SBCF Seacoast Banking Corporation of Florida

STUART, Fla., Jan. 28, 2016 /PRNewswire/ --

Fourth Quarter 2015 Earnings Highlights

• Adjusted revenues increased $5.0 million or 16% year-over-year to $36.9 million. 
• Net interest margin increased eleven basis points year-over-year to 3.67%.
• Net interest income improved $4.4 million or 18% largely due to organic loan growth.
• Adjusted net income¹ increased 56% to $6.5 million or $0.19 per diluted share, compared to $4.2 million or $0.13 per diluted share in the fourth quarter 2014. 
• Adjusted return on tangible common equity improved to 8.4% from 6.2% year-over-year.

Fourth Quarter 2015 Growth Highlights

• Loans increased $57 million or 3% not annualized, compared to third quarter 2015 and rose 18% year-over-year.  Excluding acquisitions, loans increased $218 million or 12% above year-ago levels.
• Strategic initiatives continue to pay off.  Excluding acquisitions, households grew 5% year-over-year and consumer loans originated outside the branch hit a record 26% during the fourth quarter.   
• Successful integration of Grand Bank and BankFIRST franchises resulted in net household growth by the third month as opposed to net attrition typical for acquisitions.

2016 Guidance

• Seacoast provided 2016 adjusted diluted EPS target of $1.00.

Seacoast Banking Corporation of Florida (NASDAQ: SBCF) today reported results for the fourth quarter and full year 2015.

Fourth quarter 2015 net income increased to $6.0 million compared to a net loss of $1.5 million reported in the same period of the prior year. Adjusted net income¹ increased $2.3 million, or 56%, from year-ago levels.  Diluted earnings per common share (EPS) were $0.18 and adjusted diluted EPS¹ were $0.19 in the fourth quarter, compared to adjusted diluted EPS of $0.13 in the fourth quarter of 2014 and $0.19 in the third quarter of 2015.

Dennis S. Hudson, III, Chairman and CEO said, "Our sustained execution of Seacoast's balanced growth strategy produced another quarter of strong results, measured by increases in loans, deposits and households.  The combination of organic and acquired growth in 2015 and our  significant operating leverage led to nearly 60% growth in core EPS, reinforcing our conviction that our continued execution of Seacoast's long-term strategy positions us well to produce strong results for shareholders."

Seacoast's earnings improvement reflected continued strong business growth and execution of digital and other strategic initiatives, supplemented by successful acquisitions.  Fourth quarter net income included a $416,000 bargain purchase gain from the acquisition of the Grand Bankshares, arising from unanticipated recoveries and resulting valuation adjustments to loans and other real estate owned (OREO) realized in the fourth quarter.

Full-year 2015 net income improved $16.4 million to $22.2 million and fully diluted earnings per share increased 214% to $0.66 compared with $0.21 per diluted common share in 2014.  Adjusted net income¹ increased to $25.3 million, or $0.75 per diluted share, in 2015 from $13.0 million, or $0.47 per diluted share, in 2014.

Hudson added, "We believe that community banking is undergoing a revolution and we plan to be at the forefront of refining the user experience to the benefit of our customers. Exiting the Great Recession, we recognized that a fundamental shift in community banking had taken place, and we began to invest for a new future.  We introduced Seacoast's Accelerate commercial banking model in 2011, and in 2013 began to invest in analytics, digital servicing capabilities and digital marketing talent and technology.  These investments in our future  drove our 16% revenue growth in 2015, with loans increasing at a 12% organic rate and households rising 5% year-over-year.

"Seacoast is building a fully integrated distribution platform across all channels to provide our customers with the ability to choose their path of convenience to satisfy their banking needs.  In 2015, we rolled out integrated digital marketing, automated cross sell, and deeper customer analytics which are creating shareholder value as we move forward.  Additionally, we are making trade-offs by reinvesting a portion of the cost savings related to consolidating branch locations and more efficient business processes into new and innovative ways to serve and grow our customer base.  In 2015, we fully absorbed incremental costs needed to support better channel integration including the expansion of our 24/7 call center, that now originates over 10% of our deposit relationships and almost 30% of our consumer loan production.  Looking forward, we expect our digital and phone based channels to expand dramatically.

"As our upgraded technology platform enabled us to effectively adapt to changes in consumer banking behavior, we were able to close three branches during 2015 with minimal customer impact; in fact household growth continued to accelerate during the year.  We are currently in the process of consolidating an additional four legacy locations in the first half of 2016.

"While we remained disciplined in executing an organic-growth focused strategy, our recent acquisitions have boosted our growth trajectory. Our convenient service model and enhanced product offerings, especially digital banking, allowed us to grow our acquired banks' households and further cross-sell additional products to our newly acquired customers. Specifically, our recently acquired BankFIRST (Orlando) and Grand Bankshares (Palm Beach County) franchises attained net household growth within three months of acquisition, and Orlando increased households at a rate above 7% in 2015."

Hudson concluded, "We look to 2016 with confidence as we continue to execute on our long term strategy, investing in important initiatives, managing expenses and executing on the right acquisition opportunities.  As a result, we have provided an adjusted diluted EPS outlook target of $1.00 for the year.  We look forward to discussing this goal with shareholders on our Q4 earnings call."

Acquisitions Update

Hudson noted, "We continue to be encouraged by results from our recent acquisitions.  In Orlando, we achieved growth levels in excess of our already-strong franchise growth rate as we delivered our service and product offerings to the BankFIRST customer base.  Acquisitions in the asset-based lending space and in demographically-strong Palm Beach County have helped us further propel growth.  We are pleased with our ability to execute against our commitments.

"We look forward to welcoming more than 5,000 customers of Floridian Bankshares and nearly 9,000 customers from BMO Harris' Orlando banking operations in the first part of 2016.  We are pleased to announce that we have received regulatory approval for both of these transactions and expect to close the Floridian acquisition late in the first quarter and the BMO Harris branch purchase late in the second quarter, subject in both instances to customary closing conditions."

Florida Economic Update

"The strong Florida economy continues to amplify our success," said Hudson.

Wells Fargo Securities Group's December 18, 2015 report titled, "Florida Employment Update: November 2015" stated, "Florida's economy is firing on all cylinders…Florida added a nation-leading 35,200 jobs in November, which marks the largest monthly job gain for the Sunshine State since May 2010.  On a year-to-date basis, nonfarm employment has risen 3.0 percent, resulting in a net gain of 239,600 jobs."

Comerica Bank's Comerica Economic Insights report dated January 5, 2016 stated, "Our Florida Economic Activity Index increased again in October, for the 19^th consecutive month.  Most components of the index were positive in October.  Only state exports and housing starts were negative for the month.  The Florida economy is firmly re-established as a growth leader for the U.S….we see no reason for the positive trend to change in the near term."

Fourth Quarter 2015 Income Statement Highlights

Balance Sheet Mix, Driven by Growth in Relationship Customers and Improved Yields, Fuel Net Interest Income and Margin Expansion

Net interest income for the quarter totaled $29.1 million, a $4.4 million or 18% increase from fourth quarter 2014 levels.  Net interest margin expanded to 3.67%, an eleven basis point increase from the prior year.  Year-over-year net interest income and margin increases reflect improvement in rate and balance sheet mix, largely due to growth in customer relationships.

Net interest income increased $0.1 million and net interest margin decreased eight basis points from 3.75% in the prior quarter.  Linked quarter results reflect an accelerated level of purchase loan accretion in the third quarter of 2015 that contributed approximately 10 basis points of margin during that quarter.  Strong loan growth and improved core yields more than compensated for a decrease in purchased loan accretion.  Fourth quarter results included essentially no excess  purchased loan accretion.

Noninterest Income Growth Reflects Increases in Households

Noninterest income excluding securities gains and the bargain purchase gain, totaled $7.8 million for the fourth quarter, an increase of $641,000 or 9% from a year ago. Most categories of service fee income showed year-over-year growth with interchange income up a strong 24%, indicating continued strength in customer acquisition and cross sell and benefits from acquisition activity. 

Noninterest income, excluding securities gains and the bargain purchase gain related to the Grand Bankshares acquisition, decreased $300,000 from third quarter 2015 levels.  Strength in interchange income and smaller increases in many other categories were offset by decreases in mortgage banking, brokerage and marine income, which were negatively impacted by low activity during the holiday season. 

As mentioned previously, fourth quarter net income included a $416,000 bargain purchase gain from the acquisition of the Grand Bankshares, arising from unanticipated recoveries and resulting valuation adjustments to loans and other real estate owned (OREO) realized in the fourth quarter.

Noninterest Expense Continues to Show Strong Operating Leverage and Investment in Seacoast Strategy

Noninterest expense decreased $6.8 million from the fourth quarter 2014.  Prior year expenses reflected significant non-recurring costs related to the acquisition of The BANKshares on October 1, 2014 and other one-time costs.  Adjusted noninterest expense¹ increased $1.6 million from prior-year levels.  The year-over-year increase in adjusted expense reflects ongoing costs related to the acquisitions of FGC and Grand Bankshares, particularly in added salary and benefits, which increased $666,000 or 5%, and occupancy and furniture and equipment costs, which increased $265,000 or 9%.  Increases also reflect variable costs related to strong organic franchise growth, particularly in data processing costs, which increased $588,000 or 31%, an investment made to further the company's strategy.    

Noninterest expense decreased $2.0 million from the third quarter, 2015.  Excluding merger related charges and other one-time items, adjusted noninterest expense¹ grew $200,000, or less than 1%.  Increases in occupancy ($108,000) and data processing costs ($178,000) were partially offset by decreases in salary and benefits ($110,000).  These fluctuations represent normal expense volatility.

Seacoast's efficiency ratio was 72.6% in fourth quarter of 2015, down from 104.5% in the fourth quarter of 2014 and below 76.3% in the third quarter of 2015.  Adjusted¹, the efficiency ratio decreased to 69.3% in the fourth quarter of 2015 from 74.8% in the fourth quarter of 2014 and up slightly from 68.2% in the third quarter of 2015.  Linked-quarter increase was impacted by the significant amount of accelerated purchased loan accretion recorded in the third quarter of 2015, whereas fourth quarter results included essentially no excess purchased loan accretion. 

Fourth Quarter 2015 Balance Sheet Highlights

Deposit Growth Reflects Success of Core Customer Increase and Acquisitions
Total deposits increased 18% to $2.84 billion at December 31, 2015, from year ago levels.  Core customer funding increased to $2.72 billion at December 31, 2015, a $476 million, or 21% increase from the fourth quarter of 2014.  Excluding acquisitions, core customer funding increased by $286 million or 13% from one year ago and total deposits increased $239 million or 10% from one year ago.  Total deposits grew $102 million or 4% (not annualized) and core customer funding increased $138 million or 5% (not annualized) compared to the prior quarter.  Linked-quarter increases were largely due to normal seasonal growth in public funds.

Noninterest demand deposits grew $129.2 million, or 18% from the fourth quarter of 2014 and remained at a strong 30.0% of total deposits.

Loans Up Substantially from Acquisition and Strong Core Growth

Total loans were $2.16 billion at December 31, 2015, an increase of $334 million or 18% from a year ago.  Excluding acquired loans, loans increased $218 million or 12% from the prior year's fourth quarter.  Loans increased a strong $57 million or 3% (not annualized) from third quarter levels.

Loan growth continued across all business lines.  Commercial loan originations for the quarter were $80 million with the commercial pipeline (in underwriting and approval or approved and not yet closed) totaling a strong $106 million at December 31, 2015 increasing from prior quarter and well in excess of recent history.  Consumer loan and small business originations (inclusive of lines of credit) totaled $54 million in the fourth quarter of 2015 compared to $28 million one year ago.

Closed residential production for the quarter totaled $60.2 million compared with $57.9 million a year ago, with a total residential pipeline of $30.3 million at December 31, 2015 up from $21.4 million one year ago.

Other Highlights

Credit Quality Remains Stable with Growth Trends
The provision for loan losses was $369,000 for the fourth quarter of 2015, up from $118,000 in the fourth quarter 2014 and below $987,000 recorded in the third quarter 2015.  The fourth quarter provision reflects continued strong credit metrics, offset by continued loan growth.  The third quarter provision was also impacted by $655,000 related to a single purchased credit impaired loan performing below our initial expectations.  The allowance for loan losses for non-acquired loans was 1.03% of total loans, compared to 1.11% in the third quarter 2015.

Additional highlights include:

• Nonperforming loans to total loans outstanding at the end of the fourth quarter remained at a clean 0.8%, down from 1.2% at year-end 2014;
• Nonperforming assets to total assets declined to 0.7%, compared to 0.9% a year ago.

Capital Ratios Continue to Improve from Earnings Momentum
Capital ratios remain healthy and well above regulatory requirements for well-capitalized institutions.  The common equity tier 1 capital ratio (CET1) is estimated at 13.3% and the total capital ratio is estimated at 16.0% at December 31, 2015.  The tier 1 leverage ratio is estimated at 10.7% at December 31, 2015.

Tangible book value per share increased $0.13 to $9.31 and book value per share increased $0.09 to $10.29 at December 31, 2015, as earnings more than offset decreases in AFS securities valuation at the end of the 2015 year.  Average tangible common equity to assets was a strong 9.3% at December 31, 2015. 

Conference Call Information
Seacoast will host a conference call on Friday, January 29, 2016 at 10:00 a.m. (Eastern Time) to discuss the earnings results.  Investors may call in (toll-free) by dialing (888) 517-2513 (passcode: 7021 952; 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 January 29, by dialing (888) 843-7419 (domestic), using the passcode 7021 952.

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 January 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 $3.5 billion in assets and $2.8 billion in deposits as of December 31, 2015. The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through advanced banking solutions, 43 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/assets/pdf/commercial/insights/economics/regional-reports/fl-employment-20151218.pdf
http://blog.comerica.com/2016/01/05/comerica-banks-florida-index-continues-solid-gains/

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,  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, or expect to acquire, 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.

Important information for Investors and Shareholders
Seacoast has filed a registration statement on Form S-4 and amendments thereto containing a definitive Proxy Statement/Prospectus with the SEC regarding the proposed merger with Floridian into Seacoast.  On or about January 22, 2016, this Proxy Statement/Prospectus was mailed to Floridian shareholders.  INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED MERGER AND OTHER DOCUMENTS FILED BY SEACOAST WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE THEY DO OR WILL CONTAIN IMPORTANT INFORMATION.

Investors can obtain a free copy of the Proxy Statement/Prospectus, as well as other filings containing information about Seacoast and Floridian, at the SEC's website (http://www.sec.gov), with respect to information about Seacoast, and Floridian's website (www.floridianbank.com), with respect to information about Floridian.  Investors can also obtain these documents, free of charge, at http://www.seacoastbanking.com under the tab "Investor Relations" and then under the tab "Financials/Regulatory Filings."  Copies of the Proxy Statement/Prospectus and any other filing by Seacoast with the SEC can also be obtained, free of charge, by directing a request to Investor Relations, 815 Colorado Avenue, P.O. Box 9012, Stuart, FL 34994, (772) 288-6085.

Seacoast, Floridian, their respective directors and executive officers and other members of management and employees may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of Seacoast is set forth in its proxy statement for its 2015 annual meeting of shareholders, which was filed with the SEC on April 7, 2015 and its Current Reports on Form 8-K. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Proxy Statement/Prospectus.  You may obtain free copies of these documents as described in the preceding paragraph.

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: