SBCF Seacoast Banking Corporation of Florida

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

First Quarter 2016 Earnings Highlights

• Adjusted revenues¹ increased $5.9 million, or 18% year-over-year, to $38.9 million; and increased $2.0 million, or 5% (not annualized), from fourth quarter 2015 levels.
• Net interest income improved $4.5 million, or 18% year-over-year, as organic loan growth was supplemented by successful acquisitions.
• Net interest margin increased year-over-year and sequentially to 3.68%.
• Adjusted net income¹ increased 10% to $6.8 million compared to $6.2 million in the first quarter 2015.

First Quarter 2016 Growth Highlights

• Integration of Floridian Financial Group, Inc. was successfully completed during March, 2016, adding 3,400 households and locations in the Orlando and Daytona Beach markets.
• Seacoast continues to leverage organic growth capabilities in acquired franchises. BankFirst and Grand continue to show strong annualized growth of 7%, surpassing solid 4% growth rate for Seacoast's legacy franchise.
• Core deposit growth continues to accelerate. Demand deposits grew 14% (not annualized) during the quarter, 7% excluding acquired deposits. Demand deposits represent more than 56% of total deposits and non-interest bearing checking accounts now comprise nearly 33% of deposits.

2016 Guidance

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

Seacoast Banking Corporation of Florida ("Seacoast" or "the Company") (NASDAQ: SBCF) today reported results for the first quarter of 2016. 

Seacoast reported first quarter net income of $3.2 million, compared to $5.9 million in the first quarter last year. During the period, Seacoast closed the previously announced acquisition of Floridian Financial Group, Inc. and results for the quarter include $5.5 million in charges taken in conjunction with the acquisition.  Adjusted net income, including adjustments for Floridian expenses and other non-core items¹ increased $605,000 to $6.8 million, a 10% increase from year-ago levels, and increased $262,000, or 4% (not annualized), from the prior quarter.  Diluted earnings per common share (EPS) were $0.09 and adjusted diluted EPS¹ were $0.19, unchanged compared to the first quarter last year and the prior quarter. 

Dennis S. Hudson, III, Chairman and CEO said, "Our first quarter results demonstrate the impact of our digital transformation strategy, successful integration of recent acquisitions and disciplined loan growth. While our earnings were close to our expectations for the quarter, they do not fully reflect the profitability we expect over the balance of this year.  The near-term drivers for our anticipated improved earnings are cost reductions, primarily related to branch consolidations, as well as revenue improvement resulting from these acquisitions and continued strong organic growth. 

We expect to achieve a substantial portion of the cost savings from the integration of Floridian Bank and previously announced legacy branch consolidations during the second quarter.  The remaining cost savings from Floridian and substantially all of the synergies related to the BMO Harris integration will be realized during the third quarter. These in-market acquisitions, together with organic and acquisition-related revenue growth, are expected to drive substantial earnings improvements throughout the balance of the year.

At year end we anticipate that Seacoast's average deposits per branch network-wide will have increased to almost $80 million compared to $65 million at year end 2015.  This improvement in efficiency will be enabled, in part, by our ongoing digital transformation and is a meaningful part of our path to achieving our earnings target for 2016.

We will continue to implement our digital strategy, which is enabling us to add new households, both organically and in our recently acquired banks; driving cross sells of services to existing customers; and transforming our business model, by providing us with opportunities to reduce our more-expensive legacy cost structure.  Improvements this quarter include an increase in deposits made outside the branch to 31%, compared to 23% in the first quarter of 2015; an increase in consumer loans opened outside the branch to 19%, compared to 13% during the first quarter last year; and an increase in new deposit accounts opened outside the branch to 12%, compared to 5% in last year's first quarter. Customer satisfaction continued at high levels, showing our ability to move customers to lower-cost distribution channels while further building customer engagement," Hudson said. 

Hudson added, "We believe that continued execution of Seacoast's strategy, including investing in important initiatives, reducing expenses and executing on the right acquisition opportunities, will continue to produce improved results for shareholders.  We have affirmed our adjusted diluted earnings per share¹ target of $1.00 for 2016."

Acquisitions Update

Hudson noted, "We are pleased to have completed our acquisition and flawless conversion of Floridian late in the first quarter.  We now look forward to serving our new customers and expanded communities as we execute on savings opportunities, eliminating redundant functions and consolidating branch locations over the next six months.  Our customer service model, combining convenience with customer analytics technology, has enabled us to drive accelerated levels of cross sell and revenue while growing households at an even faster rate in our acquired markets.

"Our success in Orlando and Palm Beach counties, where we acquired BankFirst and Grand Bank, continues," Hudson stated.  "Household growth remains very strong and cross sell statistics outpace growth in our legacy markets.  Banking services for Grand and BankFirst customers increased at a 20% annualized rate compared to an 11% rate in our legacy franchise.

"As we welcome the new customers from Floridian, we look forward to completing our acquisition of BMO Harris' Orlando banking operations and welcoming more than 8,000 customers late in the second quarter of this year, subject to customary closing conditions.  This acquisition will further solidify our status in Orlando, propelling us to a top-10 position in this market," Hudson concluded.

Florida Economic Update

"The strong Florida economy continues to amplify our success," said Hudson.  "Florida's first quarter job growth, as reported by ADP, continues to outpace the nation.  Florida's job growth rate in the first quarter exceeded national growth rate by 50% (with Florida growing 3% vs. a 2% national rate), continuing recent strength in Florida job creation."

"Additionally, the Comerica Florida Economic Activity Index increased for the 22nd consecutive month in January. Almost all of the index components were positive for the month, indicating broad-based gains in the state economy. Only hotel occupancy dipped in January. The state economy is clearly accelerating and we expect to see ongoing growth for Florida over the remainder of this year…House prices and house construction are firming up. The state is also seeing increased net migration as baby boomer retirement increases. A recent Census Bureau report shows Florida metro areas among the fastest growing in the U.S."

First Quarter 2016 Income Statement Highlights

Organic Growth Drives Net Interest Income Increases, Merger Activity Portends Further Gains

Net interest income for the quarter totaled $30.3 million, a $4.5 million or 18% increase from first quarter 2015 levels.  Net interest margin expanded to 3.68%, a six basis point increase from the prior year.  Year-over-year net interest income and margin increases reflect successful organic growth combined with improved balance sheet mix.  Acquisition activity also contributed to net interest income gains as Seacoast welcomed customers from Floridian and continued to grow relationships with customers of other recent acquisitions.  These factors more than offset a decrease in excess purchased loan fee accretion recorded in the first quarter 2015 (approximately 9-10 basis points of excess margin).

Net interest income increased $1.1 million and net interest margin increased one basis point, from 3.67% in the prior quarter.  The improvement was built through continued growth and improved balance sheet mix, and offset the negative impact of a shorter number of days in the quarter.  Each day impacts net interest income by approximately $340,000.

Noninterest Income Growth Driven by Franchise Growth

Noninterest income excluding securities gains, totaled $8.6 million for the first quarter of 2016.  Included in this figure is $464,000 in unanticipated non-taxable income related to the Bank's investment in bank owned life insurance (BOLI). Excluding securities gains and unanticipated BOLI income, adjusted noninterest income¹ was $8.2 million for the first quarter, an increase of $859,000 or 12% from the first quarter 2015.  Strong increases in interchange income and deposit service charges, up 28% and 6%, respectively, reflect intentional customer analytics-driven cross sell combined with strong household growth and customer engagement.  Analytics enabled cross sell has driven the number of households with debit cards from no growth in 2013 to more than 16% growth last year, excluding acquisitions.  Increases in trust and brokerage businesses offset decreases in marine and mortgage banking revenues.

Adjusted noninterest income increased $385,000 or 5% (not annualized) from fourth quarter 2015 levels.  Strength in interchange and trust and brokerage income contributed to this linked-quarter gain.    

Noninterest Expense Reflects Merger Activity and Other Investment in Seacoast Strategy

Noninterest expense increased $10.4 million from the first quarter of 2015, largely driven by $5.5 million in expense related to the acquisition of Floridian on March 11, 2016.  Adjusted noninterest expense¹ increased $4.4 million from prior-year levels.  The year-over-year increase in adjusted expense reflects ongoing costs related to the 2015 acquisitions of FGC and Grand Bankshares.  Additionally, expenses reflect support of organic growth of and investment in the franchise.   Larger drivers include added salary and benefits related to additional headcount, largely from acquisition activity, decreased deferred loan origination costs and increased incentives.

Noninterest expense increased $6.4 million from the fourth quarter, 2015.  Excluding merger related charges and other one-time items, adjusted noninterest expense¹ grew $1.3 million.  Increased salary and benefit costs ($1.4 million) were primarily related to the negative impact of typical first quarter seasonality, such as higher employer 401(k) matching costs, incentive-related costs and certain employer-paid taxes; as well as to decreased deferred origination costs.

Adjustments to expenses for the first quarter 2016 relate largely to the Floridian acquisition ($5.5 million) including plans to consolidate five locations over the next two quarters.  This acquisition will provide an IRR of near 20% or above and is immediately accretive to EPS, excluding transaction costs.  One time charges were also taken for the planned closing of four legacy Seacoast branches in slower-growth, central Florida ($0.7 million) which is expected to result in annual savings of approximately $1 million. 

First Quarter 2016 Balance Sheet Highlights

Strong Originations and Acquisition Activity Continue Loan Portfolio Build

Total loans were $2.46 billion at March 31, 2016, an increase of $601 million or 32% from a year ago.  Excluding acquired loans, loans increased $208 million or 11% from the prior year's first quarter.  Loans increased $299 million or 14% (not annualized) from fourth quarter levels.  Adjusted for the acquisition, loans increased $23 million or 1.9% from prior quarter levels, reflecting strong originations offset by sizable levels of pay downs during the first quarter.    

Despite a seasonally slow quarter, loan production continued a strong pace across all business lines.  Commercial loan originations for the quarter exceeded $67 million with the commercial pipeline (in underwriting and approval or approved and not yet closed) totaling $98 million at March 31, 2016, ahead of prior-year levels.  Consumer loan and small business originations (inclusive of lines of credit) totaled $53 million in the first quarter of 2016 compared to $39 million one year ago.

Closed residential production for the quarter totaled $67 million compared with $56 million during the first quarter 2015, with a total residential pipeline of $58 million at March 31, 2016 up from $49 million one year ago.

Credit Quality Remains Stable and Strong

The provision for loan losses was $199,000 for the first quarter of 2016, down from $433,000 in the first quarter 2015 and $369,000 recorded in the fourth quarter 2015.  The decrease in provision was driven by strong credit metrics, including $397,000 in net recoveries collected during the quarter, partially offsetting the impact of continued loan growth. The ratio of allowance for loan losses to non-acquired loans rose to 1.04% as of March 31 2016, as slight increase from 1.03% as of December 31, 2015. 

Additional highlights include:

• Nonperforming loans to total loans outstanding at the end of the first quarter decreased to 0.63%, down from 1.14% as of March 31, 2015;
• Nonperforming assets to total assets also declined to 0.59%, compared to 0.84% one year ago.

Deposits Built on Core Customer Growth and Acquired Deposits and Reflect Seasonal Public Funds Trends

Total deposits increased 23% to $3.22 billion at March 31, 2016, from year ago levels.  Core customer funding increased to $3.06 billion at March 31, 2016, a $590 million, or 24% increase from the first quarter of 2015.  Excluding acquisitions, core customer funding increased by $176 million or 7% from one year ago and total deposits increased $100 million or 4% from one year ago.  Total deposits grew $378 million or 13% (not annualized) and core customer funding increased $336 million or 12% (not annualized) compared to the prior quarter.  Excluding acquired deposits, total deposits increased $54 million or 2% (not annualized) from fourth quarter levels.  First quarter 2016 deposit growth is impacted by a reduced focus on, and seasonal decreases in public fund balances, which decreased by $74 million during the quarter. 

Noninterest demand deposits grew $200 million or 23% from the fourth quarter of 2015 and $261 million or 33% from the first quarter of 2105.  Excluding acquired deposits, noninterest demand deposits increased $112 million, or 13% from the fourth quarter 2015.  Noninterest demand deposits increased to a strong 33% of total deposits.

Other Highlights

Capital Ratios Remain Strong

Capital ratios remain healthy and well above regulatory requirements for well-capitalized institutions.  The common equity tier 1 capital ratio (CET1) is estimated at 12.0% and the total capital ratio is estimated at 14.6% at March 31, 2016.  The tier 1 leverage ratio is estimated at 10.9% at March 31, 2016.  Ratios are down slightly as earnings during the first quarter were offset by merger activity.

Tangible book value per share increased $0.41 to $9.15 while book value per share increased $1.18 to $10.89 compared to the first quarter of 2015.  Average tangible common equity to assets was a strong 9.4% at March 31, 2016. 

Conference Call Information 
Seacoast will host a conference call on Friday, April 29, 2016 at 10:00 a.m. (Eastern Time) to discuss the earnings results.  Investors may call in (toll-free) by dialing (800) 697-5978 (passcode: 7908 524). 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 April 29, by dialing (888) 843-7419 and using passcode: 7908 524.

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 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.   

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

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 $4.0 billion in assets and $3.2 billion in deposits as of March 31, 2016. The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through advanced banking solutions, 53 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 Daytona Beach area, into Orlando and Central Florida, and west to Okeechobee and surrounding counties. More information about the Company is available at SeacoastBanking.com.

Sources: 

http://blog.comerica.com/2016/03/29/comerica-banks-florida-index-sees-broad-based-gains/ 
http://www.adpemploymentreport.com

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, 2015, 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: