Seacoast Reports $0.9 Million In Net Income For The Quarter

STUART, Fla., April 26, 2012 /PRNewswire/ --

Highlights for First Quarter 2012

• Demand deposit balances increased 20.2%
• Other real estate owned declined by 25.8 %
• Noninterest income (excluding securities gains) grew 17.3%
• Company exits government TARP program
• Risk-based capital ratio grew year over year to 18.6%

Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF), today reported first quarter 2012 net income of $938,000 compared to $358,000 for the same quarter last year.  Net income available to common shareholders for the first quarter 2012 totaled $1,000, or $0.00 per diluted common share, compared with 2011 net loss of $579 thousand, or $0.01 per diluted common share. Fourth quarter 2011 net income available to common shareholders was $1.6 million, or $0.02 per diluted common share. 

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"We produced record growth in new households during the quarter and significant growth in consumer and business core deposit balances compared to the prior year.  We are finding that our distinctive business model is increasingly effective in growing our customer franchise which is the key to achieving sustainable growth in shareholder value," said Dennis S. Hudson, III, Chairman and Chief Executive Officer.  "During the quarter we were also pleased to exit the government's troubled asset relief program following the sale of our Class A Preferred Stock by the Treasury Department to new investors."

Earnings for the quarter, while improved over the prior year, were below our expectations due to our decision to reduce a significant amount of our nonperforming assets.  During the quarter we took advantage of market conditions to sell, at a faster pace than previously anticipated, a substantial portion of other real estate owned.  The assets were primarily commercial properties which were sold for cash on a conventional basis closing this quarter and next quarter.  We continue to believe reducing the level of problem assets as quickly as possible is an important factor in reducing overhead going forward.  We will remain focused on expanding our customer franchise in response to the significant opportunities we see to capture market share in our markets.  This is the key to revenue growth which when combined with reduced costs will drive earnings improvements.

Highlights for the quarter:

• Other real estate owned fell to $15.5 million compared to $20.9 million last quarter and $24.1 million one year earlier.  Approximately 40 percent of the remaining portfolio is under contract to be sold in the second quarter;
• Nonperforming assets fell to 2.64% of total assets at March 31, 2012 compared to 4.34% last year, but was up from 2.31% last quarter;
• Noninterest bearing demand deposits grew $66.2 million or 20.2 percent linked quarter and now total 22.7 percent of total deposits, compared with 19.3 percent one year earlier;
• Commercial and retail banking added 3,065 new household relationships during the first quarter of 2012 compared to 2,696 for the fourth quarter 2011;
• Retail and commercial deposit related fees grew 11.1 percent, compared with one year earlier, and included a 20.2 percent growth in check and debit card fees; and
• Mortgage banking fees grew 57.7 percent compared with one year earlier.

A key objective of our strategic plan is to produce strong organic growth of our customer deposit franchise.  During the quarter, our tactical initiatives produced significantly improved growth in customer relationship funding compared to the same quarter last year.  Total core customer funding increased by 15.0 percent over the past twelve months. 

(1)   Total deposits and sweep repurchase agreements, excluding certificates of deposits.

New household acquisition was particularly strong for the first quarter 2012.  New personal retail checking relationships opened during the quarter rose 30.8 percent compared to the same quarter in 2011 and grew 9.8 percent compared with the fourth quarter of 2011.  Likewise, new commercial business checking deposit relationships opened increased by 22.9 percent compared with the same quarter one year ago.  Along with the new relationships, our programs have improved market share, increased average services per household and decreased customer attrition.

Total revenue was $25.0 million for the first quarter of 2012 compared with $20.7 million for the first quarter of 2011. The increase included a first quarter 2012 securities gain of $3.4 million, as well as higher fees primarily related to increased households and increased services per household, greater mortgage banking gains, marine finance fees, and interchange income.

Net interest income increased $186,000 to $16.6 million compared with the first quarter 2011 and resulted from loan growth and lower funding costs which was partially offset by a decline in the yield of investment securities portfolio and lower loan yields.  These factors reduced the net interest margin by 9 basis points to 3.33 percent for the first quarter compared with 3.42 percent for the fourth quarter and 3.48 percent in the first quarter of 2011.

Over the past 12 months the net interest margin was aided by much lower nonperforming assets and lower costs for interest bearing liabilities, offset by lower asset yields caused by Federal Reserve actions to stimulate economic growth.  In addition the net interest margin continues to be negatively impacted by higher levels of overnight liquidity and short-term investments.  Interest bearing deposit costs decreased 11 basis points to 0.58 percent during the first quarter 2012, and the total cost of interest bearing liabilities decreased from 0.98 percent for the first quarter 2011 to 0.68 percent in the first quarter 2012.  The mix in deposits continues to improve, which strengthens the net interest margin, and is a result of our tactical activities designed to attract, onboard and retain new household relationships.  Noninterest bearing demand deposits increased to 22.7 percent of total deposits from 19.3 percent a year ago and total transaction accounts and customer sweep repurchase accounts now account for more than half of total customer relationship funding.

Nonperforming assets of $57.2 million at March 31, 2012 declined $33.1 million, or 36.6 percent, compared with the first quarter 2011.  Accruing loans past due 90 days or more were $29,000 at March 31, 2012 and $0 at December 31, 2011. Net charge-offs declined to $3.4 million in the first quarter 2012 compared with $4.0 million in the last year's first quarter.  The allowance for loan losses was 2.01 percent of loans at March 31, 2012 compared to 2.12 at December 31, 2011.  Nonperforming loans declined by $24.5 million during the last twelve months and totaled 3.43 percent of loans outstanding at quarter-end.  Early stage delinquencies (accruing loans 30-89 days past due) remain nominal at 0.6 percent of loans outstanding. 

The provision for credit losses increased to $2.3 million for the first quarter compared with $640,000 in the first quarter 2011.  While overall credit quality continues to improve, a specific allowance attributable to loans moving to foreclosure was increased.  The provision for credit losses is expected to fall to a level more consistent with recent prior quarters going forward.

Noninterest income, excluding investment gains, was $4.9 million for the first quarter of 2012, up 17.3 percent compared with $4.2 million for the first quarter of 2011.  Residential mortgage revenue increased $228,000 or 57.7 percent compared with the first quarter last year due to increased production and service release premiums.  Interchange fees totaled $1.1 million for the first quarter 2012 and were up 20.2 percent compared with the first quarter 2011 primarily due to the increases in households.  

Revenue growth improved throughout 2011 and into 2012 as a result of retail and small business deposit account growth, and improvements in loan production.  

Loans grew to $1.216 billion at March 31, 2012, up 2.6 percent annualized from $1.208 billion at December 31, 2011. Commercial lending decreased $0.9 million during the first quarter but new client activity improved across diverse industries including medical and manufacturing. Consumer loans increased $9.6 million linked quarter mainly due to higher residential, auto and boat loans.  Average loans of $1.214 billion in the first quarter grew $22.5 million, or 1.8 percent, compared with the first quarter a year ago.  This is the third consecutive quarter of total loan growth as a result of improving loan production, stabilized credit quality and our tactical focus on growing market share in lower risk customer segments. 

Deposits grew to $1.737 billion at March 31, 2012 compared with $1.719 billion at December 31, 2011 and $1.686 billion at March 31, 2011.  Growth in transaction deposits in the first quarter 2012 of $33.3 million and savings and money market deposits of $25.7 million was partially offset by declines in retail certificates of deposit of $40.3 million.  Average deposits were $1.699 billion for the first quarter 2012, an increase of $42.7 million from the first quarter of 2011.

Seacoast strengthened its regulatory capital ratios as profitability was restored throughout 2011 and 2012.  The estimated total risk-based capital ratio at quarter-end increased to 18.6 percent, up from 18.2 percent a year ago.  The estimated tangible common equity ratio was 5.6 percent at March 31, 2012 and will increase to an estimated 7.5 percent when the deferred tax asset valuation allowance is released. 

Core operating expenses (total noninterest expenses less losses on other real estate owned and other asset disposition expenses) totaled $19.2 million for the quarter, up $793 thousand over the fourth quarter 2011.  Contributing to the increase for the quarter were significant increases in employee benefits expense of $563 thousand and legal and professional fees of approximately $477 thousand.  The increase in employee benefits expense was due to higher payroll taxes (typical for the first quarter), as well as higher health insurance and retirement costs.  The increase in legal and professional fees included higher costs related to the disposition of problem assets and costs related to the preferred stock sale by the Treasury Department.

Core operating expense trends are presented in the table below:

The Company will host a conference call on Friday, April 27, 2012 at 9:00 a.m. (Eastern Time) to discuss its earnings results and business trends.  Investors may call in (toll-free) by dialing (888) 517-2464 (access code: 5785075; leader: Dennis S. Hudson).  Charts will be used during the conference call and may be accessed at Seacoast's website at www.seacoastbanking.net by selecting "Presentations" under the heading "Investor Services".  A replay of the conference call will be available beginning the afternoon of April 27 by dialing (888) 843-7419 (domestic), using the passcode 5785075.

Alternatively, individuals may listen to the live webcast of the presentation by visiting the Company's website at www.seacoastbanking.net.  The link to the live audio webcast is located in the subsection "Presentations" under the heading "Investor Services".  Beginning the afternoon of April 27, 2012, an archived version of the webcast can be accessed from this same subsection of the website.  This webcast will be archived and available for one year. 

Seacoast, with over $2.1 billion in assets, is one of the largest independent commercial banking organizations in Florida.  Seacoast has 39 offices in South and Central Florida and is headquartered on Florida's Treasure Coast, which is one of the wealthiest areas in the nation.

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, 2011 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.