Statement of Condition June 30, 2011 Beach Community Bancshares, Inc. and Subsidiary Member FDIC
Dear Shareholders and Friends, Enclosed is our report of the unaudited results of Beach Community Bancshares, Inc. s operations from January 1, 2011 to June 30, 2011. Beach Community Bancshares, Inc. is the parent company of Beach Community Bank. The report includes our Statement of Condition as of June 30, 2011 and June 30, 2010; our Statement of Operations through June 30, 2011 and June 30, 2010; Changes in the Allowance for Loan Loss Reserves; the Statement of Loans Past Due over 90 days and Non-Accruing; and our Capital Ratios for both the parent company and the bank as of June 30, 2011. The first half of 2011 saw a continuation of the economic challenges our area has faced since 2007, now combined with the continuing impact on our local economy from the Deepwater Horizon Oil Spill. We continue to aggressively pursue our claim against BP through the Gulf Coast Claims Facility and to work with our borrowers who have also been adversely impacted by the Spill. The absence of a meaningful tourist season last summer coupled with the well documented issues our local small businesses have had with getting their claims paid through the GCCF meant that the 2010-2011 winter season along Northwest Florida would be a significant challenge; as it turned out, that prediction was spot on. Anecdotal evidence thus far indicates our tourism industry is fairing much better than this time last year but much damage was done and our small business customers continue to struggle. Our economy has also been caught in the middle of the debt ceiling debate. The last thing we need is more uncertainty in our markets and unfortunately that is what has been delivered to us by Washington. Compared to June 30, 2010, Total Loans declined $23.88 million, Total Assets declined $27.38 million and Total Deposits have declined $18.93 million. We were profitable in the second quarter, earning $714,000 pre-tax. This reduced our year to date loss to $(1,723,000). This compares favorably to our pre-tax loss for the same period last year of $(7,724,000). Both the Bank and the Company continue to meet regulatory definitions of adequately capitalized.
In addition to the good news for our local tourism industry, there is other good news to share. The U.S Army 7th Special Forces Group began their planned move to our area in May, and Eglin Air Force Base received the first two of the 59 F-35s slated to come to our area. Lockheed Martin, the prime contractor for the F-35, has also begun hiring its team that will be working arm in arm with the Air Force to maintain and fly this jet. Congratulations to Matt Hamilton, Judy Winter and Suzie Kelly who were all promoted to Senior this past quarter. These three individuals lead key areas of our bank and have put in tireless hours ensuring our systems work properly and our deposit and loan operations function accurately and efficiently. Well done and well deserved! On behalf of the Board of Directors, the Management and the Staff, we thank you again for your support, patience and investment. Sincerely, A. Anthony Hughes President & Chief Executive Officer
Statement of Condition Assets June 30, 2011 June 30, 2010 Cash & Due from Banks... $ 19,976,000 $ 5,592,000 Securities... 82,075,000 105,386,000 Federal Funds Sold... 0 0 Investment in Equity Securities... 372,000 372,000 Loans Held for Sale... 7,457,000 6,062,000 Loans Receivable... $ 463,990,000 $ 487,872,000 Less: Allowance for Loan Losses... (10,412,000) (10,071,000) Loans Net of Unearned Income and Allowance... $ 453,578,000 $ 477,801,000 Premises and Fixed Assets, Net... 19,709,000 20,336,000 Other Real Estate Owned... 41,916,000 30,864,000 Other Assets... 10,675,000 16,721,000 Total Assets... $ 635,758,000 $ 663,134,000 Liabilities Non-Interest-Bearing Deposits... $ 24,795,000 $ 26,785,000 Interest-Bearing Deposits... 523,181,000 540,121,000 Total Deposits... $ 547,976,000 $ 566,906,000 Federal Funds Purchased... 0 0 Other Borrowed Money... 42,025,000 44,168,000 Subordinated Debentures... 12,372,000 12,372,000 Other Liabilities... 2,694,000 2,635,000 Total Liabilities... $ 605,067,000 $ 626,081,000 Equity Capital Preferred Stock... $ 4,086,000 $ 3,794,000 Common Stock... 11,882,000 11,882,000 Surplus... 21,070,000 21,041,000 Retained Earnings... (7,422,000) (453,000) Unrealized Gain (Loss) on Securities Available for Sale... 1,075,000 789,000 Total Equity Bank Holding Company... $ 30,691,000 $ 37,053,000 Total Liabilities and Equity Capital... $ 635,758,000 $ 663,134,000
Interest Income Statement of Operations For the Year to Date Ended, June 30, 2011 and June 30, 2010 2011 2010 Securities $ 1,006,000 $ 1,602,000 Short Term Investments 34,000 29,000 Loans and Loan Fees 10,071,000 12,205,000 Total Interest Income $ 11,111,000 $ 13,836,000 Interest Expense Int. Bearing Trans. Accts. $ 275,000 $ 641,000 Certificates of Deposit 3,966,000 5,727,000 Other Borrowed Money 752,000 725,000 Total Interest Expense $ 4,993,000 $ 7,093,000 Net Interest Income $ 6,118,000 $ 6,743,000 Less: Provision for Loan Losses $ 1,124,000 $ 5,725,000 Add: Non Interest Income 2,445,000 2,059,000 Less: Non Interest Expense 9,162,000 10,801,000 Net Income Before Tax $ (1,723,000) $ (7,724,000) Income Taxes (2,901,000) Net Income $ (1,723,000) $ (4,823,000) Loss Per Common Share $ (0.73) $ (2.03) Book Value Per Common Stock $ 11.20 $ 14.00 Capital Ratios For quarter ended, June 30, 2011 Actual Total Capital (to risk weighted assets) Minimum to be adequately capitalized under prompt corrective action provisions Minimum to be well capitalized under prompt corrective action provisions Amount Ratio Amount Ratio Amount Ratio Consolidated $43,700,000 9.00% $38,852,000 8% N/A N/A Bank $43,497,000 8.96% $38,852,000 8% $48,718,200 10% Tier I Capital (to risk weighted assets) Consolidated $35,310,000 7.27% $19,426,000 4% N/A N/A Bank $37,373,000 7.70% $19,426,000 4% $29,139,000 6% Tier I Leverage Capital (to average assets) Consolidated $35,310,000 5.64% $25,063,000 4% N/A N/A Bank $37,373,000 5.97% $25,048,000 4% $31,310,000 5%
Changes in Allowance For Loan Losses Balance at December 31, 2010 $ 8,425,000 Recoveries 2,284,000 Loans Charged Off 1,421,000 Provision for Loan Losses 1,124,000 Balance at June 30, 2011 $ 10,412,000 Loans 90 days Past Due and Non-Accrual Loans Accruing Non-Accruing Real Estate Loans $ 14,340,000 $ 96,378,000 Installment Loans - - Commercial and All Other Loans 2,076,000 3,721,000 Total $ 16,416,000 $ 100,099,000 The financial information contained in this report has not been audited, nor has it been reviewed or approved by the Federal Reserve. Corporate Headquarters 17 SE Eglin Parkway Fort Walton Beach, FL 32548 850.244.9900 fax 850.244.9901 toll free 866.36BEACH/ 866.362.3224 Mary Esther 412 Mary Esther Cutoff Fort Walton Beach, FL 32548 850.244.9160 Racetrack Road 3 NE Racetrack Road Fort Walton Beach, FL 32547 850.315.3500 Niceville 100 Armstrong Avenue Niceville, FL 32578 850.678.3990 Destin 661 Harbor Boulevard Destin, FL 32541 850.650.9041 Crestview 5131 S Ferdon Boulevard Crestview, FL 32536 850.682.9930 Navarre 9290 Navarre Parkway Navarre, FL 32566 850.515.1344 Gulf Breeze 60 Northcliff Drive Gulf Breeze, FL 32561 850.916.5100 Garden 33 W Garden Street Pensacola, FL 32502 850.202.9900 Cordova 4465 Bayou Boulevard Pensacola, FL 32503 850.202.9000 Nine Mile 9329 N Palafox Highway Pensacola, FL 32534 850.202.9109 Beach Community Mortgage 11 NE Racetrack Road, Suite A Fort Walton Beach, FL 32547 850.315.4100 toll free 888.864.2946 fax 850.315.4102 Beach Title Services, LLC 4 Laguna Street Fort Walton Beach, FL 32548 850.244.0350 fax 850.244.5231
Board of Directors Joseph W. Henderson Chairman of the Board Partner, O Sullivan, Creel, LLP CPA s Charles W. Clary, III Principal, DAG Architects Major General A. Bowen Ballard, USAF (Ret.) CEO, The Ballard Companies Julian B. MacQueen Chairman & CEO, Innisfree Hotels A. Anthony Hughes President & CEO, Beach Community Bank C. LeDon Anchors Partner, Anchors, Smith, Grimsley Dr. Joe L. Story Physician and Entrepreneur Art F. Schweizer Retired Retail Store Owner A. Anthony Hughes President & Chief Executive Officer Kimberly A. Cox Executive Branch Administration Gary E. Johns Executive & Chief Financial Officer Keith D. Parks Executive & Senior Lending Officer Kathleen A. Pritchard Executive Brian P. Bell Senior, Pensacola Area City President D. Scott Gashaw Senior Matthew S. Hamilton Senior Caroline A. Hartnett Senior Suzanne B. Kelly Senior W. Scott McCormick Senior Judith L. Winter Senior Officers Pamela G. Woodall Senior President, Beach Community Mortgage Karen J. Bennett Michael A. Bennett Allison M. Cochran Kelly J. Fish Aggie F. Gibson Elayne E. Jones-Yon Daniel L. Kenan Karen J. Helms L. Michelle Johnson Cecilia M. McAdams Terra M. Meadows Sharmon V. Morris Deborah A. Patzig Gary A. Pelham Cathy V. Ricks Malinda E. Ritter Jessica R. Rybarczyk Wanda J. Wallace Jennifer M. Benedict Rachael M. Doan Courtney L. Falasca Kristan N. Howard Jennifer E. Tallman Vicky D. Tucker Linda G. Walker