Seacoast Reports Results for First Quarter 2011

STUART, Fla., April 25, 2011 /PRNewswire/ -- Seacoast Banking Corporation of Florida (NASDAQ-NMS:  SBCF), a bank holding company whose principal subsidiary is Seacoast National Bank, today reported first quarter 2011 net income of $358,000, compared with a net loss of $10.2 million in the fourth quarter of 2010 and a net loss of $1.6 million a year earlier.  Including preferred stock dividends and accretion of preferred stock discount of $937,000, the net loss applicable to common shareholders was $579,000 or $0.01 per average common diluted share for the first quarter, compared to a net loss of $11.1 million or $0.12 per average common diluted share in the fourth quarter and a net loss of $2.5 million or $0.04 per average common diluted share for the first quarter of 2010.

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"The strategic framework we put in place over two years ago has enabled us to manage the effects of the real estate crisis effectively and on schedule," said Dennis S. Hudson, III, Chairman and Chief Executive Officer. "We are now poised to accelerate our business plan to increase profitability and ultimately position Seacoast as a top-tier community bank, measured by low risk, strong organic growth and increased shareholder value."

Revenue generation improvements accelerated during the quarter as a result of growth in core business and a stronger balance sheet as favorable new customer trends continued to bring increased deposit balances, lower deposit costs, improved margins and increased fees.  A total of 2,146 new core households were added in the first quarter of 2011, up 28.0 percent over the prior year.  Average noninterest bearing demand deposit balances for the first quarter increased 14.8 percent compared to the prior year.  Noninterest bearing demand deposits now total 19.3 percent of total deposits compared to 15.8 percent one year earlier.

"Our performance improved significantly in the first quarter of 2011 due to the completion last year of our focused strategy to eliminate exposure to residential and commercial construction and land development loans," said Hudson.  These loans included our largest and most troubled borrowers and represented our highest loss content following the unprecedented real estate valuation declines in Florida.  True to our prediction that nonaccrual loans had peaked in September 2009, we have seen six consecutive quarters of improvement since then.  We now expect more rapid improvement in the next two quarters as several larger problem loan relationships, which together comprise approximately 50 percent of nonaccrual loans outstanding at March 31, 2011, are expected to be liquidated as a result of contracts executed late in the first quarter."  

Highlights for the first quarter 2011 include:

• Core deposits (excluding certificates of deposits > $100,000 and brokered time certificates) increased 13.9 percent annualized, and noninterest bearing demand deposits increased 49.4 percent annualized compared to the fourth quarter 2010;
• Average business and personal noninterest bearing checking deposit balances increased $7.8 million or 20.5 percent and $11.8 million or 43.1 percent annualized, respectively, compared to the fourth quarter 2010;
• Debit card income for the quarter totaled $891,000, up $77,000 or 9.5 percent linked quarter, and up $174,000 or 24.3 percent compared to first quarter 2010 as a result of the increased households added over the last twelve months, as well as, seasonal impacts;
• A reduced provision for loan losses was required in the first quarter of $640,000, a decline of $1.4 million from a year ago and  $3.3 million lower than the fourth quarter 2010;
• Nonperforming assets (NPAs), compared to the fourth quarter 2010, declined by approximately $3.6 million to 4.34 percent of total assets, and declined $25.1 million or 21.7 percent over the last twelve months;
• Net interest margin increased to 3.48 percent, 6 basis points higher than last quarter and unchanged from the first quarter 2010;
• Net interest income (taxable equivalent) totaled $16.5 million, compared to $16.4 million the prior quarter; the lower deposit costs, a slightly larger investment portfolio and a slower loan runoff were the primary reasons for net interest income stabilization;
• The cost of interest bearing liabilities totaled 0.98 percent, 3 basis points lower than the fourth quarter 2010 and 27 basis points lower than first quarter 2010;
• Tangible common equity ratio increased to 5.6 percent from 4.8 percent as of March 31, 2010; and
• Total risk based capital increased to 18.2 percent, up from 15.3 percent as of March 31, 2010.

During the last twelve months, overall asset quality improved notably. Early stage delinquencies, nonperforming loans, and net charge-offs improved, and in some cases, significantly.  In addition, the aforementioned reduction in nonaccrual loans expected in the second and third quarter is not expected to result in further charge-offs.  Nonetheless, the economic outlook while improved remains uncertain, resulting in an elevated and stable allowance for credit losses.  As of March 31, 2011, the allowance for loan losses was $34 million, a decline of $4 million from year-end, and it represented 2.80% of total loans compared to 3.04% and 3.18% of total loans as December 31, 2010 and March 31, 2010, respectively.

The tax benefit for the net operating loss carry forward for the first quarter totaled $172,000. The deferred tax valuation allowance was lowered by a like amount, and therefore there was no change in the carrying value of deferred tax assets which are supported by tax planning strategies.  Due to limitations on the inclusion of deferred tax assets, regulatory capital ratios are unaffected.  As our earnings continue to improve and credit losses moderate, we believe we can place increased reliance on our forecast of future taxable earnings, which would support realization of the deferred tax assets and increase the Company's common shareholders' equity by up to $48 million.

Solid growth in new households have increased noninterest income over the past year with service charges on deposit accounts up 5.1 percent and debit card income up 24.3 percent.  Trust and brokerage commissions and fees also increased 9.9 percent and 11.9 percent, respectively, over the past year as financial markets have improved and our sales activities have improved.  Service charges on deposit accounts fell slightly in the first quarter on a linked quarter basis primarily due to fewer days in the first quarter compared to the fourth quarter and increased average deposit balances.  Revenue increased for debit card and other EFT transactions, attributable to increases in the number of customers served and a seasonal increase in transactions.  

Wealth management fees were up $8,000 linked quarter or 3.9 percent annualized and were up $81,000 or 10.6 percent compared to first quarter a year ago.  Marine finance fees were lower by $57,000 compared to the fourth quarter and lower by $41,000 compared to a year ago, as $5 million of production was retained in the loan portfolio.  Mortgage banking revenues declined by $185,000 this quarter compared to the fourth quarter 2010 as a result of a surge in home purchase closings before year-end and a seasonal slowing of home purchase transactions in early 2011.  

Core operating expenses remained stable for the quarter and were improved over the prior year.  Expenses associated with other real estate owned and asset dispositions were substantially reduced for the quarter compared with both the prior and year earlier period. 

Salaries, wages and benefits for the first quarter 2011 were nearly unchanged at $6.5 million from a year ago and when compared to the fourth quarter 2010.  Employee benefit costs, which typically are higher in the first and second quarters each year as a result of higher payroll taxes and unemployment insurance costs, increased when compared to the fourth quarter, but were down year over year by $178,000 or 10.0 percent. Costs associated with foreclosed and repossessed asset disposition and management activities declined by $8.4 million compared to the fourth quarter 2010 and $2.5 million compared to a year earlier. Also decreasing this quarter compared to a year earlier were legal and professional fees, down $344,000 related to reduced risk management and strategic planning consulting assistance.  

The Company's retail core deposit focus has produced strong growth in core deposit customer relationships and has resulted in increased balances, which allowed for run-off in brokered and single service certificates of deposit. The improved deposit mix and lower rates paid on deposits during the first quarter reduced the overall cost of total deposits to 0.72 percent, 4 basis points lower than in the fourth quarter 2010 and 31 basis points below last year's first quarter.

Total deposits, excluding brokered certificates of deposits totaled $1.7 billion at March 31, 2011, up $49 million or 12.1 percent annualized compared to year-end 2010 total deposits.  The average cost of interest bearing deposits, excluding certificates of deposits, during the first quarter was 0.30 percent, unchanged from the fourth quarter and 29 basis points lower from first quarter 2010. Certificate of deposit rates paid were lower compared to the fourth quarter and totaled 1.78 percent during the first quarter of 2011, a decline of 10 basis points compared to the fourth quarter and 28 basis points lower compared to first quarter 2010.  

The mix in deposits has improved with time certificates declining to 32 percent of total deposits, compared to 35 percent a year ago.  The decline in deposits resulted from management's decision not to retain higher rate single-service certificates of deposit clients.  These balances declined by $82 million, year over year, and were replaced with lower cost new core deposit accounts. As previously reported, the Company has experienced strong growth in core deposit customer relationships since implementing its new deposit growth strategy.  Net core household growth increased by 3.3 percent over the last twelve months with new personal checking relationships up 37.3 percent and new commercial business checking relationships increasing 61.6 percent during the first quarter 2011 compared to the same quarter a year earlier.  These new relationships have improved market share and increased average services per household.  

Seacoast will host a conference call on Monday, April 25, 2011 at 10:00 a.m. (Eastern Time) to discuss the 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 call will be available for one month, beginning the afternoon of April 25, 2011, 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 April 25, 2011, an archived version of the webcast can be accessed from this same subsection of the website, and will be available for one year.

Seacoast Banking Corporation of Florida has approximately $2.1 billion in assets.  It is one of the largest independent commercial banking organizations in Florida, and is headquartered on Florida's Treasure Coast, one of the wealthiest and fastest growing areas in the nation.

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.