Loan Growth And Improved Fundamentals Drive Increases In Revenues And Earnings Per Share

STUART, Fla., Oct. 27, 2014 /PRNewswire/ -- Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF) today reported third quarter 2014 net income of $3.0 million or $0.12 per diluted common share. Excluding merger related charges and other adjustments as described below, adjusted net income was $3.3 million or $0.13 per diluted share.

Our previously announced acquisition of The BANKshares, Inc., was completed on October 1, 2014, creating the sixth largest Florida-based bank with total assets of approximately $3.0 billion.  The acquisition expands our reach in the Orlando and Central East Coast Florida markets and increases our total deposits to approximately $2.3 billion with 46 branches.  The acquisition, together with previously announced cost reductions coming from both companies and continued revenue growth resulting from our strategic investments, is expected to substantially reduce our efficiency ratio.  The combination will also result in an improved mix of loans which is expected to increase our consolidated net interest margin to approximately 3.40 percent next quarter. 

Adjusted Net Income

To better evaluate its earnings, the Company removes certain items to arrive at Adjusted Net Income and Adjusted Diluted Earnings Per Share (non-GAAP measures) as detailed in the table below:

Organic Core Customer Growth and Digital Engagement Continues to Improve

• Ending noninterest bearing demand deposits were up $69.1 million or 15.2 percent compared with the prior year;
• Ending noninterest bearing demand deposits increased to 28.9 percent of total deposits compared with 26.7 percent for the third quarter 2013, and;
• The improved deposit mix has resulted in average cost of deposits declining to 12 basis points compared to 15 basis points a year ago.

Core customer funding totaled $1.686 billion at September 30, 2014, a $136.1 million increase from the third quarter of 2013 and a $227.6 million or 16 percent increase from 2012. 

Loan Growth Improves

Total loans were $1.391 billion at September 30, 2014, up $55.9 million or 4.2 percent from June 30, 2014.  As indicated in the table below, commercial loan originations for the quarter totaled $72.6 million, an increase of $19.4 million linked quarter and $38.9 million higher than the prior year's third quarter production.  Year-to-date commercial loan originations total $163.3 million, an increase of $23.6 million from 2013 and $101.5 million from 2012.  Commercial loan originations have assisted in the margin improvement noted this quarter. 

• Closed residential production totaled $66.0 million compared to $61.2 million in the second quarter and $62.3 million in the third quarter of 2013; and
• Consumer loan originations (inclusive of lines of credit) totaled $24.5 million  compared to $21.5 million in the second quarter and $17.2 million in the third quarter of 2013.

Income Statement Highlights

Net interest Income

Net interest income for the quarter totaled $17.3 million and includes approximately $192,000 in nonaccrual loan interest recoveries.  Core net interest income (excluding nonaccrual loan interest recoveries) totaled $17.1 million, a $311,000 increase from the prior quarter and a $723,000 increase from the third quarter of 2013 (adjusted for $505,000 in nonaccrual loan interest recoveries).  Growth in net interest income was driven by a $27.6 million quarter over quarter increase in average loans outstanding and $20.5 million increase in average investment securities with a corresponding decline in lower yield federal funds sold and other investments.  Year-to-date core net interest income totaled $50.1 million at September 30, 2014 compared to $48.6 million one year earlier.

Net interest margin for the quarter was 3.17 percent or 3.13 percent, after the exclusion of the nonaccrual loan interest recoveries, up from 3.10 percent in the second quarter.  The acquisition of BANKshares will result in improved loan mix that is expected to increase our net interest margin to approximately 3.40 percent in the fourth quarter.

Noninterest Income

Noninterest income (excluding security gains) increased from the prior quarter by $253,000 or 4.3 percent.  Wealth management fees continued at a notable growth rate, up $112,000 or 10.1 percent compared to the prior quarter and $175,000 or 16.7 percent compared to the prior year.  Excluding mortgage banking fees (which declined 23.3 percent over last year), noninterest income increased $312,000 or 6.2 percent compared to the third quarter of 2013. 

Noninterest Expense

Total noninterest expenses decreased $794,000 from the prior quarter to $19.9 million with lower realized costs for merger-related charges compared to the second quarter.  Total core operating expenses of $18.8 million were in line with the prior quarter despite higher commissions and incentives related to increased commercial and mortgage banking production. 

Legacy cost reductions (primarily branch consolidations) totaling $1.8 million annualized were announced in the prior quarter and remain on track to be substantially implemented late in the fourth quarter of this year.  The one-time charges related to these reductions are expected to total $4.5 million.    These legacy cost reductions are in addition to the previously announced $5.5 million cost reductions we expect to implement during the fourth quarter related to our acquisition of BANKshares. 

Income Taxes

The effective tax rate for the second and third quarters of 2014 was higher due to merger related expenses that are not deductible for tax purposes.  The effective tax rate for the fourth quarter of 2014 is expected to be approximately 41.8 percent compared to 43.0 percent for the third quarter and 43.3 percent for the second quarter.

Other Highlights

Credit Quality Continues to Improve

The payoff of a larger commercial loan during the quarter resulted in a recovery totaling $1.3 million.  The payoff combined with continued improvement in credit quality in all portfolios supported a $1.4 million provision recapture in the third quarter.

• Net recoveries totaled $856,000 during the quarter compared to net charge-offs of $842,000  one year ago;
• Nonperforming assets to total assets declined to 1.0 percent, compared to 1.6 percent a year ago;
• OREO balances declined by $1.2 million to $5.0 million during the third quarter.

Capital Ratios Continue to Strengthen

The Company's tier 1 capital ratio is estimated at 17.6 percent and the total risk based capital ratio at 18.8 percent at September 30, 2014.  The tier 1 leverage ratio is estimated at 11.3 percent at September 30, 2014 compared to 11.0 percent at June 30, 2014 and 10.1 percent the prior year. 

About Seacoast Banking Corporation of Florida (NASDAQ: SBCF)

Seacoast will host a conference call on Tuesday, October 28, 2014 at 8:30 a.m. (Eastern Time) to discuss the earnings results.  Investors may call in (toll-free) by dialing (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, beginning the afternoon of October 28, 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 October 28, 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.   

Seacoast Banking Corporation of Florida is one of the largest community banks headquartered in Florida with approximately $3.0 billion in assets and $2.3 billion in deposits. The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through 46 traditional branches of its locally-branded wholly-owned subsidiary bank, Seacoast National Bank (including BANKshares offices), and five Accelerate offices fueled by the power of Seacoast National Bank.  Offices stretch from Fort Lauderdale north through the Treasure Coast and into Orlando, and west to Okeechobee and surrounding counties.

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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, 2013 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.

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SOURCE Seacoast Banking Corporation of Florida

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http://www.seacoastbanking.net