This excerpt taken from the SBCF 8-K filed Oct 27, 2006.
So you said stability on the net interest income line would be a best case scenario, but in your earlier comments you did say you thought that the spread would compress quarter-over-quarter a little bit, but less than this quarter?
I was talking of net interest income in dollarsspreads may compress and I think our comments were that they may compress.
They are certainly under pressure.
They are certainly under pressure, right.
John Pandtle is online with a question; please go ahead.
Thank you. Good morning. Denny, with the trends this quarter, how was growth in deposits and loans at Big Lake? How did that compare to the core Seacoast franchise?
Well first of all, back to the deposit trends weve been talking about in one the last couple of questionsthose trends were evident in most markets and that would include the Big Lake market. We saw some declines there that contributed to the trend that weve just spoken of. Another factor that I probably should mention is that we have a number of large commercial relationships in all of our markets, whether it be Orlando or Big Lake or here in the coastal areas, that came under some pressure. These included municipal deposits as well as large commercial deposit relationships, and we began to see some movement back into sweep accounts and repurchase agreements. That was a pressure we also felt this quarter. And a lot of that was front-end loaded in that quarter, and thats one hopeful sign that we may see those factors slow down as we hit the next quarter. To answer your question, it wasnt a Big Lake problem, or with that acquisition. It is was equally felt there as it was on a relative basis throughout the Company.
It looked like to me you had about, as a follow-up question, $48 million in average loan growth in the third quarter versus second quarter. I was wondering if you could walk through your decision-making process or rationale in using investment securities essentially to fund the loan growth, as opposed to going out into the secondary market or being more aggressive from a deposit pricing standpoint.
We had in the investment portfolio 18 months ago, or maybe even further back than that, prior to most of the run-up in interest rates that the Fed did, we had acquired a position of over $100 million in floating rate securities. Frankly we thought it was a good time to move out of some of those, with relatively no impact on the bottom-line, and to fund loans with those. So that was a decision that we made. On the borrowing side, if we would have borrowed, it would have been a higher rate than we were earning, maybe a little north of 5% on those Libor floating rate securities. So we decided to reduce our floating rate exposure. We think thats the right direction for us. As I mentioned, we are maintaining our CD portfolio fairly shortthree to six months, certainly nothing beyond 12 monthsin anticipation that when the yield curve does steepen, its going to steepen on the short end with the Fed lowering rates.