Seacoast Reports $6.7 Million in Net Income for the Year, $2.5 Million for the Quarter and Strong Organic Customer Growth

STUART, Fla., Jan. 26, 2012 /PRNewswire/ -- Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF), today reported 2011 fourth quarter net income of $2.5 million, up $12.8 million compared to the fourth quarter of 2010.  Net income was $6.7 million for the full year compared to the net loss for the year 2010 totaling $33.2 million.  Net income available to Common shareholders for the fourth quarter and the year 2011 totaled, respectively, $1.6 million or $0.02 diluted earnings per share (DEPS), and $2.9 million or $0.03 DEPS.  These figures compare to a loss of $0.12 DEPS and $0.48 DEPS a year ago for the same periods, respectively.

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“We are pleased with the quarter as it represented good progress against our strategic plan even with significant headwinds from the operating and interest rate environment,” said Dennis S. Hudson, III, Chairman and Chief Executive Officer. “There were many positives that confirm we are making significant progress to improve profitability and add to long-term earnings growth. Net interest income increased, reflecting loan and deposit growth. Noninterest income increased, reflecting growth in key activities such as mortgage banking gains, and fees earned from increased households and business deposit relationships, as well as, an increase in fees from wealth management. Noninterest expenses declined significantly as a result of meaningful improvements in credit quality.  

“Generating improved returns while reducing risk for our shareholders is our key objective,” Hudson continued. “Over the last two years, we have significantly improved the risk profile of the balance sheet by increasing capital, strengthening reserves, and reducing the concentrations of higher risk noncore commercial real estate loans.”

Highlights for the quarter:

• Fourth quarter results reflected growth in customers, loans and deposits with improving overall credit quality and disciplined core expense management;
• Commercial and retail banking added 2,696 new household relationships during the fourth quarter of 2011. For the year 2011, new households totaled 8,515, almost 1.2 times the growth in 2010;
• Average accruing commercial loan balances grew $10 million and residential loan balances increased $20 million compared to third quarter 2011;
• Commercial loans closed totaled approximately $18.6 million, the highest quarterly production in 2011;
• Nonperforming loans fell to 2.36 percent of loans compared to 2.70 percent last quarter and 5.50 percent one year earlier; and
• Other real estate owned fell to $20.9 million compared to $23.7 million last quarter and $25.7 million 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 15.5 percent over the past year.  

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

Seacoast strengthened its regulatory capital ratios as profitability was restored throughout the year.  The estimated total risk-based capital ratio at year-end increased to 18.8 percent, up from 17.8 percent a year ago.  The estimated tangible common equity ratio was 5.6 percent at year-end 2011 and will increase to an estimated 7.6 percent when the deferred tax asset valuation allowance is released. 

With a strong balance sheet and reduced aggregate credit risk, the board and executive management have been focused on improvements designed to increase profitability and ultimately position Seacoast as a top-tier community bank as measured by low risk, strong organic growth and increased shareholder value.

Revenue growth improved throughout 2011 as a result of retail and small business deposit account growth, and improvements in loan production.  Excluding $600,000 realized on the sale of the Company’s merchant business in the fourth quarter 2010, noninterest income was up $296,000 or 6.5 percent in the fourth quarter compared with a year ago and was up for the full year by $811,000 or 4.6 percent compared with 2010.

Revenue earned from service charges on deposits, and interchange income improved over the prior year as a result of increased households.  Retail household growth for the entire year has improved as a result of the Company’s retail deposit program and expanded efforts to attract new commercial deposit accounts.  New household acquisition was particularly strong for the fourth quarter; new personal retail checking relationships opened during the quarter rose 20.2 percent from the same quarter of 2010 and 27.3 percent from the third quarter of 2011.  Likewise, new commercial business checking deposit relationships increased by 11.8 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.

Nonperforming loans declined by $39.8 million, or 58.2 percent during the year and totaled 2.36 percent of loans outstanding at year-end. Early stage delinquencies (accruing loans 30-89 days past due) remain nominal at 0.42 percent of loans outstanding.  The allowance for loan losses totals $25.6 million or 2.12 percent of loans, down slightly from 2.35 percent the prior quarter and 3.04 percent at year-end 2010.   Other real estate owned (“OREO”) balances declined by $4.8 million or 18.5 percent from the prior year as the result of sales and fewer loans foreclosed.

Accruing loans increased by approximately $7 million to $1.18 billion at year-end, which was the first yearly increase in accruing loans since 2007 as more resources have been dedicated to loan production and problem loan management declined.  This is the second 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. 

Core operating expenses (total noninterest expenses less losses on other real estate owned and other asset disposition expenses) have been well managed throughout the year as noted in the table below.  Fourth quarter salary costs were higher by $399,000 compared to the third quarter as a result of severance payments as several positions were eliminated which will lower quarterly salary expense by approximately $125,000 going forward.  Noninterest expenses for the quarter totaled $20.0 million a decline of $7.8 million from the prior year's fourth quarter, entirely due to lower expenses for OREO and other asset dispositions which totaled $1.5 million in the fourth quarter 2011 compared to $9.9 million the prior year.  Noninterest expenses for 2011 totaled $77.8 million compared to $89.6 million, a decrease of $11.8 million.  This was due to lower consulting fees of approximately $1.3 million for development and implementation assistance related to our strategic plan and enterprise risk management projects in 2010, reduced legal fees of $0.4 million, and lower expense for OREO and other asset dispositions which totaled $15.8 million last year, compared to $6.0 million in 2011.  Core operating expenses were $18.4 million in the fourth quarter, up approximately $578,000 primarily related to the aforementioned higher severance costs, data processing as the result of household and account growth, employee benefits and additional marketing and promotion expenses.  Offsetting were much lower legal and professional fees as a result of fewer problem assets.

Core operating expense trends are presented in the table below:

The net interest margin remained unchanged at 3.42 percent in the fourth quarter 2011 compared to the fourth quarter of 2010 aided by much lower nonperforming assets and lower costs for interest bearing liabilities, but offsetting were 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 0.69 percent during the fourth quarter 2011, and the total cost of interest bearing liabilities decreased from 1.01 percent for the fourth quarter 2010 to 0.77 percent in the fourth quarter.  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 19.1 percent of total deposits from 17.7 percent a year ago and total transaction accounts and customer sweep repurchases now account for more than half of total customer relationship funding.

The Company will host a conference call on Friday, January 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 January 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 January 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 approximately $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, 2010 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.