Seacoast Reports Second Quarter Results

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

Highlights compared to a year ago

• Demand deposit balances increased 22.3%
• Noninterest income (excluding securities gains) grew 14.8%
• Other real estate owned declined by 72%
• Nonperforming assets decline to 2.64% of assets
• Risk-based capital ratio of 18.4%

Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF) (the "Company") today reported a net loss for the quarter ended June 30, 2012 of $2.335 million compared with net income of $1.113 million one year earlier.  The net loss for the first six months of 2012 was $1.397 million compared with net income of $1.471 million in the first six months of 2011.  Including preferred stock dividends and accretion of $937,000, the net loss applicable to common shareholders was $3.272 million or $0.03 per average common diluted share for the second quarter 2012, compared to net income of $176,000 or $0.00 per average common diluted share for the second quarter of 2011.  

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New household acquisition was strong again during the second quarter 2012.  New personal retail checking relationships opened during the quarter rose 23.7 percent compared to the same quarter in 2011.  Likewise, new commercial business checking deposit relationships opened increased by 65.5 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 improved customer retention.

We were pleased to complete all of the previously announced sales related to a substantial portion of foreclosed properties during the quarter.  In addition, market conditions permitted us to negotiate and close additional foreclosed property sales during the quarter.  As a result, other real estate owned fell by 54% during the quarter and 72% compared with one year earlier to $7.2 million at June 30, 2012.  This represents the lowest level of other real estate owned since 2008.   Nonperforming assets (loans on nonaccrual and other real estate owned) to total assets fell to 2.64% compared with 3.46% one year earlier. 

During the quarter we also continued to review our remaining problem loan assets and took substantial write downs and added additional specific reserves for certain loan assets which we determined late in the quarter could potentially be liquidated over the balance of this year.  As a result, the provision for loan losses was $6,455,000 for the quarter compared with $902,000 one year earlier.  Nonperforming loans in the second quarter totaled 3.97 percent of loans outstanding nearly unchanged from 3.88 percent at June 30, 2011.

The decision to further accelerate our problem loan liquidation activities was part of a larger project initiated during the quarter to improve earnings in the near term.  We are currently evaluating a combination of additional actions we intend to take, including office consolidations, revenue enhancements, acceleration of growth initiatives and a variety of cost-saving opportunities.

"Our growth initiatives have proven to be effective as demonstrated by strong performance during the quarter and over the last year in household build, core deposit growth and revenue improvements.   We are pleased with the steady improvement in asset quality, and we intend to make further improvements at a faster pace which will also help us achieve expense savings.  While we are pleased with having produced four consecutive quarters of profitability prior to this quarter, we are taking action to restore higher levels of profitability while also recognizing the need to continue to support our growth initiatives," said Dennis S. Hudson, III, Chairman and Chief Executive Officer.  In addition, our franchise picks up value as total customer funding (total deposits and repurchase agreements, excluding certificates of deposits) increases.  Customer funding was up $200 million or 15.9 percent compared to June 30, 2011 and totaled $1.456 billion at June 30, 2012." 

The Company's retail and business core deposit focus has produced strong growth in valuable deposit customer relationships and has resulted in increased balances and improved deposit mix.  Small business and commercial relationship growth initiatives are also starting to produce improved loan growth.  The improved deposit mix and lower rates paid on interest bearing deposits during the second quarter reduced the overall cost of total deposits to 0.37 percent, 9 basis points lower than in the first quarter 2012 and 33 basis points lower than the second quarter 2011.

Additional highlights include:

• Mortgage banking revenue in the second quarter 2012 was up $279,000 or 44.8 percent compared to first quarter 2012, and up $393,000 or 77.2 percent over the prior year due to higher volume and spreads;
• Interchange income totaled $1,154,000 for the quarter, an increase of $83,000 or 7.7 percent compared to first quarter 2012 and up $159,000 or 16.0 percent over the prior year;
• Total noninterest bearing deposits at June 30, 2012 comprised 23.3 percent of total deposits, up from 19.1 percent a year ago;
• Checking account household growth was 7.1 percent annualized for the first half of 2012 compared to 3.5 percent annualized for the same period in 2011;
• Regulatory capital ratios remained strong with the total risk based capital ratio of 18.4 percent (estimated) at June 30, 2012, compared with 18.6 percent in the prior quarter; and
• Wealth management fees were up $55,000 or 6.8 percent linked quarter.

Over the last two years, the Company has experienced strong growth in core deposit customer relationships since implementing its growth strategy.  A total of 10,635 new households started banking with Seacoast over the past 12 months, up 19.7 percent over the same period one year earlier.  These new households have opened 10,382 new checking accounts, an increase of 21.9 percent over the number of new accounts opened during the prior twelve months.  These new relationships have also increased services and average balances per household. 

These results reflect our relationship-based growth strategy which will continue to strengthen our valuable customer franchise in the state of Florida.  This strategy will continue to serve us well in the current environment and was designed to position the franchise for added earnings growth in a more typical yield curve environment and as excess liquidity is deployed into higher rate earning assets. 

Average total deposits for the second quarter ended June 30, 2012 totaled $1.7 billion, up slightly compared to June 30, 2011 and first quarter 2012.  Compared to the prior year, the mix of deposits continued to improve with run-off of customers with single-service certificates of deposits offset by increases in lower cost and no cost deposits. The mix of deposits improved with low cost interest bearing NOW and savings deposits increasing $11.4 million or 5.1 percent annualized, and average demand deposits increasing $32.7 million or 37.0 percent annualized compared to the first quarter 2012.  Average demand deposits increased $57.2 million or 17.3 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 0.18 percent, down 13 basis points from the second quarter of 2011.  Interest rates paid on certificate of deposit rates were also lower compared to the second quarter last year and totaled 1.12 percent during the second quarter 2012, a decline of 62 basis points.  The average cost of total interest bearing liabilities was 0.59 percent, down 9 basis points compared to the first quarter 2012 and 36 basis points lower than the second quarter of 2011.

Net interest income for the quarter totaled $16.0 million, down $534,000 compared to the prior year.  The decline in net interest income this quarter was a result of lower yields due to Federal Reserve policy to lower interest rates, partially offset by lower deposit costs and lower rates paid on interest bearing liabilities.  The net interest margin for the second quarter totaled 3.17 percent, down 16 basis points compared to the first quarter of 2012 and down 19 basis points compared to the second quarter 2011.  In the first and second quarters of 2012, a portion of the investment portfolio was sold to manage interest rate risk and price risk.  This also reduced net interest income compared to prior periods.  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 0.47 percent during the second quarter 2012, and the total cost of interest bearing liabilities decreased from 0.95 percent for the second quarter 2011 to 0.59 percent in the second 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 personal and business relationships.  Noninterest bearing demand deposits increased to 23.3 percent of total deposits from 19.1 percent a year ago, and total transaction accounts and customer sweep repurchase accounts now account for more than two-thirds of total customer relationship funding.

Loan growth has improved over the last twelve months with total loans outstanding increasing year-over-year by $32.4 million or 2.7 percent.  Loan growth improved due to new loan production, excluding loans originated for sale, which totaled $243.5 million, which was offset by nonperforming loan resolutions and increased principal prepayments.  Loan production over the last year has consisted primarily of commercial loans with average balances of approximately $350,600 comprised of owner occupied real estate loans amortizing adjustable rate prime residential loans with initial interest rates fixed for 3, 5 and 7-year terms, and consumer installment loans as follows:

The Company recorded a provision for loan losses in the second quarter 2012 of $6.5 million compared to $0.9 million for the second quarter of 2011.  The allowance for loan losses as a percentage of loans was 2.02 percent at June 30, 2012, compared to 2.01 percent for the first quarter this year and 2.63 percent at June 30, 2011.  The higher provision for loan losses resulted from our decision to accelerate plans to liquidate underperforming loans more quickly than originally planned.  Current quarter net loan charge-offs totaled $6.3 million compared to $4.0 million for the second quarter 2011 and $3.4 million for the first quarter 2012.

Second quarter 2012 noninterest income, excluding securities gains, was up $282,000 or 5.7% compared to the first quarter and was up $672,000 or 14.8% compared to the second quarter of 2011.  Mortgage banking fees increased by $279,000 compared to the first quarter of 2012 with revenues of $902,000, and were $393,000 higher than the second quarter 2011.  Aggregate service charges on deposits and interchange income were up when compared to the first quarter 2012 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 $2.6 million in the second quarter, up $100,000 or 3.9 percent compared with second quarter 2011.

The Company's residential lending group has produced solid, quality mortgage loan growth in 2012.  A total of 409 applications were accepted in the second quarter 2012 for total loans of $95.2 million, and 784 applications were taken in the first six months for $186.1 million.  A total of $26 million in residential mortgage loans were sold in the second quarter of 2012.  Over the first six months of 2012, a total of $47 million in residential mortgage loans were sold, and $67 million were added to the portfolio.

Core operating expenses were nearly unchanged for the quarter, but were up by $2.1 million over the prior year, related mainly to the overall growth initiatives. 

Total noninterest expenses were up $1.6 million in the second quarter of 2012 compared to a year ago.  Salaries wages and benefit expenses were higher by $1.4 million as a result of adding lending production personnel and increased incentive payments due to higher revenues generated from wealth management and residential lending production.  Costs associated with outsourced data processing services were also higher as a result of the increased account levels associated with household growth.  Total expenses remain elevated due to the continued costs associated with the management and disposal of nonperforming assets.

The Company will host a conference call on Friday, July 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) 517-2458 (access code: 7659998; leader: Dennis S. Hudson).  Charts will be used during the conference call and may be accessed at the Company'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 July 27 by dialing (888) 843-7419 (domestic), using the passcode 7659998.

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

SOURCE Seacoast Banking Corporation of Florida