SBCF Seacoast Banking Corporation of Florida

STUART, Fla., July 23, 2015 /PRNewswire/ --

Second Quarter 2015 Earnings Highlights

• Revenues increased $1.5 million, or 4.5%, linked quarter to $34.5 million, and $11.9 million, or 53%, compared to Q2 2014,
• Fee income increased $1.5 million, or 21%, sequentially and $3.0 million, or 50%, year-over-year,
• Net interest margin increased 40 basis points year-over-year to 3.50%, reflecting improved balance sheet mix particularly due to increased lending,
• Adjusted net income excluding merger costs and other adjustments¹ increased 106% to $6.2 million, or $ 0.19 per diluted share, compared to $3.0 million, or $0.12 per diluted share, in Q2 2014.

¹ Non-GAAP measure, see "Explanation of Certain Unaudited Non-GAAP Financial Measures"

Second Quarter 2015 Growth Highlights

• Loans increased $83 million or 18% annualized compared to Q1 2015, and rose 45% year-over-year.  Excluding the acquisition of The BANKshares, loans increased $238 million or 18% compared to Q2 2014,
• Total households increased a strong 5%, annualized from Q1 and 20% compared to Q2 2014.  Excluding BANKshares customers, year-over-year household growth was 5.3%,
• Achieved record levels of business and consumer lending during the quarter, reflecting success in Accelerate Commercial Banking, as well as digitally-enabled marketing and cross-selling initiatives,
• Closed the Grand Bancshares, Inc. acquisition and completed the conversion of Grand's customers over the July 17 weekend, adding approximately $190 million in deposits and $121 million in gross loans in the attractive Palm Beach market.

Seacoast Banking Corporation of Florida (NASDAQ: SBCF) today reported results for the second quarter of 2015.  Second quarter revenue rose $1.5 million, or 4.5%, to $34.5 million compared to $33.0 million in the prior quarter.  Net income increased $3.9 million, or 203%, to $5.8 million, compared to the second quarter of 2014, and decreased slightly from $5.9 million in the first quarter 2015. The company reported $0.18 diluted net income per common share compared with $0.07 in the second quarter last year, and $0.18 sequentially in the first quarter of 2015.

Net income improved 177% to $11.7 million, or $0.35 per diluted common share, for the first half of 2015 from $4.2 million, or $0.16 per diluted common share, for the first half of 2014.

"Our strategic focus on improving profitability, investing for growth and managing risk continues to yield consistent results, as demonstrated by our second quarter performance," said Dennis S. Hudson, III, Chairman and CEO.  "Investments to expand our Accelerate business banking platform, combined with increased digital marketing and cross sell efforts company-wide, are yielding strong results that demonstrate our value proposition and community bank approach are resonating in the marketplace."

"With our success comes additional expense, reflecting our growth and investment for the future," Hudson continued.  "These expenses include the addition of a receivables funding team from First Growth Capital (FGC), volume-related commissions, brand-based marketing in our Orlando markets and key senior management hires."

"We look forward to sustained growth as we leverage our recent acquisitions, most recently welcoming the customers and customer-serving associates from Grand Bancshares, Inc., which we successfully closed and integrated last week," Hudson concluded.

"Revenue increases drove the improvement in Seacoast's profitability and reflect significant organic growth, as well as benefits from acquisition activity," said Stephen A. Fowle, Executive Vice President and Chief Financial Officer.  "We continue to produce positive trends in loan production, fee income, and household growth, including record loan originations and record new household growth through the first half of the year.  During the quarter, we achieved outsized loan growth and strong fee income increases despite a seasonally slow quarter. Net interest income, taking into consideration an expected decrease in acquired loan accretion, also showed significant continued momentum."

¹ Non-GAAP measure, see "Explanation of Certain Unaudited Non-GAAP Financial Measures"

Acquisitions Update
"Our 2014 acquisition of The BANKshares, continues to be a home run, opening the vibrant greater Orlando markets to us," said Hudson.  "Orlando remains one of the strongest markets in Florida, and we remain bullish on this area for growth and profitability."

"We are also excited to welcome the customers and customer-service team members from Grand Bancshares, Inc., which we successfully closed and integrated into our platform just last week," Hudson continued. "Our acquisition strategy is complementing our legacy banking business and is successfully adding new customers and opening new markets, fueling robust franchise growth."

Florida Economic Update
"Our Florida markets, spanning much of the central Atlantic coastline and the greater Orlando markets, are growing at very healthy rates," said Hudson.  According to the June 2015 American Banker Magazine, "Florida is once again outgrowing the rest of the country, and some of its thriving community banks are emerging as real contenders to be the next state flagship." 

"Nonfarm employment rose on a year-over-year basis in 23 of Florida's 24 metropolitan areas and was unchanged in one area, Homosassa Springs.  The largest gains continue to be in the Orlando (47,200 new jobs), Tampa-St Petersburg (32,900 jobs) and Miami (27,900 jobs) metropolitan areas.  Fort Lauderdale (27,300 jobs), West Palm Beach (15,900 jobs) and Jacksonville (15,100 jobs) round out Florida's big 6 metro areas," according to the U.S. Department of Labor and Wells Fargo Securities, LLC.

"Our move into Orlando is going very well, and is providing excellent opportunities for growth," Hudson continued.  According to the Orlando Business Journal, "It was another record quarter for Florida tourism numbers, as the Sunshine State welcomed 28.4 million visitors in the first quarter, an increase of 6.2% over the same period a year ago.  (May 15, 2015)   "Visit Orlando reports that more than 62 million people visited Orlando in 2014, marking an all-time new record for the U.S. travel industry." (April 9, 2015) As an additional indication of the Orlando market growth, Orlando Realtors.org reported, "A leap in "normal" transactions has boosted Orlando area home sales more than 21% over June 2014 and to its highest number --3,435-- since the Orlando Regional REALTOR® Association began recording sales. In addition to skyrocketing sales, the median price for existing homes sold in June increased 7.73%."

Income Statement Highlights

Net Interest Income and Margin, up 40 basis points from 2Q14, Normalizes as Expected from the First Quarter
Net interest income for the quarter totaled $25.8 million, a $9.0 million or 54% increase from second quarter 2014 levels.  Net interest income held flat with Q1 levels despite a significant amount of excess purchase loan accretion recognized in the first quarter.  Strong loan growth (a $55.0 million average balance increase) helped offset the impact of reduced purchased loan accretion.  Net interest margin increased 40 basis points from prior year levels to 3.50%.  Margin decreased twelve basis points sequentially, also related to purchased loan accretion.  Purchased loan accretion for the second quarter is near expected levels, although the timing of such loan accretion is expected to be unpredictable.   

Noninterest Income Boosted by New Account Growth
Noninterest income increased $3.0 million or 50% from a year ago to $8.8 million and $1.5 million or 21% above the first quarter of 2015.  Year-over-year growth in all categories of service fee income reflects strength in customer acquisition and cross sell, as well as benefits of the successful BANKshares customer integration.  Linked-quarter noninterest income improvement was fueled by continued household growth.  Service charges on deposit accounts increased $113,000 and interchange income grew $296,000 from the first quarter of 2015.  Marine finance fees also grew $295,000 or 150% from the first quarter.  Adjusting for the gain on a participated loan of $725,000 during the quarter, fee income increased $813,000 or 11%.  Accounting treatment for $725,000 of discount accreted from the participated loan required this income to be included in other operating income rather than taken through the margin. 

Noninterest Expense Increases from Core Growth and Acquisition
Seacoast's efficiency ratio improved to 68.6% in the second quarter of 2015 from 89.4% during the prior year.  This decrease is related to improved operating leverage, as strong revenue growth significantly outpaced expenses. 

Noninterest expense increased $3.6 million or 17% from prior year levels and $1.1 million or 5% from the first quarter 2015.  Year-over-year expense increases reflect the acquisition of The BANKshares, offset by planned expense reduction initiatives.  Linked quarter increases reflect investment in our franchise, and variable expenses related to a strong quarter of production. Notable increases include: the acquisition of FGC during the second quarter 2015 which contributed approximately $351,000 in expense; production-driven commission expense which added approximately $375,000; marketing expense focused on customer acquisition and for corporate branding in BANKshare's Orlando footprint which contributed $250,000 to the increase. 

Merger related expenses totaled $337,000 in the second quarter 2015 compared to $275,000 in the first quarter of 2015 and $1.2 million in the second quarter 2014.

Balance Sheet Highlights

Year-over-Year Deposit Growth Reflects Marketing Wins and Successful Acquisitions
Total deposits increased 44.3% to $2.61 billion at June 30, 2015, from year ago levels.  Core customer funding increased to $2.47 billion at June 30, 2015, a $781.0 million increase from the second quarter of 2014.  Noninterest demand deposits grew $15.1 million, or 1.9% from the first quarter and $298.6 million or 58.6% from the second quarter of 2014.  As a result, noninterest demand deposits increased to 31.0% of total deposits, up from 28.2% one year ago.  Excluding the acquisition, core customer funding increased by $333.6 million or 19.8% from one year ago and total deposits increased $283.3 million or 15.7% from one year ago.  A 5% linked quarter household growth rate was offset by seasonal deposit balance decreases.

(1)     Total deposits and customer sweep accounts, excluding time certificates of deposit.

Loan Growth and Pipelines at Trailing-Four-Quarter Highs
Total loans were $1.94 billion at June 30, 2015, up $602.2 million from a year ago.  Excluding loans acquired in the BANKshares transaction, loans increased $237.9 million or 17.8% from the prior year's second quarter.

Commercial loan originations for the quarter were a strong $85.8 million, increasing $24.5 million or 39.9% over the first quarter and $32.6 million or 61.2% over the second quarter 2014. The commercial pipeline (in underwriting and approval or approved and not yet closed) totaled $108.5 million at June 30, 2015, yet again the highest in the trailing four quarters.

Closed residential production totaled $81.8 million compared to $55.8 million in the first quarter and $61.2 million in the second quarter of 2014. The residential pipeline continued to climb, totaling $53.9 million at June 30, 2015 compared to $48.5 million at March 31, 2014 and $28.3 million one year ago. Consumer loan and small business originations (inclusive of lines of credit) totaled $55.3 million in the second quarter of 2015 compared to $38.9 in the first quarter and $18.0 million one year ago.

Other Highlights

Credit Quality Maintains Strong Trends
The provision for loan losses increased to $855,000 for the second quarter of 2015, up from a $1.4 million recapture in the second quarter 2014 and a $422,000 or 97% increase from $433,000 recorded in the first quarter 2015.  The second quarter provision is attributable to strong loan growth during the quarter.  The allowance for loan losses for non-acquired loans was 1.10% of total loans, compared to 1.13% in the first quarter 2015.

Additional highlights include:

• Nonperforming loans to total loans outstanding at the end of the second quarter was 1.0%, down from 1.6% at June 30, 2014;
• Nonperforming assets to total assets declined to 0.8%, compared to 1.2% a year ago.

Capital Ratios Continue to Improve from Earnings Momentum
Tangible book value and book value per share each increased by $0.13 per share from the prior quarter to $8.87 and $9.84, respectively at the end of the second quarter.  Average tangible common equity to assets was a strong 9.24% for the second quarter 2015.

Conference Call Information
Seacoast will host a conference call on Friday, July 24, 2015 at 1:00 p.m. (Eastern Time) to discuss the earnings results.  Investors may call in (toll-free) by dialing (888) 517-2513 (passcode: 7789246; host: Dennis S. Hudson). Slides will be used during the conference call and may be accessed at Seacoast's website at SeacoastBanking.com by selecting "Presentations" under the heading "Investor Services."  A replay of the call will be available for one month, beginning late afternoon of July 24, 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.com. The link is located in the subsection "Presentations" under the heading "Investor Services." Beginning the afternoon of July 24, 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 $3.2 billion in assets and $2.6 billion in deposits as of June 30, 2015. The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through advanced banking solutions, 44 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: 

http://www.americanbanker.com/magazine/2015-06-01-1074530-1.html 

https://www08.wellsfargomedia.com/downloads/pdf/com/insights/economics/regional-reports/FL_Employment_07172015.pdf

http://www.floridatoday.com/story/news/local/2015/05/15/record-tourism-numbers-sunshine-state/27367565/

http://www.bizjournals.com/orlando/blog/2015/04/orlando-becomes-first-destination-to-surpass-60m.html

http://www.orlandorealtors.org/resource/resmgr/docs_market_pulse/MarketPulse072015.html       

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.

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. 

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:

(1)     Non-GAAP measure