Seacoast Reports Improved Earnings and Credit Quality for Second Quarter 2011

STUART, Fla., July 28, 2011 /PRNewswire/ --

• Earnings increase for second consecutive quarter
• Nonperforming loans declined by 49.2% over the last twelve months, 30.3% for the quarter
• Average low cost deposits (NOW & savings) increased 17.4% annualized during the quarter
• Average demand deposits increased 23.8% annualized during the quarter and were up 18.2% over the prior year

Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF), today reported a second quarter 2011 net income of $1.1 million, compared to a net loss of $13.8 million for the second quarter of 2010.  For the first six months of 2011 net income totaled $1.5 million compared to a net loss of $15.4 million a year ago. Including preferred stock dividends and accretion of $937,000, the net income applicable to common shareholders was $176,000 or $0.00 per average common diluted share for the second quarter, compared to a net loss of $14.7 million or $0.25 per average common diluted share for the second quarter of 2010.  

Nonperforming loans fell for the seventh consecutive quarter to 3.88 percent of loans outstanding compared with a peak level of 10.23 percent at September 30, 2009 as new problem credit inflows continued to moderate and liquidation activities were accelerated.  As previously forecast the Company closed on contracts liquidating $27.5 million of nonperforming loans and $3.5 million of OREO properties during the quarter.  Nonperforming assets fell to 3.46 percent of total assets from 5.25 percent a year ago and totaled $72.0 million at June 30, 2011, a dollar level last achieved in December 2007.  Nonperforming loans are expected to continue to decline in the second half of 2011.

“Our results in the second quarter were consistent with our expectations for continued earnings improvement during the year,” said Dennis S. Hudson, III, Chairman and Chief Executive Officer.  “Revenues continued to grow and included a strong 8.0 percent linked quarter increase in noninterest income as we continued to successfully execute our core growth strategy.  Our focus on building new core checking account relationships continued to gain momentum with average noninterest bearing checking balances growing 18.2 percent over the prior year and 23.8 percent (annualized) on a linked quarter basis.  Average repurchase agreement funding for the quarter grew by 21.1 percent compared with the prior year reflecting our success in building larger core business and local governmental relationships.”  

Additional highlights include:

• Mortgage banking revenue in the second quarter 2011 was up $45,000 or 9.7 percent compared to second quarter 2010 due to higher volume and spreads;
• Marine finance revenue totaled $349,000 for the quarter, 12.6 percent higher than a year ago;
• Service charges on deposit accounts totaled $1.546 million for the quarter, an increase of 6.5 percent over the same quarter last year;
• Interchange income totaled $995,000 for the quarter, an increase of $173,000 or 21.0 percent compared to second quarter 2010;
• Total noninterest bearing deposits at June 30, 2011 comprised 19.1 percent of total deposits up from 16.1 percent a year ago;
• Checking account household growth was 4.9 percent annualized for the first six months of 2011;
• Regulatory capital ratios improved during the quarter with the total risk based capital ratio increasing to 18.9 percent (estimated) at June 30, 2011, compared with 18.2 percent in the prior quarter; and
• Tangible common equity (TCE) ratio improved to 5.84 percent from 5.60 percent in the prior quarter; a future recapture of the deferred tax asset valuation allowance would add (proforma) approximately 200 basis points to the TCE ratio.  

Net interest income for the quarter totaled $16.5 million, unchanged from the first quarter, and up $324,000 or 2% compared with second quarter 2010.  The increase over the prior year’s second quarter net interest income is a result of lower deposit costs and lower rates paid on interest bearing liabilities, and a slightly larger investment portfolio.  The net interest margin for the second quarter totaled 3.36 percent, down 12 basis points compared to the first quarter 2011, and 9 basis points higher than the second quarter 2010.  In the first quarter of 2011, collection of interest on nonaccrual loans increased, while in the second quarter there was a higher level of interest income reversed related to nonaccrual loans. A stable margin is expected going forward, as a result of lower levels of nonperforming loans.  For the first six months of 2011 the margin was 3.42 percent, up six basis points compared with the prior year’s first six months.  

The Company recorded a provision for loan losses in the second quarter 2011 of $0.90 million compared to $0.64 million for the first quarter and $16.8 million for the second quarter of 2010.  The allowance for loan losses as a percentage of loans was 2.63 percent at June 30, 2011, compared to 2.80 percent for the first quarter this year and 3.10 percent at June 30, 2010.  The reduction in the allowance for the quarter is consistent with lower overall risk in the loan portfolio as both the concentration and loan size have been reduced, particularly in the construction and land development portfolios where the majority of prior loan losses occurred.  Current quarter net loan charge-offs totaled $4.0 million compared to $20.2 million for the second quarter 2010 and $4.0 million for the first quarter 2011.

Second quarter 2011 noninterest income was up $338,000 compared to the first quarter and was up $295,000 compared to the second quarter of 2010.  Mortgage banking fees were up $114,000 compared to the first quarter of 2011 with revenues of $509,000, up $45,000 compared with second quarter 2010.  Service charges on deposits and interchange income were both up when compared to the first quarter 2011 and last year’s second quarter as a result of the increases in new business and retail households.  Combined these deposit account related revenues totaled $2.5 million in the second quarter, up $267,000 or 11.7 percent compared with second quarter 2010.

Core operating expenses declined by $642,000 for the quarter and were lower by $966,000 over the prior year.  Expenses associated with other real estate owned and asset dispositions were stable compared to the reduced level of the first quarter, but higher by $1.2 million compared with the prior year second quarter.  Salaries, wages and benefits for the second quarter 2011 declined $224,000 or 2.7 percent from a year ago, and were $313,000 lower for the first six months compared to the same period in 2010.   FDIC assessments were lower by $271,000 for the second quarter compared with first quarter and were down by $351,000 compared to last year’s assessments implemented during the quarter.

The Company’s residential lending group has produced solid, quality mortgage loan growth in 2011.  A total of 272 applications were accepted in the second quarter 2011 for total loans of $59.7 million, and 630 applications were taken in the first six months for $139.5 million.  Closed mortgage loans totaled $50 million for the quarter, up $18 million compared with the first quarter 2011.  A total of $19 million in residential mortgage loans were sold in the second quarter of 2011.  Over the first six months of 2011, a total of $32 million in residential mortgage loans were sold, and $50 million were added to the portfolio.

The Company’s retail and business core deposit focus has produced strong growth in core deposit customer relationships and has resulted in increased balances and improved deposit mix.    The improved deposit mix and lower rates paid on interest bearing deposits during the second quarter reduced the overall cost of total deposits to 0.70 percent, 2 basis points lower than in the first quarter 2011 and 24 basis points lower than the second quarter 2010.

Average total deposits for the second quarter ended June 30, 2011 were up $41 million or 9.9 percent annualized compared to March 31, 2011, and ending deposits were nearly unchanged compared to first quarter at $1.681 million.  Compared to the prior year, average total deposits were lower by $34 million due to a planned deposit runoff of customers with single-service certificates of deposit and brokered certificates as they matured. The mix of deposits improved with low cost average interest bearing NOW and savings deposits increasing $25 million or 12.6 percent annualized, and average demand deposits increasing $19 million or 23.8 percent annualized compared to the first quarter 2011.  Average demand deposits increased $50.9 million or 18.2 percent compared with second quarter a year ago.  The average cost of interest bearing core deposits (NOW, savings and MMDA) during the second quarter was 0.31 percent, down 25 basis points from the second quarter of 2010.  Interest rates paid on certificate of deposit rates were also lower compared to the second quarter last year and totaled 1.74 percent during the second quarter 2011, a decline of 25 basis points.  The average cost of total interest bearing liabilities was 0.95 percent, down 3 basis points compared to the first quarter 2011 and 22 basis points lower than the second quarter of 2010.

As previously reported, the Company has experienced strong growth in core deposit customer relationships since implementing its core growth strategy.  A total of 7,645 new households started banking with Seacoast over the past year, up 23.8 percent over the same period one year earlier.  These new households have opened 8,035 new checking accounts, an increase of 35.3 percent over the number of new accounts opened during the prior twelve months.  These new relationships have also increased average services and average balances per household.  

Seacoast will host a conference call on Friday, July 29, 2011 at 9:00 a.m. (Eastern Time) to discuss the earnings results and business trends.  Investors may call in (toll-free) by dialing (888) 517-2464 (passcode: 5785075; host: 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 call will be available for one month, beginning the afternoon of July 29, by dialing (888) 843-7419 (domestic), using the passcode 5785075.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Seacoast’s website at www.seacoastbanking.net.  The link is located in the subsection “Presentations” under the heading “Investor Services”.  Beginning the afternoon of July 29, 2011, 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, 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.

SOURCE Seacoast Banking Corporation of Florida