Seacoast Reports Improvements For The Fourth Quarter

STUART, Fla., Jan. 24, 2013 /PRNewswire/ --  

Profitability improvement plan on target  

• Core costs down $625,000 in the fourth quarter, comparable with core cost reductions of $727,000 in the third quarter (versus second quarter 2012)
• Targeting $7.4 million in reduced expenses in 2013

Continued acceleration in new households, deposit and fee income growth

• Total households increase 9.4 percent year over year
• Strong growth in noninterest bearing deposits of 28.8 percent over prior year
• Fee based revenues up 14.9 percent year over year for the fourth quarter

Credit quality improvements continue in the quarter

• Nonperforming loans decline by 7.9 percent compared to last quarter
• Other real estate owned down 43.2 percent compared to 2011

Seacoast Banking Corporation of Florida (NASDAQ-NMS: SBCF), today reported 2012 fourth quarter net income of $240,000, compared to $2.5 million for the fourth quarter of 2011.  Net loss of $710,000 for the full year compared to net income of $6.7 million for the year 2011.  Net loss available to common shareholders for the fourth quarter and the year 2012 totaled, respectively, $697,000 or $0.01 diluted earnings per share (DEPS), and $4.5 million or $0.05 DEPS.  These figures compare to net income of $0.02 DEPS and $0.03 DEPS a year ago for the same periods, respectively.

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Net pre-provision income, excluding securities gains, the change in fair value of loans available for sale, branch consolidation and severance costs and loss on sale of other real estate owned ("OREO") and other assets was $2.9 million for the quarter.  "Our growth initiatives continued to perform well during the quarter and for the entire year," said Dennis S. Hudson, III, Chairman and Chief Executive Officer.  "Loan growth began to accelerate this quarter as a result of our expanded business loan production teams, which helped us maintain a stable net interest margin." 

During 2012, we added 11 commercial loan officers, including 6 in the second half of 2012, to improve new loan production.  In the fourth quarter 2012, new commercial loan production totaled $49.6 million, compared to $25.1 million last quarter.  We expect to see continued growth in overall loan production throughout 2013 as additional resources are added and we further build upon our business household growth initiatives.  This will include making further investments in revenue producing commercial and mortgage loan officers in 2013. 

Net income for the year 2012 was impacted by our decision at mid-year to accelerate the reduction of problem loans and foreclosed properties.  We took this action in part to take advantage of improving market conditions.  These actions continued in the current quarter with $4.6 million in charge offs which were offset with $2.4 million in recoveries related to loans previously charged off.  Shortly after year-end a problem commercial loan, which was moved last quarter to available for sale and valued based on market bids at $10.3 million was sold for a net loss (reflected in the quarter) of $1.2 million.  Foreclosed properties were reduced by 43.2 percent during the year and nonperforming loans declined by 7.9 percent compared to the last quarter. 

In addition, we took final charges totaling $490,000 during the current quarter related to branch consolidation and severance costs associated with our Profitability Improvement Plan for 2013 which was announced last quarter.  This plan is on target and is expected to reduce our core overhead structure by approximately $4.9 million annually in 2013.  We expect our losses on OREO and asset disposition expense will be reduced by $2.8 million in 2013 and we also expect the provision for loan losses to be significantly lower in 2013.         

Highlights for the quarter:

• In the fourth quarter loans increased $23.6 million or 7.9 percent annualized reflecting improving commercial and consumer loan production, as well as, continued strong residential mortgage production;
• Mortgage banking fees for the quarter increased by $350,000 or 51.5% compared to 2011 and totaled $3.7 million for the year compared to $2.1 million for last year, up 73.4%;
• Interchange fees and service charges on deposit accounts grew by 21.4% and 4.9%, respectively, compared with last year's fourth quarter, reflecting strong growth in our core customer franchise;
• Ending noninterest bearing demand deposits increased by $94.5 million or 28.8 percent for the year and 13.4 percent annualized linked quarter on continued strong core retail and commercial account growth;
• Nonperforming loans declined by 7.9 percent compared to last quarter and nonperforming assets to total assets declined to 2.43 percent from 2.56 percent for the third quarter 2012;
• Savings, NOW and money market deposits increased $91.2 million linked quarter or 9.8 percent, in part reflecting a seasonal increase in local municipalities' deposits, which are up $95.9 million compared to a year ago; and
• The improved deposit mix resulted in a decline of 6 and 36 basis points in the cost of deposits compared to the third quarter and fourth quarter a year ago, respectively.

Over the past several years we have implemented focused tactical initiatives designed to produce strong organic growth of our core customer account franchise.  Since the fourth quarter 2010, we have increased total core customer funding by $377 million or 31.4 percent and improved our funding mix by increasing noninterest bearing deposits to 24.0 percent of total deposits from 17.7 percent at year end 2010.  Total core customer funding increased by 13.8 percent over the past year. 

Seacoast has maintained strong regulatory capital ratios over the past two years.  The estimated total risk-based capital ratio at year-end increased to 18.3 percent, up from 17.8 percent at year end 2010.  The estimated tangible common equity ratio was 5.3 percent at year-end 2012. Recovering the deferred tax asset valuation allowance would increase this ratio to 7.2 percent.

Average earning assets for the fourth quarter are up $35.8 million from the prior year with average loans up $31.7 million on retained loan production of $287 million over the last twelve months.  New loan growth has been concentrated in smaller average balance commercial loans and residential home purchase transactions consistent with our concentration management objectives.  Offsetting loan growth has been nonperforming loan resolutions, refinancing and early payoffs as a result of the low rate environment.  Total loans increased to $1.226 billion at year-end 2012, up $18.0 million compared to the prior year and including available for sale loans increased by $47.2 million compared to a year ago.

Total revenue (excluding securities gains and change in fair value of loans available for sale) for year was $86.3 million, up $1.1 million as a result of increased loan growth, lower funding costs and improved fees as a result of retail and small business deposit account growth, and improvements in loan production.  Noninterest income (excluding securities gains) was up $726,000 or 14.9 percent in the fourth quarter compared with a year ago and was up for the full year by $3.1 million or 16.9 percent compared with 2011.

Over the last three years we have been investing in people to expand and help drive further increases in revenues from mortgage banking.  Mortgage banking fees increased $1.6 million or 73.4 percent for the year 2012 compared to 2011. 

Additionally, investments were made in commercial relationship managers in 2012 to help accelerate our commercial loan production in 2013 and improve revenue growth in the last half of 2012.

Revenue earned from service charges on deposits, and interchange income increased over the prior year as a result of increased households.  Retail household growth has been a focus over the past several years and more recently the addition of new commercial relationship managers were added for increased loan production and has also aided in efforts to attract new commercial deposit accounts.  Household acquisition for 2012 included 6,585 new personal retail checking relationships, an increase of 9.4 percent from 2011.  Likewise, new commercial business checking deposit relationships increased by 21.9 percent compared with one year ago.  Along with the new relationships, our programs have improved market share, increased average services per household and decreased customer attrition.

Credit quality continued to improve this quarter with nonperforming loans declining $3.5 million from the third quarter 2012 and over $4.9 million of loans were moved to other real estate owned which increased by $3.0 million.  Nonperforming assets totaled $52.8 million at quarter end, up $3.4 million compared to a year earlier but down $496,000 from last quarter.  The ratio of nonaccrual loans and accruing loans delinquent 90 days or more to total loans at December 31, 2012 was 3.34 percent down from 3.70 percent at September 30, 2012.  Early stage delinquencies (accruing loans 30–89 days past due) remained nominal at 0.29 percent of loans outstanding.  These improvements together with lower net charge offs resulted in a lower allowance loan losses of 1.80 percent of total loans for the fourth quarter 2012 compared to 1.92 percent last quarter.

Core operating expenses (total noninterest expenses less losses on other real estate owned, expenses related to branch consolidation and organizational changes and other asset disposition expenses) have been managed lower throughout the year as noted in the table below.  Noninterest expenses for 2012 totaled $82.5 million compared to $77.8 million, an increase of $4.7 million.  This was due to added personnel related to growth initiatives, increased health insurance expense, severance related to organizational changes, branch consolidation expenses and outsourced data processing costs.  Core operating expenses were $18.9 million in the fourth quarter or an annual run rate of $75.6 million.

The organizational changes and branch closures completed during the third and fourth quarters together with the other components of our profitability implementation plan announced last quarter are expected to reduce core operating expenses in 2013.

Core operating expense trends are presented in the table below:

The net interest margin was up 5 basis points linked quarter to 3.22 percent, but was lower by 20 basis points compared to the fourth quarter of 2011.  The margin was aided by lower costs for interest bearing liabilities increased and improved mix of earning assets, which was offset by lower asset yields caused by Federal Reserve actions to stimulate economic growth.  In addition the net interest margin continues to be impacted by higher levels of overnight liquidity and short-term investments.  The average cost of deposits decreased 6 basis points to 0.20 percent during the fourth quarter 2012, and the total cost of interest bearing liabilities decreased from 0.77 percent for the fourth quarter 2011 to 0.42 percent in the fourth quarter.  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 household relationships.  Noninterest bearing demand deposits increased to 24.0 percent of total deposits from 19.1 percent a year ago and total transaction accounts and customer sweep repurchase agreements now account for more than half of total customer relationship funding.

The Company will host a conference call on Friday, January 25, 2013 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: 6117222; 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 conference call will be available beginning the afternoon of January 25 by dialing (888) 843-7419 (domestic), using the passcode 6117222.

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 Services".  Beginning the afternoon of January 25, 2013, 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, with approximately $2.1 billion in assets, is one of the largest independent commercial banking organizations in Florida.  Seacoast has 34 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, 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