752
18,305,258
16,749,386
16,361,196
See notes to consolidated financial statements.
51
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31
2007
2006
(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 trading (at fair value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities available for sale (at fair value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities held for investment (fair values:
2007 — $31,682 and 2006 — $127,395) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net of unearned income ($1,102 in 2007 and $2,163 in 2006) . . . . . . . . . . .
Less: Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bank premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
50,490
47,985
98,475
13,913
254,916
31,900
300,729
3,660
1,898,389
(21,902)
1,876,487
40,926
735
49,813
6,639
42,410
$2,419,874
LIABILITIES
Demand deposits (noninterest bearing) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Time certificates of $100,000 or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 327,646
1,056,025
332,838
270,824
1,987,333
Federal funds purchased and securities sold under agreement to repurchase,
maturing within 30 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88,100
65,030
53,610
11,420
2,205,493
$
89,803
2,412
92,215
—
313,983
129,958
443,941
5,888
1,733,111
(14,915)
1,718,196
37,070
—
49,401
7,898
34,826
$2,389,435
$ 391,805
929,444
325,251
244,518
1,891,018
206,476
26,522
41,238
11,756
2,177,010
Commitments and Contingencies (Notes K and P)
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 35,000,000 shares, issued
19,194,174 and outstanding 19,110,089 shares in 2007 and authorized
35,000,000 shares, issued 18,990,327 and outstanding 18,974,295 shares in
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Treasury stock (84,085 shares in 2007 and 16,032 shares in 2006), at cost. . .
Accumulated other comprehensive income (loss), net
. . . . . . . . . . . . . . . . . . . . . .
TOTAL SHAREHOLDERS’ EQUITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . .
See notes to consolidated financial statement.
1,920
90,924
122,396
(1,193)
214,047
334
214,381
$2,419,874
1,899
88,380
124,811
(310)
214,780
(2,355)
212,425
$2,389,435
52
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
2007
For the Year Ended December 31
2006
(Dollars in thousands)
2005
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 148,171
24,953
(65,395)
(72,386)
(10,681)
(9,270)
(214,432)
216,660
(872)
$ 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)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . .
16,748
18,901
23,855
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities of securities available for sale . . . . . . . . . . . . . . . . . . . . . . .
Maturities of securities held for investment . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of securities available for sale . . . . . . . . . . . . . . . .
Proceeds from sale of securities held for investment . . . . . . . . . . . . . . .
Purchases of securities available for sale . . . . . . . . . . . . . . . . . . . . . . .
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
67,233
10,511
148,453
85,551
(158,871)
(170,636)
32
125,392
25,730
112,420
—
(92,627)
(240,763)
151
166,261
48,675
50,974
—
(143,339)
(281,057)
—
Bank Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,125
4,915
—
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 . . . . . . . . . . . . . . . . . . . . . . .
(12,380)
(6,799)
—
(6,329)
(6,991)
1,302
(1,987)
(3,601)
—
—
—
48,622
—
121,046
13,538
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . .
(26,781)
(28,178)
(29,490)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in federal funds purchased and repurchase
agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in borrowings and subordinated debt . . . . . . . . . . .
Stock based employee benefit plans . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend reinvestment plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . .
96,307
(194,091)
89,491
(118,376)
50,000
450
92
(12,180)
16,293
6,260
92,215
103,555
(19,000)
1,760
—
(11,225)
(119,001)
(128,278)
220,493
8,009
47,238
1,324
—
(9,612)
136,450
130,815
89,678
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . .
$ 98,475
$ 92,215
$ 220,493
See notes to consolidated financial statements.
53
SEACOAST BANKING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Dollars in thousands, except share amounts)
Common Stock
Shares Amount
Paid-in
Capital
Retained
Earnings
Treasury
Stock
BALANCE AT DECEMBER 31, 2004 . . . . 15,468 $1,710 $23,695 $101,423 $(16,172)
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
—
—
—
—
—
(1)
—
—
—
—
—
—
—
—
— 20,759
—
—
—
—
—
—
— (9,612)
—
—
(153)
153
—
—
—
—
—
(33)
—
employee benefit plans . . . . . . . . . . . . . . .
119
(74)
(235)
1,666
Common stock issued for the acquisition of
Century National Bank . . . . . . . . . . . . . . .
1,498
— 19,126
— 14,321
Accumulated
Other
Comprehensive
Income (Loss), Net
Total
$(2,444)
$108,212
—
(1,430)
20
—
—
—
—
—
—
20,759
(1,430)
20
19,349
(9,612)
(33)
—
—
33,447
BALANCE AT DECEMBER 31, 2005 . . . . 17,084
Comprehensive Income:
1,710
42,900
112,182
(218)
(3,854)
152,720
Net income . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on securities . . . . . . . .
Net reclassification adjustment . . . . . . . . .
Net unrealized (loss) on cash flow interest
rate swap . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . .
Cash dividends at $0.61 per share . . . . . . . . .
Treasury stock acquired . . . . . . . . . . . . . . . .
SFAS No. 123R expense . . . . . . . . . . . . . . .
Dissenting shareholders of Century National
—
—
—
—
—
—
(12)
—
—
—
—
—
—
—
—
—
— 23,854
—
—
—
—
—
—
—
—
— (11,225)
—
—
—
332
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
(1)
(108)
—
Common stock issued for stock based
employee benefit plans . . . . . . . . . . . . . . .
132
12
1,839
Common stock issued for the acquisition of
Big Lake National Bank . . . . . . . . . . . . . .
1,775
178
43,417
—
—
—
—
—
—
—
(298)
—
—
206
—
—
1,294
217
(12)
—
—
—
—
—
—
—
23,854
1,294
217
(12)
25,353
(11,225)
(298)
332
(109)
2,057
43,595
BALANCE AT DECEMBER 31, 2006 . . . . 18,974
Comprehensive Income:
Net income . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gain on securities . . . . . . . .
Net reclassification adjustment . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . .
Cash dividends at $0.61 per share . . . . . . . . .
Treasury stock acquired . . . . . . . . . . . . . . . .
SFAS No. 123R expense . . . . . . . . . . . . . . .
Common stock issued for stock based
employee benefit plans . . . . . . . . . . . . . . .
Dividend reinvestment plan . . . . . . . . . . . . .
—
—
—
—
—
(161)
—
291
6
1,899
88,380
124,811
(310)
(2,355)
212,425
—
—
—
—
—
—
—
21
—
—
—
—
9,765
—
—
—
—
—
—
516
2,173
—
—
— (12,180)
—
423
—
—
— (2,659)
—
—
2,127
(6)
1,678
98
—
—
—
—
—
—
—
9,765
516
2,173
12,454
(12,180)
(2,659)
423
3,826
92
BALANCE AT DECEMBER 31, 2007 . . . . 19,110 $1,920 $90,924 $122,396 $ (1,193)
$
334
$214,381
See notes to consolidated financial statements.
54
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A Significant Accounting Policies
General: Seacoast Banking Corporation of Florida (“Seacoast”) is a single segment bank holding
company with one operating subsidiary bank, Seacoast National Bank (together the “Company”). The bank’s
service area includes Okeechobee, Highlands, Hendry, Hardee, Glades, DeSoto, Palm Beach, Martin, St. Lucie,
Brevard, Indian River, Broward, Orange and Seminole counties, which are located in central and southeast
Florida. The bank operates full service branches within its markets.
The consolidated financial statements include the accounts of Seacoast and all its majority-owned
subsidiaries but exclude three trusts created for the issuance of trust preferred securities. 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, and contingent liabilities.
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 and for trading, contingent
liabilities and goodwill. Actual results could differ from those estimates.
Securities: Securities are classified at date of purchase as trading, available for sale or held to maturity.
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 quoted market prices for similar securities, pricing
models or discounted cash flow analyses, using observable market data where available. Debt securities that
the Company has the ability and intent to hold to maturity are carried at amortized cost.
Realized gains and losses, including other than temporary impairments, are included in noninterest
income as investment securities gains (losses). Interest and dividends on securities, including amortization of
premiums and accretion of discounts, is recognized in interest income on an accrual basis using the interest
method. The Company anticipates prepayments of principal in the calculation of the effective yield for
collateralized mortgage obligations and mortgage backed securities by obtaining estimates of prepayments
from independent third parties. The adjusted cost of each specific security sold is used to compute realized
gains or losses on the sale of securities on a trade date basis.
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
55
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
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. Interest income is recognized on an accrual basis.
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 on a straight-line basis 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. When interest accruals are discontinued, interest credited to income
on the current year is reversed. Consumer loans that become 120 days past due are generally charged off.
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
56
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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
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 are classified as held for sale based on management’s intent to sell the
loans, either as part of a core business strategy or related to a risk mitigation strategy. 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 fair value less costs to sell. At the time of the transfer to loans held for sale, if the fair value
is less than cost, the difference is recorded as additional provision for credit losses in the results of operations.
Fair 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, 2007 fair 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 fair
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 fair
value of loans held for sale are recorded in other fee income in the results of operations. Fair 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.
Fair Value Measurements (SFAS 157): The Company measures or monitors many of its assets and
liabilities on a fair value basis. Fair value is used on a recurring basis for assets and liabilities that are elected
to be accounted for under SFAS No. 159 as well as for certain assets and liabilities in which fair value is the
primary basis of accounting. Examples of these include derivative instruments, available for sale and trading
securities, loans held for sale and long-term debt. Additionally, fair value is used on a non-recurring basis to
evaluate assets or liabilities for impairment or for disclosure purposes. Examples of these non-recurring uses
of fair value include certain loans held for sale accounted for on a lower of cost or fair value, mortgage
servicing rights, goodwill, and long-lived assets. Fair value is defined as the price that would be received to
57
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Depending on the nature of the asset or liability, the Company uses various valuation
techniques and assumptions when estimating fair value, which are in accordance with SFAS No. 157.
In accordance with SFAS No. 157, the Company applied the following fair value hierarchy:
Level 1 — Assets or liabilities for which the identical item is traded on an active exchange, such as
publicly-traded instruments or futures contracts.
Level 2 — Assets and liabilities valued based on observable market data for similar instruments.
Level 3 — Assets and liabilities for which significant valuation assumptions are not readily observable in
the market; instruments valued based on the best available data, some of which is internally-developed, and
considers risk premiums that a market participant would require.
When determining the fair value measurements for assets and liabilities required or permitted to be
recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in
which it would transact and considers assumptions that market participants would use when pricing the asset
or liability. When possible, the Company looks to active and observable markets to price identical assets or
liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to market
observable data for similar assets and liabilities. Nevertheless, certain assets and liabilities are not actively
traded in observable markets and the Company must use alternative valuation techniques to derive a fair value
measurement.
Fair Value Option (SFAS 159):
In conjunction with the adoption of SFAS 157, the Company early-
adopted SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159), as of
January 1, 2007. SFAS 159 provides an option for most financial assets and liabilities to be reported at fair
value on an instrument-by-instrument basis with changes in fair value reported in earnings. After the initial
adoption, the election is made at the acquisition of a financial asset, financial liability, or a firm commitment
and it may not be revoked. Under the SFAS 159 transition provisions, the Company has elected to report
certain financial instruments and other items at fair value on a contract-by-contract basis, with future changes
in value reported in earnings. SFAS 159 provides an opportunity to mitigate volatility in reported earnings that
was caused by measuring hedged assets and liabilities that were previously required to use an accounting
method other than fair value, while the related economic hedges were reported at fair value.
Other Real Estate Owned: Other real estate owned (“OREO”) 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 and amortization are recognized 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.
Goodwill and Other Intangible Assets: Goodwill and intangible assets with indefinite lives are not
subject to amortization. Rather they are subject to impairment tests at least annually, or more often if events or
circumstances indicate there may be impairment. The Company’s goodwill evaluation for the year ended
December 31, 2007, indicated that none of the goodwill was 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 to determine whether there have been any events or circumstances to indicate the recorded amount is
58
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
not recoverable from projected undiscounted net operating cash flows. A loss is recognized to reduce the
carrying amount to fair value, where appropriate.
Revenue Recognition: Revenue is recognized when the earnings process is complete and collectibility is
assured. Brokerage fees and commissions are recognized on a trade date basis. Asset management fees,
measured by assets at a particular date, are accrued as earned. Commission expenses are recorded when the
related revenue is recognized.
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: Seacoast uses the asset and liability method of accounting for 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. See Note L, income taxes
for related disclosures.
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.
Stock-Based Compensation: 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
59
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
option-pricing model with market assumptions. This amount is amortized on a straight-line basis over the
vesting period, generally five years. (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 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:
In April 2007, the FASB issued FSP FIN 39-1, “Amendment of
FASB Interpretation No. 39.” FSP FIN 39-1 permits companies to offset fair value amounts recognized for the
right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair
value amounts recognized for derivative instruments executed with the same counterparty under the same
master netting arrangement that have been offset in accordance with FIN 39. Under the provisions of this
pronouncement, a company shall make an accounting policy decision whether or not to offset fair value
amounts recognized for derivative instruments under master netting arrangements. A company’s decision
whether to offset or not must be applied consistently. FSP FIN 39-1 is effective for annual periods beginning
after November 15, 2007. The Company adopted FSP FIN 39-1 effective January 1, 2008 and currently has
elected not to offset fair value amounts related to collateral arrangements recognized for derivative instruments
under master netting arrangements; therefore, the adoption did not have an impact on our financial position
and results of operations.
In November 2007, the SEC issued Staff Accounting Bulletin (“SAB”) No. 109. SAB 109 revises the
view expressed in SAB No. 105 and states that the expected net future cash flows related to the associated
servicing of a loan should be included in the measurement of all written loan commitments that are accounted
for at fair value through earnings. SAB No. 109 expands to all loan commitments, the view that internally-
developed intangible assets, such as customer relationship intangible assets, should not be recorded as part of
the fair value of a derivative loan commitment. SAB No. 109 is effective on a prospective basis for loan
servicing activities related to derivative loan commitments issued or modified in fiscal quarters beginning after
December 15, 2007. Effective January 1, 2008, the Company began including the value associated with the
servicing of loans in the measurement of all written loan commitments issued after that date that are accounted
for at fair value through earnings. The adoption did not have a material impact on the Company’s financial
position and results of operations.
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations”, which revises
SFAS No. 141 and changes multiple aspects of the accounting for business combinations. Under the guidance
in SFAS No. 141R, the acquisition method must be used, which requires the acquirer to recognize most
identifiable assets acquired, liabilities assumed, and noncontrolling interests in the acquiree at their full fair
value on the acquisition date. Goodwill is to be recognized as the excess of the consideration transferred plus
the fair value of the noncontrolling interest over the fair values of the identifiable net assets acquired.
Subsequent changes in the fair value of contingent consideration classified as a liability are to be recognized
in earnings, while contingent consideration classified as equity is not to be remeasured. Costs such as
transaction costs are to be excluded from acquisition accounting, generally leading to recognizing expense and
additionally, restructuring costs that do not meet certain criteria at acquisition date are to be subsequently
recognized as post-acquisition costs. SFAS No. 141R is effective for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company is currently evaluating the impact that this issuance will have on its
financial position and results of operations; however, it anticipates that the standard will lead to more volatility
in the results of operations during the periods subsequent to an acquisition.
60
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note B Securities Trading
Trading securities purchased during 2007 consisted of U.S. Treasury bills, notes and U.S. Government
Agency notes and were primarily used for customer repurchase agreements and pledging requirements. At
December 31, 2007, the trading portfolio consisted of $13.9 million in US Treasury notes with maturities of
less than five months.
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 $12,350,000 for 2007 and
$20,340,000 for 2006.
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, 2007, 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 $24,572,000 as dividends to the Company as of December 31, 2007, without prior approval of
the Comptroller of the Currency.
Note D Securities
The amortized cost and fair value of securities at December 31, 2007, 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.
Due in less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through five years . . . . . . . . . . . . . . . . . . .
Due after five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateralized mortgage obligations of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . . . . . . . . . .
No contractual maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Held for Investment
Fair
Value
Amortized
Cost
Available for Sale
Fair
Value
Amortized
Cost
(In thousands)
$ — $ — $
584
5,561
6,145
582
5,608
6,190
7,997
22,074
2,021
32,092
$ 8,006
22,399
2,057
32,462
—
—
31,970
32,303
1,960
23,795
—
1,946
23,546
—
156,894
29,945
3,517
157,012
29,622
3,517
$31,900
$31,682
$254,418
$254,916
Proceeds from sales of securities available for sale during 2007, were $148,453,000 with gross gains of
$120,000 and gross losses of $2,885,000. Proceeds from sales of securities held for investment during 2007
were $85,551,000 with gross losses of $2,283,000. Securities were sold as part of the securities portfolio
restructuring during the first quarter.
61
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the first quarter of 2007, due to the ongoing inverted yield curve and other economic challenges,
the Company determined it was in the best interest of shareholders to restructure its balance sheet by selling
low yielding securities and paying off overnight borrowings. At the date that the lower yielding securities were
sold, the Company had concluded that they would elect the fair value option under SFAS No. 159 for these
securities and therefore considered them to be trading securities. This conclusion was based on the Company’s
understanding and interpretation of SFAS No. 159 at that time and followed a thoughtful evaluation and
extensive discussion by management, the audit committee, and the Company’s independent registered public
accounting firm. Following the sales of these securities, additional interpretations of the requirements for early
adoption of SFAS No. 159 were discussed publicly. These discussions included general comments made by the
Securities and Exchange Commission and guidance from the Center for Audit Quality. After considering these
interpretations and further analysis by the accounting industry, the Company concluded that it should not have
elected the fair value option for these securities. Accordingly, the Company presented these securities as
available for sale and held for investment and recorded other-than-temporary impairment of $5.1 million in the
Consolidated Statement of Income.
Proceeds from sales of securities available for sale 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 available for sale were
$50,974,000 with gross gains of $3,000 and no gross losses.
Securities with a carrying value of $242,325,000 and a fair value of $242,312,000 at December 31, 2007,
were pledged as collateral for repurchase agreements, United States Treasury deposits, other public deposits
and trust deposits.
Gross
Amortized
Cost
December 31, 2007
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. . . . . . . . . . . . . . . . . . . $ 30,071
$ 334
$ —
$ 30,405
Mortgage-backed securities of Government Sponsored
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,970
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
156,894
29,945
2,021
3,517
333
792
—
36
—
—
32,303
(674)
(323)
—
—
157,012
29,622
2,057
3,517
$254,418
$1,495
$(997)
$254,916
SECURITIES HELD FOR INVESTMENT
Collateralized mortgage obligations of Government
Sponsored Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Private collateralized mortgage obligations . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . .
1,960
23,795
6,145
$ 31,900
62
$ —
—
53
$
53
$ (14)
(249)
(8)
1,946
23,546
6,190
$(271)
$ 31,682
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private collateralized mortgage obligations . . . . . . . . . . . .
Obligations of state and political subdivisions . . . . . . . . . .
72,398
51,189
6,371
46
—
67
(1,623)
(1,051)
(2)
70,821
50,138
6,436
$129,958
$113
$(2,676)
$127,395
All of the Company’s securities which had unrealized losses at December 31, 2007 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.
December 31, 2007
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. . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ — $ — $
Mortgage-backed securities of
Government Sponsored Entities . . . . . .
—
—
Collateralized mortgage obligations of
Government Sponsored Entities . . . . . .
90,009
(688)
—
155
—
—
— $ —
—
—
90,164
(688)
Private collateralized mortgage
obligations . . . . . . . . . . . . . . . . . . . . .
—
Obligations of state and political
subdivisions . . . . . . . . . . . . . . . . . . . .
204
—
—
53,167
(572)
53,167
(572)
1,253
(8)
1,457
(8)
Total temporarily impaired securities . . . . $90,213
$(688)
$54,575
$(580)
$144,788
$(1,268)
63
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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:
2007
2006
(In thousands)
Real estate mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,074,814
609,567
Construction and land development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
126,695
Commercial and financial
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
86,362
Installment loans to individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
951
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 949,824
571,133
128,101
83,428
625
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,898,389
$1,733,111
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 $10,731,000 and $11,210,000 at December 31, 2007 and
2006, respectively. During 2007, $4,738,000 of new loans were made and repayments totaled $5,217,000.
At December 31, 2007 and 2006, participations of loans sold totaled $22,754,000 and $16,002,000,
respectively, while loans purchased totaled $51,948,000 and $44,622,000, respectively. At December 31, 2007,
loan syndications sold and purchased totaled $10,429,000 and $22,288,000, respectively. No loan syndication
activity occurred during 2006.
Note F Impaired Loans and Allowance for Loan Losses
At December 31, 2007 and 2006, the Company’s recorded investment in impaired loans and related
valuation allowance was as follows:
2007
2006
Recorded
Investment
Valuation
Allowance
Recorded
Investment
Valuation
Allowance
Impaired loans . . . . . . . . . . . . . . . . . . . . . . . .
$67,762
$67,762
( In thousands )
$4,183
$4,183
$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, 2007, 2006 and 2005 was $22,238,000, $2,119,000 and
$174,000, 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, 2007, 2006 and 2005, the Company did not record any interest
income on impaired loans.
In 2007, and 2006 impaired loans with valuation allowances totaled approximately $30.2 million and
$8 million, respectively.
The nonaccrual loans and accruing loans past due 90 days or more for the year ended December 31, 2007
were $67,834,000 and $25,000, respectively, and were $12,465,000 and $64,000, respectively, at the end of 2006.
64
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Transactions in the allowance for loan losses for the three years ended December 31, are summarized as
follows:
Balance, beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,915
12,745
Provision charged to operating expense . . . . . . . . . . . . . . . . . . . . . .
Allowance for loan losses of acquired banks . . . . . . . . . . . . . . . . . .
—
(5,950)
Charge offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
192
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
2006
( In thousands )
$ 9,006
3,285
2,518
(311)
417
2005
$6,598
1,317
1,225
(415)
281
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,902
$14,915
$9,006
Note G Bank Premises and Equipment
Bank premises and equipment are summarized as follows:
December 31, 2007
Premises (including land of $10,075) . . . . . . . . . . . . . . . . . . .
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2006
Premises (including land of $10,260) . . . . . . . . . . . . . . . . . . .
Furniture and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated
Depreciation &
Amortization
(In thousands)
Net
Carrying
Value
$(14,181)
(12,179)
$33,344
7,582
$(26,360)
$40,926
$(13,026)
(11,033)
$30,266
6,804
$(24,059)
$37,070
Cost
$47,525
19,761
$67,286
$43,292
17,837
$61,129
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, 2007, are presented below.
Balance, December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2007
and 2006
(In thousands)
$31,727
17,674
Balance, December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49,401
412
Balance, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$49,813
Included in additions to goodwill during 2007 and 2006 are $412,000 and $261,000, respectively, related
to fair value refinements made in relation to the acquisition of Big Lake in 2006 and Century National Bank
in 2005.
65
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The gross carrying amount and accumulated amortization for each of the Company’s identified intangible
assets subject to amortization at December 31, 2007 and 2006, are presented below.
December 31, 2007
December 31, 2006
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
Deposit base intangible . . . . . . . . . . . . . . . . . . . .
$9,494
$9,494
(In thousands)
$(2,855)
$(2,855)
$9,494
$9,494
$(1,596)
$(1,596)
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.
Intangible amortization expense related to identified intangible assets for each of the years in the three-
year period ended December 31, 2007, is presented below.
Year Ended December 31
2007
2006
(In thousands)
2005
Intangible Amortization
Identified intangible assets
Deposit base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,259
$1,063
$533
The estimated annual identified intangible assets amortization expense determined using the straight line
method in each of the five years subsequent to December 31, 2007, is as follows (in thousands): 2008, $1,259;
2009, $1,259; 2010, $985; 2011, $847 and 2012, $788.
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. . . . . . . . . . . .
Weighted average interest rate at end of year. . . . . . . . . . . . . . .
Average amount outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average interest rate . . . . . . . . . . . . . . . . . . . . . . . . .
2007
$220,940
2006
(In thousands)
$206,476
2005
$107,073
3.12%
4.79%
3.56%
$148,610
$119,045
$ 84,972
4.48%
4.30%
2.60%
On July 31, 1998, the Company obtained $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 percent. During 2007, the Company obtained advances of $25,000,000 each on September 25, 2007 and
November 27, 2007, increasing total borrowings from the FHLB to $65,000,000 at December 31, 2007. The
new advances mature in ten years on September 15, 2017 and November 27, 2017, respectively, and have
fixed rates of 3.64 percent and 2.70 percent at December 31, 2007, respectively, payable quarterly; the FHLB
has a perpetual three-month option to convert the interest rate on either advance to an adjustable rate and the
Company has the option to prepay the advance should the FHLB convert the interest rate.
The Company’s subsidiary bank has unused lines of credit of $334,640,000 at December 31, 2007.
66
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At December 31, 2006, there was no balance 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
$12,000,000 term loan was repaid on June 29, 2007 with the proceeds from a subordinated debt offering.
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 I and II”) which each
completed a private sale of $20.0 million of floating rate preferred securities. On June 29, 2007, the Company
issued an additional $12,372,000 in junior subordinated debentures which was issued in conjunction with the
formation of a Delaware trust subsidiary, SBCF Statutory Trust III (“Trust III”), which completed a private
sale of $12,000,000 million of floating rate trust preferred securities. The rates on the trust preferred securities
are the 3-month LIBOR rate plus 175 basis points, the 3-month LIBOR rate plus 133 basis points, and the
3-month LIBOR rate plus 135 basis points, respectively. The rates, which adjust every three months, are
currently 6.58 percent, 6.32 percent, and 6.34 percent, respectively, per annum. The trust preferred securities
mature in thirty years, and may be redeemed without penalty on or after June 10, 2010, March 15, 2011, and
September 15, 2012, 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 issued $619,000,
$619,000 and $372,000, respectively, of common equity securities to the Company. The proceeds of the
offering of trust preferred securities and common equity securities were used by Trusts I and II to purchase the
$41.2 million junior subordinated deferrable interest notes issued by the Company, and by Trust III to purchase
the $12.4 million junior subordinated deferrable interest notes issued by the Company, all of 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 $52.0 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.
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
67
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
basis under the plan. The profit sharing contributions charged to operations were $1,187,000 in 2007,
$2,041,000 in 2006, and $2,196,000 in 2005.
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 were 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 791,000 shares for the 1991, 1996 and 2000 plans, respectively,
through December 31, 2007. Under the 2000 plan the Company granted stock settled appreciation rights
(“SSARs”) of 306,000 shares at a weighted average fair value of $4.21 per share and issued 58,000 shares of
restricted stock awards at $22.14 per share during 2007, granted options on 116,000 shares at a weighted
average fair value of $5.71 per share and issued 21,000 shares of restricted stock awards at $26.72 per share
during 2006, and granted options on 56,000 shares at a weighted average fair value of $3.35 per share and
issued 28,000 shares of restricted stock awards at $19.45 per share during 2005. 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
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
162,000.
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 of 4.50 percent in 2007, 5.10 percent to 5.18 percent in 2006, and 3.90 percent
to 4.50 percent in 2005; dividend yield of 2.72 percent in 2007, 2.19 percent to 2.25 percent in 2006 and
2.36 percent in 2005; weighted average expected lives of the stock options of 5 years and 7 years in 2007 and
2006, and 7 years in 2005; and volatility of the Company’s common stock of 19 percent in 2007 and
18 percent in 2006 and 2005. Additionally, the estimated fair value of stock options and SSARs is reduced, as
applicable, by an estimate of forfeiture experience of 10 percent in 2007, 22 percent for 2006, and 13 percent
for 2005.
68
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents a summary of stock option and SSARs activity for the year ended
December 31, 2007:
Dec. 30, 2004 . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . .
Dec. 30, 2005 . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . .
Number of
Shares
778,000
56,000
(80,000)
(17,000)
737,000
116,000
(99,000)
(4,000)
Dec. 30, 2006 . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . .
750,000
306,000
(178,000)
(34,000)
Option or
SSAR Price
per Share
$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
6.59 — 27.36
22.16 — 22.22
7.73 — 22.40
17.08 — 26.72
Dec. 30, 2007 . . . . . . . . . . . . . . . . .
844,000
7.46 — 27.36
Weighted Average
Exercise Price
$12.41
18.89
8.11
18.92
13.22
26.74
7.59
19.74
16.03
22.22
11.68
23.53
18.89
Aggregate
Intrinsic
Value
$7,656,000
$7,171,000
$6,577,000
$ 277,000
Cash received for stock options exercised during 2007 totaled $2,084,000; the intrinsic value of options
exercised totaled $1,909,000 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.
The following table summarizes information about stock options outstanding and exercisable at Decem-
ber 31, 2007:
Options / SSARs Outstanding
Options / SSARs Exercisable (Vested)
Number of
Shares
Outstanding
844,000
Weighted Average
Remaining
Contractual Life
in Years
6.45
Number of
Shares
Exercisable
368,000
Weighted
Average
Exercise
Price
13.86
Weighted Average
Remaining
Contractual Life
in Years
3.60
Aggregate
Intrinsic
Value
$277,000
Since December 31, 2006, SSARs for 306,000 shares have been granted, stock options for 81,000 shares
have vested and stock options for 34,000 shares were forfeited. Adjusting for potential forfeiture experience,
non-vested stock options and SSARs for 419,000 shares were outstanding at December 31, 2007 and are as
follows:
Number of
Non-Vested
Stock Options
and SSARs
419,000
Weighted
Average
Remaining
Contractual Life
In Years
8.67
Weighted
Average
Fair Value
4.29
Remaining
Unrecognized
Compensation
Cost
$1,548,000
Weighted
Average
Remaining
Recognition
Period in Years
3.67
Since December 31, 2006, restricted stock awards on 58,000 shares have been issued, 19,000 awards have
vested and 7,000 awards were forfeited. Non-vested restricted stock awards for a total of 193,000 shares were
outstanding at December 31, 2007, 32,000 more than at December 31, 2006, and are as follows:
Number of
Non-Vested
Restricted Stock
Award Shares
193,000
Remaining
Unrecognized
Compensation Cost
$1,326,000
69
Weighted Average
Remaining Recognition
Period in Years
3.36
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The total intrinsic value of stock options exercised in 2006, and 2005 was $1.9 million and $1.1 million,
respectively.
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.
In 2007, 2006 and 2005 the Company recognized $735,000 ($452,000 after tax), $1,046,000 ($742,000
after tax) and $965,000 (658,000 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 significant 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 are recognized on a straight-line basis over the term of
the lease. At December 31, 2007, future minimum lease payments under leases with initial or remaining terms
in excess of one year are as follows:
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(In thousands)
3,519
2,882
2,017
1,961
1,869
22,294
$34,542
Rent expense charged to operations was $4,092,000 for 2007, $3,463,000 for 2006 and $2,539,000 for
2005. Certain leases contain provisions for renewal and change with the consumer price index.
Certain property is leased from related parties of the Company. Lease payment to these individuals were
$308,000 in 2007, $285,000 in 2006 and $270,000 in 2005.
Note L Income Taxes
The provision (benefit) for income taxes is as follows:
2007
Year Ended December 31
2006
(In thousands)
2005
Current
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,036
(4)
$13,760
744
$11,642
564
Deferred
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,465)
(1,169)
(1,327)
(218)
(469)
(83)
$ 4,398
$12,959
$11,654
70
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Temporary differences in the recognition of revenue and expense for tax and financial reporting purposes
resulted in deferred income taxes as follows:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (125)
(2,924)
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(269)
Interest and fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19)
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Fair value of derivative instruments . . . . . . . . . . . . . . . . . . . . . . .
(472)
Deposit base intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(36)
Stock compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(310)
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(561)
State tax loss carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
Year Ended December 31
2006
(In thousands)
$ (232)
(1,330)
748
—
—
(407)
(6)
(270)
—
(48)
2005
$ 110
(457)
54
—
271
(183)
(158)
(167)
—
(22)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(4,634)
$(1,545)
$(552)
The difference between the total expected tax expense (computed by applying the U.S. Federal tax rate of
35% to pretax income in 2007, 2006 and 2005) and the reported income tax expense relating to income before
income taxes is as follows:
Tax rate applied to income before income taxes . . . . . . . . . . . .
Increase (decrease) resulting from the effects of:
Year Ended December 31
2006
(In thousands)
$12,885
2007
$ 4,957
2005
$11,345
Tax exempt interest on obligations of states and political
subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(197)
410
148
253
(165)
(184)
75
(178)
(73)
(168)
—
69
Federal tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,571
(1,173)
12,433
526
11,173
481
Applicable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,398
$12,959
$11,654
71
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The net deferred tax assets (liabilities) are comprised of the following:
December 31
2007
2006
(In thousands)
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,603
1,658
Accrued interest and fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Net unrealized securities losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
201
Accrued stock compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
561
State tax loss carryforward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,023
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax asset valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,065
—
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposit base intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized securities gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,870)
(2,429)
(188)
(103)
$ 5,679
1,389
—
1,435
165
—
713
9,381
—
(1,995)
(2,901)
—
(21)
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,590)
(4,917)
Net deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,475
$ 4,464
The realization of deferred income tax assets may be based on the utilization of carrybacks to prior tax
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 scheduling of temporary differences. The Company’s taxable income for the last two years
exceeded $64 million, an amount in excess of the net deferred tax assets.
At December 31, 2007 the Company has state net operating loss carryforwards of approximately
$9.9 million available to offset future Florida taxable income through 2027. The Company expects to fully
utilize the net operating losses before they expire.
The Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (FIN 48) which clarifies the criteria for recognizing tax benefits under FASB
Statement No. 109, “Accounting for Income Taxes”. The Company adopted the interpretation in the first
quarter 2007 with no material impact on its consolidated financial position, results of operations or liquidity.
The Company recognizes interest and penalties related, as appropriate, as part of the provisioning for income
taxes. Interest of $13,000 was accrued during 2007 and is outstanding at December 31, 2007. The Internal
Revenue Service (IRS) examined the federal income tax return for the year 2003. The IRS did not propose
any material adjustments related to this examination. The following are the major tax jurisdictions in which
the Company operates and the earliest tax year subject to examination:
Jurisdiction
Tax Year
United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004
2004
The Company has unrecognized income tax benefits of $99,000 related to uncertain income tax positions
related to the current year end, and none at the beginning of the year. The positions will be monitored
72
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
prospectively and the benefit recorded should unambiguous interpretation of law and regulation, a review by
the taxing authority, or relevant circumstances, including expiration of the statute of limitation, deem
recognition of the benefit.
Income taxes or (benefit) related to securities transactions were $(1,795,000), $(60,000) and $49,000 in
2007, 2006 and 2005, respectively. Of the amount recorded for 2007, a tax benefit of $(1,822,000) was
recorded for losses related to the securities portfolio restructuring during the first quarter. The Company sold
approximately $225 million in low yielding securities and recorded other-than-temporary impairment of
$5.1 million during the first quarter of 2007.
Note M Noninterest Income and Expenses
Details of noninterest income and expense follow:
2007
Year Ended December 31
2006
(In thousands)
2005
Noninterest income
Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . $ 7,714
2,575
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,409
Mortgage banking fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,935
Brokerage commissions and fees . . . . . . . . . . . . . . . . . . . . . . . .
2,865
Marine finance fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,306
Debit card income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other deposit based EFT fees . . . . . . . . . . . . . . . . . . . . . . . . . . .
451
2,841
Merchant income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Gain on sale of partnership interest. . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
1,814
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,784
2,858
1,131
3,002
2,709
2,149
421
2,545
1,147
—
1,514
Securities restructuring losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities gains (losses), net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,910
(5,118)
70
24,260
—
(157)
$ 5,022
2,573
1,810
2,562
3,068
1,714
417
2,230
—
(267)
1,388
20,517
—
128
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19,862
$24,103
$20,645
Noninterest expense
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,575
7,337
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,581
Outsourced data processing costs . . . . . . . . . . . . . . . . . . . . . . . .
1,905
Telephone/data lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,677
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,863
Furniture and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,075
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,070
Legal and professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FDIC assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
225
1,259
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,856
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$29,146
7,322
7,443
1,836
7,435
2,523
4,359
2,792
325
1,063
8,801
$23,783
6,313
6,477
1,357
5,126
2,121
3,194
2,595
225
533
7,376
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $77,423
$73,045
$59,100
73
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
At December 31, 2007 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. The Company implemented a dividend reinvestment plan
during 2007, issuing approximately 6,000 shares from treasury stock since the beginning of the year.
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) . . . . . . . . . . . . . . . . . . . . . . . .
209,655
9.10
92,185 (cid:2)4.00%
assets) . . . . . . . . . . . . . . . . . . . . . . . .
197,539
8.53
92,619 (cid:2)4.00%
12.17% $152,598 (cid:2)8.00%
76,299 (cid:2)4.00%
10.99
11.70% $145,336 (cid:2)8.00%
72,668 (cid:2)4.00%
10.87
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, 2007:
Total Capital (to risk-weighted assets) . . $232,080
Tier 1 Capital (to risk-weighted assets) . .
209,655
Tier 1 Capital (to adjusted average
At December 31, 2006:
Total Capital (to risk-weighted assets) . . $212,578
197,539
Tier 1 Capital (to risk-weighted assets) . .
Tier 1 Capital (to adjusted average
SEACOAST NATIONAL BANK (A
WHOLLY OWNED BANK
SUBSIDIARY)
At December 31, 2007:
Total Capital (to risk-weighted assets) . . $229,865
207,440
Tier 1 Capital (to risk-weighted assets) . .
Tier 1 Capital (to adjusted average
12.06% $152,434 (cid:2)8.00% $190,542 (cid:2)10.00%
76,217 (cid:2)4.00% 114,325 (cid:2) 6.00%
10.89
assets) . . . . . . . . . . . . . . . . . . . . . . . .
207,440
9.01
92,118 (cid:2)4.00% 115,148 (cid:2) 5.00%
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
assets) . . . . . . . . . . . . . . . . . . . . . . . .
205,134
8.86
N/A — Not Applicable
12.12% $145,235 (cid:2)8.00% $181,543 (cid:2)10.00%
72,617 (cid:2)4.00% 108,926 (cid:2) 6.00%
11.30
92,568 (cid:2)4.00% 115,710 (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
74
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
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, 2007, 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, 2007, the Company’s deposit-taking bank subsidiary
met the capital and leverage ratio requirements for well capitalized banks.
Note O
Seacoast Banking Corporation of Florida
(Parent Company Only) Financial Information
Balance Sheets
December 31
2007
2006
(In thousands)
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Securities purchased under agreement to resell with subsidary bank, maturing within
10
$
10
30 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,868
265,776
441
4,502
261,257
254
$268,095
$266,023
LIABILITIES AND SHAREHOLDERS’ EQUITY
Borrowed funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $ 12,000
41,238
360
212,425
53,610
104
214,381
$268,095
$266,023
75
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Statements of Income
Income
2007
Year Ended December 31
2006
(In thousands)
2005
Dividends from subsidiary Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest/other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,223
390
$12,705
451
$ 8,600
316
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income tax benefit and equity in undistributed income of
subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before equity in undistributed income of subsidiaries. . . . . . . . . . . . .
Equity in undistributed income (losses) of subsidiaries . . . . . . . . . . . . . . . . .
14,613
3,716
545
10,352
1,355
11,707
(1,942)
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
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,765
$23,854
$20,759
76
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Statement of Cash Flows
2007
Year Ended December 31
2006
(In thousands)
2005
Cash flows from operating activities
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . .
$
390
(3,695)
14,223
1,233
0
255
12,406
$
310
(3,492)
12,705
1,706
137
(328)
11,038
$
134
(978)
8,600
177
156
(131)
7,958
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 (repayment of) borrowing . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock based employment plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividend reinvestment plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . .
Net change in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,634
—
(3,402)
(768)
(12,000)
12,000
450
92
(12,180)
(11,638)
(1,487)
(109)
(5,977)
(7,573)
2,666
—
(49,574)
(46,908)
6,000
—
1,760
—
(11,225)
(3,465)
6,000
41,238
1,324
—
(9,612)
38,950
—
10
10
$
—
10
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
activities:
$ 9,765
$ 23,854
$ 20,759
Equity in undistributed income (losses) of subsidiaries . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,942
699
(13,512)
696
(13,001)
200
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . .
$ 12,406
$ 11,038
$ 7,958
77
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
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 $351,053,000 in commitments to extend credit
outstanding at December 31, 2007, $97,223,000 is secured by 1-4 family residential properties for individuals
with approximately $19,650,000 at fixed interest rates ranging from 5.12% to 7.87%.
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 liquidity 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, 2007 and 2006 amounted to $10,704,000 and $9,016,000 respectively.
December 31
2007
2006
(In thousands)
Contract or Notional Amount
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Standby letters of credit and financial guarantees written:
$351,053
$420,968
Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,566
725
8,176
1,021
78
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities restructuring losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on sale of securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on fair value of interest rate swap . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on sale or write down of foreclosed assets . . . . . . . . . . . . . . . .
Loss (gain) on disposition of equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock based employee benefit expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007
Year Ended December 31
2006
(In thousands)
$23,854
2005
$20,759
$ 9,765
3,195
(1,249)
136
(9,270)
2,228
12,745
—
(4,634)
5,118
(70)
—
(28)
50
(119)
735
458
273
(105)
(1,596)
(872)
(12)
2,839
(54)
(11)
—
(3,448)
3,285
(1,147)
(1,545)
—
157
—
(44)
(12)
181
1,046
(1,687)
461
(2,311)
654
(1,903)
(1,414)
2,150
1,405
165
—
(94)
1,317
—
(552)
—
(128)
267
(36)
—
—
965
(1,005)
461
(657)
(72)
(1,074)
(16)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16,748
$18,901
$23,855
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 trading securities . . . . . . . . . . .
$
859
817
3,974
$ 2,242
139
—
$ (2,532)
—
—
Note R Fair Value
Fair Value Instruments Measured at Fair Value
As discussed in Note A, “Accounting Policies,” to the Consolidated Financial Statements, the Company
early adopted the fair value financial accounting standards SFAS No. 157 and SFAS No. 159 as of January 1,
2007. In certain circumstances, fair value enables a company to more accurately align its financial
performance with the market value of actively traded or hedged assets and liabilities. Fair values enable a
company to mitigate the non-economic earnings volatility caused from financial assets and financial liabilities
being carried at different bases of accounting, as well as to more accurately portray the active and dynamic
79
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
management of a company’s balance sheet. No financial instruments were selected for the fair value option at
the time of adoption.
Fair value measurements for items measured at fair value included:
Fair Value
Measurements
December 31, 2007
Trading securities. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available for sale securities . . . . . . . . . . . . . . . . . . . .
Loans available for sale . . . . . . . . . . . . . . . . . . . . . . .
Derivative product assets . . . . . . . . . . . . . . . . . . . . . .
OREO(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 13,913
254,916
3,660
46
735
* Level 1 inputs
** Level 2 inputs
Significant Other
Observable
Inputs**
Quoted Prices in
Active Markets for
Identical Assets*
(Dollars in thousands)
$ 13,913
254,916
$3,660
46
735
(1) Fair value is measured on a nonrecurring basis in accordance with SFAS No. 144.
For trading securities, derivative product assets and loans available for sale, the realized and unrealized
gains and losses are included in earnings in noninterest income or net interest income, as appropriate, and
were not material for the year ended December 31, 2007.
Fair Value of Instruments Measured at Fair Value
The carrying value amounts and fair values of the Company’s financial instruments at December 31 were
as follows:
Financial Assets
2007
Carrying
Amount
At December 31
Fair
Value
Carrying
Amount
(In thousands)
2006
Fair
Value
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans held for sale . . . . . . . . . . . . . . . . . . . . . . . .
Derivative product assets . . . . . . . . . . . . . . . . . . . .
98,475
300,729
1,876,487
3,660
46
$
98,475
300,511
1,878,775
3,660
46
$
92,215
443,941
1,718,196
5,888
19
$
92,215
441,378
1,707,458
6,006
19
Financial Liabilities
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . .
Derivative product liabilities . . . . . . . . . . . . . . . . .
1,987,333
153,130
53,610
—
1,989,572
153,641
53,610
—
1,891,018
232,998
41,238
478
1,889,343
232,998
41,238
478
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.
80
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 Held for Sale: Fair values are based upon estimated values to be received from independent third
party purchasers.
Deposit Liabilities: The fair value of demand deposits, savings accounts and money market deposits is
the amount payable at the reporting date. The fair value of fixed maturity certificates of deposit is estimated
using the rates currently offered for deposits of similar remaining maturities.
Borrowings: The fair value of floating rate borrowings is the amount payable on demand at the
reporting date. The fair value of fixed rate borrowings is estimated using the rates currently offered for
borrowings of similar remaining maturities.
Subordinated Debt: The fair value of the floating rate subordinated debt is 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.
81
SEACOAST BANKING CORPORATION OF FLORIDA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
In 2007, 2006, and 2005 options to purchase 669,000, 116,000 and none, respectively were antidilutive
and accordingly, were excluded in determining diluted earnings per share.
Year Ended December 31
Per Share
Net Income
Amount
Shares
(Dollars in thousands, except per share data)
2007
Basic Earnings Per Share
Income available to common shareholders . . . . . . . . . . . . . . . . . . . . .
$ 9,765
18,936,541
$0.52
Employee restricted stock, stock options and SARs (see Note J) . . . .
221,056
Diluted Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income available to common shareholders plus assumed
conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,765
19,157,597
$0.51
2006
Basic Earnings Per Share
Income available to common shareholders . . . . . . . . . . . . . . . . . . . . .
$23,854
18,305,258
$1.30
Employee restricted stock, stock options and SARs (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
Employee restricted stock, stock options and SARs (see Note J) . . . .
388,190
Diluted Earnings Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income available to common shareholders plus assumed
conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20,759
16,749,386
$1.24
82
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, 2007, is presented below.
Pre-tax
Amount
Income Tax
(Expense)
Benefit
After-tax
Amount
ACCUMULATED OTHER COMPREHENSIVE INCOME, NET
Accumulated other comprehensive income (loss), net, December 31, 2004 . .
Unrealized net holding loss on securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on cash flow hedge derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss), net, December 31, 2005 . .
Unrealized net holding loss on securities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net gain on cash flow hedge derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for realized gains and losses on securities . . . . .
Accumulated other comprehensive income (loss), net, December 31, 2006 . .
Unrealized net holding gain on securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification adjustment for realized gains and losses on securities . . . . .
$(3,982)
(2,244)
32
(6,194)
2,087
(19)
336
(3,790)
859
3,453
Accumulated other comprehensive income, net, December 31, 2007 . . . .
$
522
1,538
814
(12)
2,340
(793)
7
(119)
1,435
(343)
(1,280)
(188)
(2,444)
(1,430)
20
(3,854)
1,294
(12)
217
(2,355)
516
2,173
334
83
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S e a c o a s t B a n k i n g C o r p o r a t i o n
o f F l o r i d a O f f i c e r s
S e a c o a s t N a t i o n a l B a n k
E x e c u t i v e M a n a g e m e n t G r o u p
Dennis S. Hudson, III
Chairman and Chief Executive Offi cer
Dale M. Hudson
Vice Chairman
A. Douglas Gilbert
President and Chief Operating Offi cer
C. William Curtis, Jr.
Senior Executive Vice President and
Chief Banking Offi cer
Jean Strickland
Senior Executive Vice President
William R. Hahl
Executive Vice President and
Chief Financial Offi cer
Charles A. Olsson
Senior Vice President
Human Resources
Richard Yanke
Executive Vice President
Chief Information Offi cer
Sharon Mehl
Corporate Secretary
S e a c o a s t B a n k i n g C o r p o r a t i o n
o f F l o r i d a B o a r d o f D i r e c t o r s
Dennis S. Hudson, III
Chairman and Chief Executive
Offi cer, Seacoast Banking Corporation
of Florida and Seacoast National
Bank
John H. Crane
Retired, C&W Fish
T. Michael Crook
Proctor, Crook & Crowder,
Certifi ed Public Accountants
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
Offi cer, Seacoast Banking Corporation
of Florida and Vice Chairman
and Chief Credit Offi cer, Seacoast
National Bank
Jean Strickland
Senior Executive Vice President,
Seacoast Banking Corporation of
Florida and President and Chief
Operating Offi cer, Seacoast National
Bank; serves on the board of the bank
only
Dennis J. Arczynski
Dennis Arczynski & Company, LLC;
serves on the board of the bank only
Stephen E. Bohner
Premier Realty Group
Jeffrey C. Bruner
Self-employed Real Estate Investor
H. Gilbert Culbreth, Jr.
Gilbert Chevrolet; serves on the board
of the bank only
Christopher E. Fogal
Fogal and Associates, LLC,
Certifi ed 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 Chairman,
Suncepts, Inc.
Thomas H. Thurlow, Jr.
Retired, Thurlow & Thurlow, P.A.,
a law fi rm
Edwin E. Walpole, III
Walpole, Inc.
Dennis S. Hudson, III
Chairman and Chief Executive
Offi cer
H. Russell Holland, III
Executive Vice President,
Commercial Lending Division
A. Douglas Gilbert
Vice Chairman and Chief Credit
Offi cer
Jean Strickland
President and Chief Operating Offi cer
C. William Curtis, Jr.
Senior Executive Vice President and
Chief Banking Offi cer
William R. Hahl
Executive Vice President and Chief
Financial Offi cer
W. D. (“Chic”) Acosta
Executive Vice President, Mortgage
Banking Division
Perry Barbee
Executive Vice President,
Credit Administration
Susan Bergstrom
Senior Vice President,
Marketing Services
Sidney Cash
Chairman, Central Florida
Kathleen M. Cavicchioli
Senior Vice President, Retail
Operations Support and Cash
Management Operations
Maria Frias
Senior Vice President, Compliance
and Auditing
Thomas L. Hall
Executive Vice President, Retail
Banking, Private Banking and
Consumer Lending Divisions
Jasper W. (Jay) Hart
President, Indian River County
Leonard J. Hoag
President, FNB Brokerage Services,
Inc., FNB Insurance Services, and
Executive Vice President, Wealth
Management
Teresa Idzior
Senior Vice President, Credit
Compliance Manager and CRA
Offi cer
Michael D. Jackson
President, Central Florida
Thomas G. Jones
President, St. Lucie County
Gregory E. Leach
President, Palm Beach County
Joe G. Mullins
President, Big Lake
Lynda Napolitano
President, Broward County
Charles A. Olsson
Senior Vice President,
Human Resources
David L. Osgood
Executive Vice President,
Director of Wealth Management
William Pittenger
Senior Vice President,
Chief Real Estate Economist
Lang B. Ryder
Senior Vice President,
Seacoast Marine Finance
Charles Shaffer
Vice President and Controller
John R. Turgeon
Senior Vice President
Director of Finance
Thomas H. Wilkinson
President, Treasure Coast
Richard Yanke
Executive Vice President and Chief
Information Offi cer
S e a c o a s t B a n k i n g C o r p o r a t i o n
o f F l o r i d a D i r e c t o r s E m e r i t u s
Evans Crary, Jr.
Frederick P. Stein
Archie A. Hendry, III
2 0 0 7 A n n u a l R e p o r t
I
C o m m u n i t y B o a r d o f D i r e c t o r s
Big Lake
John W. Abney Sr.
Abney & Abney Construction, Inc.
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.
Bobby H. Tucker
The Tucker Group
Martin County
Don Anderson
Anderson Construction
Ted Astolfi
Director of Real Estate Investments,
FFC Capital Corporation
Robert C. Johnson
RV Johnson Insurance Agency
Sue Kinane
Kinane Corporation
Robert L. Lord, Jr.
Chief Legal Offi cer, Martin Memorial
Medical Center
James C. Morgan
Treasure Coast Commercial Real Estate
Indian River County
P. Ross Cotherman
Harris, Cotherman, Jones, Price & Associates
Certifi ed Public Accountants
David Satur
Developer/Broker
Karl Thomas
Investor
Tony Donadio
Donadio & Associates, Architects
Daniel G. Downey, Jr.
Marquette Lumber
H.R. “Bump” Holman
Sun Aviation
Scott Lambeth
Golden River Fruit Company
William “Scott” Wade
NuCo2
Palm Beach County
Stephen W. Bradford, DMD, PA
Orthodontist
Robert L. Crane, Esq.
Casey, Ciklin, Lubitz, Martens, & O’Connell, P.A.
Robert C. McNally
Palm Coast Development of Vero Beach Inc.
Robert Friedman, AIA
Vice-Mayor, Town of Jupiter
St. Lucie County
John Auld
SLC Commercial, Inc.
Sam Beller
Consultant, Seacoast National Bank
Michelle Lee Berger
Councilwoman, District II,
City of Port St. Lucie
John Donahue
Boyle Engineering Corporation, P. E.
James V. Gaines
Pineapple Enterprises, Inc.
Rudy Howard
R. V. Howard & Associates, Inc.
Gerri McPherson
Florida Atlantic University,
Treasure Coast Campus
R. Duke Nelson
Ft. Pierce City Commissioner
Ira Pearlstine, M.D.
Heart & Family Institute
David Rieger
Kimberly & Co. Jewelers
Merry Parent
Parent Construction, Inc.
Jane Schwiering
Norris & Company Real Estate
Susan Schuyler Smith
Spectrum Interior Design
Michael J. Swan
Rossway Moore & Taylor, Attorneys
and Counselors At Law
George Gentile, FASLA
Gentile, Holloway, O’Mahoney & Associates, Inc.
James Helm
Sundown Development & Realty, Inc.
Mark Klaine
Business Real Estate, Inc.
Rubye E. Mate
Realtor
William J. Romanos, Jr. M.D., P.A.
Psychiatrist
Andrew Russo
VIP Properties of Distinction
Wayne Sanders, CPA
Proctor, Crook & Crowder,
Certifi ed Public Accountants
Jaap Uittenbogaard
Retired Chief Financial Offi cer,
R.J. Reynolds International, Inc.
2 0 0 7 A n n u a l R e p o r t
II
I n v e s t o r I n f o r m a t i o n
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 fi lings. 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 or www.sbcf.com
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 com pany’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
www.DHI.com
2 0 0 7 A n n u a l R e p o r t
III
U.S. 1 and Colorado Avenue
P.O. Box 9012
Stuart, Florida 34995-9012