Seacoast Reports Improved Earnings and Credit Quality for Third Quarter 2011

STUART, Fla., Oct. 20, 2011 /PRNewswire/ --  

• Earnings increase 12 percent annualized for third quarter
• Nonperforming loans down 79% compared to peak levels in 2009
• Ending loans increased $19.6 million linked quarter or 6.6% annualized
• Average demand deposits increased 15.9% over the prior year

Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF) today reported a third quarter 2011 net income of $2.6 million, compared to a net loss of $7.6 million for the third quarter of 2010.  For the first nine months of 2011, net income totaled $4.1 million compared to a net loss of $23.0 million a year ago. Including preferred stock dividends and accretion of $937,000, the net income applicable to common shareholders was $1.7 million or $0.02 per average common diluted share for the third quarter, compared to a net loss of $8.6 million or $0.09 per average common diluted share for the third quarter of 2010.  

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Nonperforming loans to loans outstanding continued to trend lower at 2.70 percent, marking the eighth consecutive quarterly decline from the peak level of 10.23 percent at September 30, 2009.  Nonperforming assets fell to 2.75 percent of total assets from 5.06 percent a year ago and totaled $56.3 million at September 30, 2011, a dollar level last achieved at September 30, 2007.  

Revenues continued to grow and improved to $21.7 million for the quarter, up $623,000 linked quarter and $508,000 compared to a year ago.  New customer growth has produced increases in consumer and commercial core checking account relationships resulting in better deposit mix and increased deposit fees and interchange income.  Average noninterest bearing checking balances for the third quarter totaled $323 million, up $44 million or 15.9 percent over the prior year.

"Seacoast's third quarter results were improved and reflected continued sequential revenue growth and improved credit trends," said Dennis S. Hudson, III, Chairman and Chief Executive Officer.  "Bottom-line results were the best the Company has generated since 2007.

Balance Sheet Highlights

Total loans were $1,209 million at September 30, 2011, and grew $20 million or 6.6 percent annualized linked quarter, the first quarterly increase since 2007.  Loan growth benefited from reduced need to liquidate problem loans and continued strong residential production.  There were also improvements in commercial production resulting from a focused program to target small business segments less impacted by the lingering effects of the recession.

Total deposits were $1,661 million at September 30, 2011, increasing $24 million or 1.5 percent compared with a year ago.  Noninterest bearing checking balances totaled $324 million, up $48 million or 17.2 percent compared with last year.  Total transaction accounts (demand deposit, NOW and money markets) were up $61 million or 6.2 percent and totaled $1,043 million compared to $982.1 million at September 30, 2010.  Savings balances increased $20 million to $128 million at quarter-end.  Retail certificates of deposit continued to decline with a reduction of $38.7 million or 7.3 percent in the third quarter, and $56.7 million lower than in the third quarter last year.  

The Company's balance sheet continues to be primarily core funded with a loan-to-deposit ratio of 72.7 percent at September 30, 2011, and a strong liquidity position to support further growth.

Capital levels remained strong again this quarter with the Tier 1 capital ratio estimated at 17.4 percent at September 30, 2011 compared with 17.1 percent a year ago.  With the strong capital ratios, the Company is well positioned to take advantage of growth opportunities in its core markets.  

Credit Quality Highlights

Improvement in overall credit quality continued in the third quarter.  Nonperforming assets decreased $45.6 million to $56.2 million at September 30, 2011 compared to September 30, 2010.  Net charge-offs declined from $10.7 million in the third quarter 2010 to $2.8 million for this year's third quarter.  The allowance for loan losses is 87 percent of nonperforming loans as of September 30, 2011 compared with 55 percent for 2010.  

Additional highlights include:

• Mortgage banking revenue in the third quarter 2011 was up $47,000 or 9.2 percent linked quarter due to higher volume and spreads;
• Service charges on deposit accounts totaled $1.675 million for the quarter, an increase of 10.9 percent over the same quarter last year and up 8.3 percent linked quarter;
• Wealth management fees totaled $862,000 for the third quarter 2011, up $56,000 or 6.9 percent compared to the same quarter 2010;
• Interchange income totaled $969,000 for the quarter, an increase of $159,000 or 19.6 percent compared to third quarter 2010;
• Total noninterest bearing deposits at September 30, 2011 comprised 19.5 percent of total deposits, up from 16.9 percent a year ago;
• Checking account household growth was 4.6 percent annualized for the first nine months of 2011; and
• Tangible common equity (TCE) ratio improved to 5.91 percent from 5.84 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 $16.9 million, up $393,000 compared with third quarter 2010.  The increase over the prior year's third quarter net interest income is a result of lower deposit costs and lower rates paid on interest bearing liabilities, and a larger investment portfolio.  The net interest margin for the third quarter totaled 3.44 percent, up 8 basis points compared to the second quarter 2011, and 9 basis points higher than the third quarter 2010.  A stable margin is expected going forward, as a result of lower levels of nonperforming loans and increased loan balances.  For the first nine months of 2011, the margin was 3.43 percent, up 8 basis points compared with the prior year's first nine months.  

The Company recorded no provision for loan losses in the third quarter 2011, compared to $0.9 million for the second quarter and $8.9 million for the third quarter of 2010.  The allowance for loan losses as a percentage of loans was 2.35 percent at September 30, 2011, compared to 2.63 percent for the second quarter this year and 3.04 percent at September 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 $2.8 million compared to $10.7 million for the third quarter 2010 and $4.0 million for the second quarter 2011.

Third quarter 2011 noninterest income, excluding securities gains and losses, was up $159,000 compared to the second quarter and was up $174,000 compared to the third quarter of 2010.  Mortgage banking fees were up $47,000 compared to the second quarter of 2011 with revenues of $556,000, down $98,000 compared with third quarter 2010.  Service charges on deposits and interchange income were both up when compared to last year's third quarter as a result of the increases in new business and retail households.  Combined revenues related to these deposit account types totaled $2.6 million in the third quarter, up $323,000 or 13.9 percent compared with third quarter 2010.

Core operating expenses increased by $188,000 for the quarter but were lower by $861,000 over the prior year.  Expenses associated with other real estate owned and asset dispositions were lower by $198,000 compared to the second quarter, and down by $51,000 compared with the prior year third quarter.  Salaries, wages and benefits for the third quarter 2011 increased $322,000 or 4.0 percent from the second quarter 2011, and were $295,000 or 3.7 percent higher when compared to the same period in 2010, as the result of added commercial lenders and higher commissions from increased residential loan production.   FDIC assessments were unchanged for the third quarter compared with second quarter but were down by $279,000 compared to last year's assessments.

The Company's residential lending group has produced solid, quality mortgage loan growth in 2011.  A total of 329 applications were accepted in the third quarter 2011 for total loans of $87 million, and 988 applications were taken in the first nine months for $233.1 million.  Closed mortgage loans totaled $53 million for the quarter, up $3 million compared with the second quarter 2011.  A total of $17 million in residential mortgage loans were sold in the third quarter of 2011.  Over the first nine months of 2011, a total of $49 million in residential mortgage loans were sold and $86 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 third quarter reduced the overall cost of total deposits to 0.65 percent, 5 basis points lower than in the second quarter 2011 and 19 basis points lower than the third quarter 2010.

Average total deposits for the third quarter ended September 30, 2011 were $1,675 million, $16 million lower than in the third quarter 2010, and ending deposits were seasonally lower compared to second quarter at $1,661 million.  Compared to the prior year, deposits were lower due to a planned deposit runoff of customers with single-service certificates of deposit and brokered certificates as they matured. The mix of deposits continued to improve in the third quarter with low cost average interest bearing NOW and savings deposits increasing $7 million or 3.1 percent annualized, and average demand deposits stable at $323 million compared to the second quarter 2011 at $331 million.  Average demand deposits increased $44 million or 15.9 percent compared with third quarter a year ago.  The average cost of interest bearing core deposits (NOW, savings and money market deposit accounts) during the third quarter was 0.29 percent, down 11 basis points from the third quarter of 2010.  Interest rates paid on certificates of deposit were also lower compared to the third quarter last year and totaled 1.66 percent during the third quarter 2011, a decline of 28 basis points.  The average cost of total interest bearing liabilities was 0.87 percent, down 8 basis points compared to the second quarter 2011 and 22 basis points lower than the third 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 8,065 new households started banking with Seacoast over the past year, up 27.2 percent over the same period one year earlier.  These new households have opened 8,523 new checking accounts, an increase of 36.8 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, October 21, 2011 at 9:30 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 October 21, 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 October 21, 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