SBCF Seacoast Banking Corporation of Florida

STUART, Fla., April 28, 2015 /PRNewswire/ --

First Quarter 2015 Earnings Highlights

• Net income grew 155% to $5.9 million, or $0.18 per diluted share, from $2.3 million, or $0.09 per diluted share, in the first quarter of 2014.  In the fourth quarter of 2014, the net loss was $1.5 million, or $0.05 per diluted share.
• Adjusted net income,⁽¹⁾ (excluding merger costs and other adjustments) increased 48% to $6.2 million or $ 0.19 per diluted share, for the first quarter 2015, compared to $4.2 million, or $0.13 per diluted share in 4Q14. 
• Revenues increased as Seacoast continued to grow its businesses.  Revenues increased $11.2 million or 52% above first quarter 2014 levels and $1.1 million or 15%, annualized, linked quarter. 
• Net interest margin improved to 3.62% compared with 3.56% in preceding quarter, and 3.07% in the first quarter a year ago due to loan growth, including the acquisition of The BANKshares, Inc., and investment of excess cash.
• Operating efficiencies improved significantly with fully implemented previously announced expense reductions.  The efficiency ratio improved to 68.3% for the quarter, compared to 84.3% in the first quarter a year ago.

⁽¹⁾ Non-GAAP measure

First Quarter 2015 Growth Highlights

• Total loans increased $32.6 million or 7% (annualized) from the fourth quarter 2014, and increased 41.3% from a year ago.  Excluding the acquisition of The BANKshares, loans increased $218.7 million or 15.9% from prior year levels. 
• Deposits increased $193.3 million or 8.0% (not annualized) from the prior quarter and 43.4% from a year earlier. Excluding the acquisition of The BANKshares, deposits increased $273.7 million or 15.0% from prior year levels. 
• Noninterest bearing deposits grew to 30.4% of total deposits, from 28.2% one year ago.
• During the first quarter, Seacoast announced the agreement to acquire Grand Bankshares, Inc. which will add approximately $208 million in assets, $184 million in deposits, and $127 million in gross loans to Seacoast's operations, along with 3 branch locations in Palm Beach County.

Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF) today reported that first quarter 2015 profits more than doubled from a year ago, fueled by expanding net interest margin, growing operating efficiencies and strong loan and deposit growth.  Net income increased 154.8% to $5.9 million, or $0.18 per diluted share, from $2.3 million, or $0.09 per share, in the first quarter of 2014.  The company reported a loss of $1.5 million, or $0.05 per diluted share, in the fourth quarter of 2014.  Excluding merger related charges and other adjustments as described below, adjusted net income (non-GAAP measure) increased 47.8% to $6.2 million or $0.19 per diluted common share, compared to $4.2 million, or $0.13 per diluted common share in the preceding quarter and $2.5 million, or $0.10 per diluted common share, a year ago.  

"Our results this quarter reflect our focus on controlling risk, improving profitability and making the necessary investments to drive our future growth. Effectively managing each of these areas is key to helping our organization take advantage of the opportunities we see ahead. Consistent growth in our core business continues to improve, driven by ongoing sales effectiveness and expanded marketing efforts. Given these factors, revenue growth during the quarter exceeded our expectations, in part due to better than expected results from customers acquired via the Central Florida acquisition, as well as better household growth in our legacy markets," said Dennis S. Hudson, III, Chairman and CEO.  "Additionally, we were also pleased to announce another acquisition this quarter, which will strengthen our business in the attractive Palm Beach county market. This acquisition, along with our prior acquisition in the Central Florida market, positions us to further capitalize on the improving Florida economy."

Balance Sheet Highlights

"The investments we made last year in digital access and automated and digital marketing technology are paying off, as our sales team continues to build momentum.  These new tools for data mining, automated outreach and targeted product offerings are generating strong results and helping to fuel growth in low-cost customer funding and loans," said Hudson.  "These investments, along with improvements in face to face sales effectiveness, are reflected in a 5% annualized growth in net households over the last three months." 

Seacoast Continues to Expand its Low-Cost Funding Base through Organic Growth and Acquisitions

Total deposits increased a strong $193.3 million, or 8.0% (not annualized), from fourth quarter levels.  Core customer funding increased $221.6 million, or 9.9% (not annualized), during the same period.  The growth is the result of increased focus on growing small business relationships in the more populated metropolitan areas of Palm Beach County and Central Florida. In addition, the Company continues to expand its focus on growing relationships with governmental entities, resulting in an increase of $95.8 million in new public funding relationships.

Total deposits were $2.61 billion at March 31, 2015, an increase of $790.0 million above the first quarter of 2014.  Excluding deposits acquired in the BANKshares transaction, total deposits increased $273.7 million or 15.0% from one year ago.    Core customer funding totaled $2.47 billion at March 31, 2015, a $753.4 million increase from the first quarter of 2014.  Excluding the acquisition, core customer funding increased by $306.0 million or 15.1%.  Demand deposits increased $68.1 million, or 9.4% from the prior quarter and $279.4 million or 54.4% from the first quarter of 2014 and represent 30.4% of total deposits, up from 28.2% one year ago.

Strong Loan Growth Reflects Seacoast Sales Momentum and a Vibrant Florida Economy

Total loans were $1.85 billion at March 31, 2015, up $542.0 million from a year ago.  Excluding loans acquired in the BANKshares transaction, loans increased $218.7 million or 15.9% from the prior year. 

Commercial loan originations for the quarter totaled $61.4 million despite a seasonally slower quarter for commercial loan closing.  Commercial loan closings increased $24.0 million or 64.1% over the first quarter 2014.  The commercial pipeline (in underwriting and approval or approved and not yet closed) totaled $82.1 million at March 31, 2015, the highest in the trailing four quarters, indicating continued strength.

Closed residential production totaled $55.8 million compared to $57.9 million in the fourth quarter and $40.0 million in the first quarter of 2014.  The residential pipeline totaled $48.5 million at March 31, 2015 compared to $21.4 million at December 31, 2014 and $26.7 million one year ago.  Consumer loan and small business originations (inclusive of lines of credit) totaled $38.9 million in the first quarter of 2015 compared to $10.5 million one year ago.

Income Statement Highlights

Net interest Income at Record Level, Margin Increases Meaningfully

Net interest income for the quarter totaled $25.7 million, a $1.0 million or 4% (not annualized) increase from the prior quarter.  Net interest margin for the quarter increased to 3.62% versus 3.56% in the fourth quarter of 2014.  Improvement in net interest income and margin was the result of increased loan growth (a $54.5 million average balance increase), the reinvestment of excess cash balances, and additional accretion on purchased loans.

Noninterest Income Increase Reflects Customer Growth and Strong Mortgage Banking Results

Noninterest income (excluding security gains) increased $167,000 from fourth quarter 2014.  Mortgage banking fees and interchange income, up $372,000 and $134,000, respectively, over the prior quarter offset seasonally (fewer number of days) and lower service charges on deposits and marine finance fees. 

Noninterest Expense Decreases Significantly Linked Quarter as Cost Efficiencies Register

Noninterest expense dropped significantly from fourth quarter 2014 levels, when sizable merger and restructuring charges were recorded. Core operating expense (non-GAAP) totaled $22.7 million for the first quarter of 2015 compared to $24.4 million in the fourth quarter of 2014.  The improvement in core operating expense and our adjusted efficiency ratio (non-GAAP measure) (67.4% in 1Q15 versus 74.8% in 4Q14) is reflective of a full quarter benefit from expense reduction initiatives.   The strategic cost initiatives we completed in the fourth quarter of 2014 became fully realized this quarter and are reflected in our lower employee costs (salaries and wages) and other fixed cost (primarily occupancy expense) infrastructure. We achieved these savings with our revenue producing staff intact to continue the sales momentum we have established over the prior quarters.

Merger related charges for the Grand Bankshares acquisition totaled $212,000 in the first quarter and are estimated to total approximately $3.6 million in aggregate. 

Income Taxes

The effective tax rate in the first quarter decreased to 37.7 % from 44.4% (higher from nondeductible merger related charges) for the 2014 calendar year.  The improvement over the prior year also reflects the full effect of income from the acquisition of tax exempt bank owned life insurance policies and tax exempt investments in the fourth quarter of 2014. 

Other Highlights

Credit Quality Maintains Strong Trends

The provision for loan losses was $433,000 for the first quarter of 2015 compared to $118,000 in the fourth quarter of 2014 and a recapture of $735,000 in the first quarter 2014.  The allowance for loan losses to loans for non-acquired loans ended at 1.13%, in line with the fourth quarter 2014 of 1.14%.  Additional highlights include:

• Nonperforming loans to total loans outstanding at the end of the first quarter of 1.1%, down from 2.0 % at March 31, 2014;
• Nonperforming assets to total assets declined to 0.8%, compared to 1.4% a year ago;

Earnings Continue to Expand Already Strong Capital Ratios

Capital ratios remain healthy and well above regulatory requirements for well-capitalized institutions.  The common equity tier 1 capital ratio (CET1) under the new Basel III standardized transition approach is estimated at 13.2% at March 31, 2015, well above the 6.5% regulatory threshold for well-capitalized institutions. The total risk based capital ratio is estimated at 15.6% at March 31, 2015 compared to 16.3% at year end 2014.  The tier 1 leverage ratio is estimated at 10.0% at March 31, 2015 compared to 10.3% at December 31, 2014.  Tangible book value per share increased from year end 2014 by $0.29 per share to $8.74.

Explanation of Certain Unaudited Non-GAAP Financial Measures

This press release contains financial information determined by methods other than Generally Accepted Accounting Principles ("GAAP").  The financial highlights provide reconciliations between GAAP net income and adjusted net income, GAAP income and adjusted pretax, pre-provision income.  Management uses these non-GAAP financial measures in its analysis of the Company's performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company's performance.  The Company believes the non-GAAP measures enhance investors' understanding of the Company's business and performance.  These measures are also useful in understanding performance trends and facilitate comparisons with the performance of other financial institutions.  The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently.  The Company provides reconciliations between GAAP and these non-GAAP measures.  These disclosures should not be considered an alternative to GAAP.  Reconciliations of GAAP to non-GAAP measures - all amounts are in thousands except per share data (unaudited):

To better evaluate its earnings, the Company removes certain items to arrive at Adjusted net income, Adjusted pretax, pre-provision income and Adjusted diluted earnings per share (non-GAAP measures) as detailed in the table below:

Conference Call Information

Seacoast will host a conference call on Wednesday, April 29, 2015 at 9:00 a.m. (Eastern Time) to discuss the earnings results.  Investors may call in at (800) 774-6070 (passcode: 7789246; host: Dennis S. Hudson).  Slides will be used during the conference call and may be accessed at Seacoast's website at SeacoastBanking.net by selecting "Presentations" under the heading "Investor Services."  A replay of the call will be available for one month, the afternoon of April 29, by dialing (888) 843-7419 (domestic), using the passcode 7789246.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Seacoast's website at SeacoastBanking.net.  The link is located in the subsection "Presentations" under the heading "Investor Services."  Beginning the afternoon of April 29, an archived version of the webcast can be accessed from this same subsection of the website.  The archived webcast will be available for one year.   

About Seacoast Banking Corporation of Florida (NASDAQ: SBCF)

Seacoast Banking Corporation of Florida is one of the largest community banks headquartered in Florida with approximately $3.1 billion in assets and $2.4 billion in deposits as of December 31, 2014.  The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through advanced banking solutions, 42 traditional branches of its locally-branded wholly-owned subsidiary bank, Seacoast Bank, and five commercial banking centers.  Offices stretch from  Ft. Lauderdale, Boca Raton and West Palm Beach north through the Space Coast of Florida, into Orlando and Central Florida, and west to Okeechobee and surrounding counties. More information about the Company is available at SeacoastBanking.com.

Sources: 

https://www08.wellsfargomedia.com/downloads/pdf/com/insights/economics/regional-reports/FL_Economic_Outlook_03202015.pdf

Cautionary Notice Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements about future financial and operating results, ability to realized deferred tax assets, cost savings, enhanced revenues, economic and seasonal conditions in our markets, and improvements to reported earnings that may be realized from cost controls and for integration of banks that we have acquired, as well as statements with respect to Seacoast's objectives, expectations and intentions and other statements that are not historical facts.  Actual results may differ from those set forth in the forward-looking statements.

Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance or achievements of Seacoast to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. You should not expect us to update any forward-looking statements. 

You can identify these forward-looking statements through our use of words such as "may," "will," "anticipate," "assume," "should," "support", "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "further", "point to," "project," "could," "intend" or other similar words and expressions of the future.  These forward-looking statements may not be realized due to a variety of factors, including, without limitation: the effects of future economic and market conditions, including seasonality; governmental monetary and fiscal policies, as well as legislative, tax and regulatory changes; changes in accounting policies, rules and practices; the risks of changes in interest rates on the level and composition of deposits, loan demand, liquidity and the values of loan collateral, securities, and interest sensitive assets and liabilities; interest rate risks, sensitivities and the shape of the yield curve; the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market areas and elsewhere, including institutions operating regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet; and the failure of assumptions underlying the establishment of reserves for possible loan losses.  The risks of mergers and acquisitions, include, without limitation: unexpected transaction costs, including the costs of integrating operations; the risks that the businesses will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected; the potential failure to fully or timely realize expected revenues and revenue synergies, including as the result of revenues following the merger being lower than expected; the risk of deposit and customer attrition; any changes in deposit mix; unexpected operating and other costs, which may differ or change from expectations; the risks of customer and employee loss and business disruption, including, without limitation, as the result of difficulties in maintaining relationships with employees; increased competitive pressures and solicitations of customers by competitors; as well as the difficulties and risks inherent with entering new markets.

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our annual report on Form 10-K for the year ended December 31, 2014, under "Special Cautionary Notice Regarding Forward-Looking Statements" and "Risk Factors", and otherwise in our SEC reports and filings.  Such reports are available upon request from the Company, or from the Securities and Exchange Commission, including through the SEC's Internet website at http://www.sec.gov.