Seacoast Reports Earnings for Fourth Quarter and Year 2013

STUART, Fla., Jan. 29, 2014 /PRNewswire/ -- Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF), today reported fourth quarter 2013 net income of $1,850,000 compared to $240,000 for the same quarter last year.  Net income available to common shareholders for the quarter totaled $588,000 or $0.03 per diluted common share, compared with a net loss of $(697,000) or $(0.04) per diluted common share for 2012. Net income available to common shareholders for the year totaled $47.9 million or $2.44 per diluted common share, compared with a net loss of $(4.5) million or $(0.24) per diluted common share for 2012.

(Logo: http://photos.prnewswire.com/prnh/20050916/SEACOASTLOGO )

Pretax earnings for the quarter and the year were substantially improved over the prior year due to our ongoing investments in loan production personnel, digital technologies and the effects of asset quality improvements and expense management.  During 2013 we reduced our total noninterest expense structure by $7.4 million or 9.0 percent while also absorbing increases in core operating expenses totaling approximately $3.7 million related to new investments including (5) new Accelerate business offices in Ft. Lauderdale, Boca Raton and Orlando as well as costs associated with faster customer adoption of our digital product offerings. Revenue growth continued to improve throughout the year as our new investments began to produce results and our legacy franchise experienced continued organic growth.

When compared with the prior quarter, pretax earnings fell 11 percent due to the recovery of interest income from a nonaccrual loan which was recovered and disclosed in the prior quarter, lower mortgage banking fees, additional investments in production personnel and year end incentive adjustments related to higher than expected production for 2013.  Additional cost reductions totaling approximately $1.2 million are being implemented in first quarter 2014 and include expenses related to slower growth expected for mortgage production in 2014.   

The Company's $50 million in outstanding Series A Preferred Stock was redeemed in full at year end which will increase net income available to common shareholders in 2014 and beyond.  During the fourth quarter the Company also successfully raised $75 million in common equity.  "These actions taken together with last quarter's recapture of our deferred tax asset strengthened capital levels, improved the quality of our capital structure and were key objectives accomplished to support our strategic growth objectives going forward," said Dennis S. Hudson, III, Chief Executive Officer.  

Revenue initiatives continue to produce results

• Noninterest income (excluding securities gains) increased by 13.4 percent for the year and 6.4 percent for the quarter in spite of lower mortgage banking fees
• Ending net loan balances up 6.4 percent compared to a year ago
• Noninterest income to total revenue at year end increased to 27.2 percent compared to 24.9 percent a year ago

Expense reduction objectives for 2013 were accomplished while providing significant investments in growth initiatives

• Total noninterest expenses down $7.4 million or 9.0 percent
• Total core expenses down $2.7 million or 3.5 percent
• New investment spend (core operating expenses) totaled approximately $3.7 million for the year primarily related to revenue related personnel and build out of our digital product suite

Investments in loan production personnel producing results

• Loan production for the year totaled $563 million, up 18.8 percent compared to 2012
• Much stronger commercial production of $200 million for the year, up 80 percent or $89 million compared to 2012
• Residential loan production grew at a slower pace compared to 2012 and totaled $251 million for the year

We will continue to refine and expand our investments in our existing growth initiatives while we implement other initiatives to support continued earnings growth in 2014 and beyond. 

Over the last several years, our focused tactical initiatives have produced strong organic core customer deposit account growth and increased core customer funding.  Transaction accounts (demand deposits and NOW accounts) surpassed $1 billion for the first time ever this quarter. Core customer funding totaled $1.7 billion at December 31, 2013, up $101.4 million from last year's fourth quarter and up 21.1 percent since the fourth quarter 2011.  In addition, deposit mix continued to improve with noninterest bearing deposits nearly 26 percent of total deposits at year end 2013 and transaction accounts increasing to over 55 percent of deposits.

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

Additional growth highlights for fourth quarter 2013:

• Interchange fees and service charges on deposit accounts grew by 20.5 percent and 6.0 percent, respectively, compared to last year's fourth quarter;
• Wealth management fees totaled $1.2 million for the fourth quarter, up $270,000 or 30.5  percent compared to a year ago;
• Net interest income totaled $16.3 million compared to $16.2 million a year ago and was lower than the linked quarter as a result of a $505,000 recovery of interest income related to nonaccrual loans in the third quarter 2013; and
• While annual mortgage banking fees increased in 2013 by $463,000 or 12.5 percent compared to a year ago, mortgage fees were $302,000 lower compared to one year earlier and $347,000 lower compared to the prior quarter, as a result of higher interest rates.

The following details noninterest income for the fourth quarter ended December 31, 2013 compared to the last four quarters:

Credit Quality Improves to Pre-Crisis Levels

• Net charge-offs totaled 0.26 percent of average loans for fourth quarter, compared to 0.69 percent a year ago;
• Annual net charge-offs to average loans of 0.41 percent for 2013 was down 75 basis points compared to 2012;
• Net loss on other real estate owned and repossessed assets at December 31, 2013 declined $2.2 million from December 31, 2012 as other real estate owned was reduced by $5.0 million or 42.3 percent from 2012;
• Restructured loans reduced to $25.1 million, down $16.8 million compared to a year ago;
• Nonperforming loans totaled 2.12 percent of loans, compared with 2.27 percent last quarter and 3.34 percent one year ago; and
• Nonperforming assets to total assets declined to 1.52 percent, compared to 2.43 percent a year ago.

Noninterest Expenses

Total noninterest expenses fell by $1.1 million or 5.8 percent for the fourth quarter compared with the prior year.  Contributing to the decline were lower expenses related to OREO and other asset disposition costs as overall asset quality continued to improve as well as reduced core operating expenses. Core operating expenses for the quarter were reduced by $311,000 or 1.6 percent compared with the prior year and were down $2.7 million or 3.5 percent annually compared to 2012. One time expenses for employee incentives of $203,000 unfavorably impacted core operating expenses.

Noninterest expenses for the fourth quarter 2013 are presented below compared to the prior four quarters:

Investments in new channels and digital technology

Over the past year, we redeployed a portion of our overhead savings to build out new delivery channels. We also added loan production personnel and implemented and promoted new digital products while simultaneously reducing overall operating expenses. During 2013 we incurred substantial core operating expenses associated with investment in our new Accelerate business banking channel.  Through the implementation of five Accelerate locations, we continued to focus on reaching our customers in unique ways, creating a path to achieve higher customer satisfaction. The Accelerate model focuses on providing our customers with talented, results oriented staff, specializing in the small business market segment. From their tenure and market experience, our bankers are familiar with the multitude of challenges our small business customers face in their lives. This strategy allows Seacoast to build customer relationships with depth that surpasses traditional commercial lending, and opens opportunities into other areas in which we provide services.  Annual salaries and benefits added to our lending and credit support teams (including the Accelerate business channel) during 2013 and each of the past two years are presented in the table below:

Annual Salaries and Benefits Added to Lending and Credit Support Teams

As indicated in the table below, total commercial loan originations for the fourth quarter totaled nearly $60 million as a result of the investments in the Accelerate business channel and other revenue producing personnel. Also included in the table below, are the salaries and benefits associated with new commercial loan officers and credit support personnel with tenures of six months or less for each quarter of 2013 and the final quarter of 2012.  These costs are included in core operating expenses, are significant, and are considered investments that impact our efficiency in the short run. 

Our successful customer growth strategy has included investments in digital delivery and products we believe have contributed to increasing core customer funding. As of December 31, 2013, nearly 43 percent of our online customers have adopted our mobile product offerings. Our mobile users grew by over 90 percent during 2013. We are concentrating on building a more integrated distribution system which will allow us to reduce our fixed costs as we further invest in technology designed to better serve our customers.

The Company's tier 1 capital ratio was 15.6 percent and the total risk based capital ratio was 16.9 percent at December 31, 2013.  The tier 1 leverage ratio was 9.6 percent at December 31, 2013, reflecting the reversal of the deferred tax valuation allowance in the prior quarter and the sale of $50 million of common equity this quarter. The Company closed on the sale of an additional $25 million in common equity in January 2014 which further strengthens our capital ratios.

Seacoast will host a conference call on Thursday, January 30, 2014 at 10:00 a.m. (Eastern Time) to discuss the earnings results and business trends.  Investors may call in (toll-free) by dialing (888) 517-2458 (passcode: 7789246; host: Dennis S. Hudson).  Charts will be used during the conference call and may be accessed at Seacoast's website at 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 January 30, by dialing (888) 843-7419 (domestic), using the passcode 7789246.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Seacoast's website at SeacoastBanking.net.  The link is located in the subsection "Presentations" under the heading "Investor Services".  Beginning the afternoon of January 30, 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 Banking Corporation of Florida is one of the largest community banks headquartered in Florida with approximately $2.3 billion in assets and $1.8 billion in deposits as of December 31, 2013.  The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through 34 traditional branches of its locally-branded wholly-owned subsidiary bank, Seacoast National Bank, and five Accelerate offices fueled by the power of Seacoast National Bank.  Offices stretch from Broward County north through the Treasure Coast and into Orlando, and west to Okeechobee and surrounding counties.

_______________________________________________________________

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, 2012 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