Seacoast Reports Third Quarter 2016 EPS Increased 85% on Record Loan Production and Expense Management

STUART, Fla., Oct. 26, 2016 /PRNewswire/ -- Seacoast Banking Corporation of Florida ("Seacoast" or "the Company") (NASDAQ: SBCF) today reported results for the third quarter of 2016.

Seacoast reported net income of $9.1 million during the third quarter of 2016, a 106% or $4.7 million increase from the third quarter of 2015 and an increase of $3.8 million, or 71%, compared to the second quarter of 2016.  Third quarter return on average assets (ROA) increased 31 basis points quarter-over-quarter to 0.82%, return on average equity increased 329 basis points to 8.4% and return on average tangible common equity¹ (ROTCE) increased 429 basis points to 10.9%.  Third quarter 2016 results include $2.6 million in costs related to consolidation of branches acquired through the BMO Harris acquisition and other nonrecurring items^1.

Seacoast reported third quarter adjusted net income¹ of $10.6 million, a 70% or $4.4 million increase year-over-year, and an increase of  $1.8 million, or 21% (not annualized), from the prior quarter.  Diluted earnings per common share (EPS) was $0.24, up 71% from $0.14 in the prior quarter and up 85% from $0.13 in the third quarter of 2015.  Adjusted diluted EPS¹ was $0.28, a $0.05 or 22% increase from the second quarter of 2016 and a gain of $0.10 or 56% from the year-ago period.

Net income for the first nine months of 2016 was $18.4 million compared to $16.1 million in the first nine months of 2015.  Diluted EPS was $0.49 compared to $0.48 in the same period of 2015.  Adjusted net income¹ increased $7.8 million to $26.1 million for the first nine months of 2016 and adjusted¹ diluted EPS increased 27% to $0.70.

Third Quarter 2016 Financial Highlights

• Total revenues increased $10.2 million, or 27% year-over-year to $47.4 million and increased $3.8 million, or 9% (not annualized), from the prior quarter.
• Net interest income increased $8.4 million or 29% year over year and $3.0 million or 9% above second quarter levels. Net interest margin increased six basis points, linked quarter, to 3.69%.
• Adjusted fully diluted earnings per share¹ rose to $0.28, an increase of 56% year-over-year and 22% from the second quarter of 2016.
• Adjusted return on assets¹ was 0.95%, an eleven basis points improvement over second quarter 2016. Adjusted return on tangible common equity¹ gained 195 basis points, reaching 12. 6% during the third quarter.

Third Quarter 2016 Growth Highlights

• Loans grew $670 million or 32% from year-ago levels.  Adjusting for acquisitions, loan growth was $330 million or 16%.  Compared to the prior quarter, loans increased at a 23% annualized growth rate, adding $153 million sequentially.
• Consumer, small business, and mortgage loan production all hit record levels in the third quarter.
• Debit card spend reached a record high, up 20% from 2015 levels, as organic households grew 3.5% above third quarter 2015 levels.  Interchange income increased 20%, as a result.

2016 Guidance

• Seacoast reaffirms 2016 adjusted diluted EPS¹ target of $1.00.

Dennis S. Hudson, III, Chairman and CEO said, "Seacoast's continuing transformation delivered exceptional results for shareholders during the third quarter. Robust organic loan growth, combined with success serving customers gained through our recent acquisitions, enabled us to increase net interest income 29% and noninterest income 21% from last year.

"Total loans increased 23%, annualized, compared with the second quarter of this year as we achieved record volumes in our small business, consumer and residential businesses.  $27 million of third quarter loan growth was related to loan purchases during the quarter.  Excluding acquisitions, loans grew 16% compared to the third quarter of 2015.  Our pace of consumer and small business lending is helping us maintain a granular loan portfolio and enabling us to limit commercial real estate to approximately 209% of total capital.

"With strong top-line growth, Seacoast drove positive operating leverage through continued branch closures and other cost savings measures related to our Orlando acquisitions and legacy expense base.  Year-over-year revenues excluding securities gains grew 27%, outpacing the 18% increase in adjusted expenses¹ during the corresponding period.

"Seacoast's performance also reflects continued success in deepening relationships with current customers.  The number of consumer loans and deposit accounts sold to existing customers increased at an annualized rate of 77% and 54% respectively, from prior year levels. Check deposits made outside the branch grew to 35% this quarter, up from 27% in the same period last year."

"The success of our balanced growth strategy is apparent in the improved tangible results for shareholders. During the last four quarters, we delivered 56% growth in adjusted diluted EPS¹ while improving adjusted ROA¹ and ROTCE¹ metrics by 18 basis points and 440 basis points, respectively. This improvement in performance positions Seacoast well as we continue to execute against our $1 per share goal for this year and look ahead to 2017," Hudson concluded.

Acquisitions Update
"Our acquisitions of Floridian Financial Corporation and the BMO Harris' Orlando banking operations in the first half of this year made Seacoast the largest Florida-based bank in Orlando, one of the nation's fastest growing MSAs," Hudson said.  "Our strong results this quarter reflect the first full quarter of revenues from these acquisitions.  During the quarter, we took the last of our redundant locations out of service, and we anticipate our fourth quarter results will benefit from the full expense reduction from these acquisitions."

Florida Economic Update
"The Florida economy continues to show broad-based strength," Hudson commented.  "An October 2016 report released by Wells Fargo Securities Economics Group commented, 'Florida's economy continues to fire on all cylinders. Output, employment, income and population growth have comfortably outpaced the nation for the past four years. Moreover, Florida's economy has continued to pick up steam over the past year while the U.S. economy lost momentum. Nonfarm employment is up 3.2 percent year-over-year, and the latest QCEW data suggest growth may be even stronger.²"

"Additionally, Florida's residential real estate market remains steady.  August statistics released by Florida REALTORS indicates a year-over-year increase in closed sales and median sales price, while the median time to contract decreased to 40 days," Hudson concluded.³

Third Quarter 2016 Income Statement Highlights

Strong Organic Growth Drives Continued Net Interest Income Improvement
Net interest income for the quarter totaled $37.4 million, an $8.4 million or 29% increase from third quarter 2015 levels.  Net interest margin was 3.69%, down six basis points from the prior year.  Year-over-year net interest income improvement reflects strong organic loan growth combined with growth from successful acquisitions in the first half of the year.  The decrease in margin reflects decreased loan yields, reflecting the current low interest rate environment, partially offset by improved balance sheet mix.

Net interest income increased $3.0 million or 9% (not annualized) compared to the second quarter of 2016 and net interest margin increased six basis points from 3.63% in the prior quarter.  Improvement reflects strong loan growth and deployment of excess liquidity held at the time of the BMO Harris acquisition in the second quarter 2016.

Noninterest Income Growth Benefits from Acquisitions, Loan Growth
Noninterest income excluding securities gains, totaled $9.8 million for the third quarter of 2016, $1.7 million or 21% above the $8.1 million recorded in the same quarter of 2015.  Significant contributors to the increase in noninterest income include mortgage banking revenue, which increased $0.7 million or 60% from the year-ago period; deposit service charges, which increased $0.5 million or 22%; interchange income, which increased $0.4 million or 20%; and other income, which increased $0.3 million or 45%.  Digitally-driven product marketing and service delivery, combined with strong organic and acquisition-related household growth, drove the growth in noninterest income during the quarter.

Noninterest income excluding securities gains, increased $0.7 million or 7% (not annualized) from second quarter 2016 levels.  Strength in mortgage banking revenue and acquisition-driven increases in deposit service charges provided significant lift despite a seasonally slower quarter.

Noninterest Expense Growth Reflects Merger Activity
Noninterest expense increased $4.3 million from the third quarter of 2015.  Third quarter 2016 expenses were impacted by $2.6 million in acquisition and other nonrecurring expenses compared to $3.0 million in the third quarter of 2015.  Adjusted noninterest expense¹ increased $4.7 million from prior-year levels.  The year-over-year increase in adjusted expense reflects ongoing costs related to the acquisitions of Floridian Financial Group and BMO Harris' Orlando operations.  Expenses also reflect costs to support significant organic growth and investment in the franchise.  Revenues, excluding securities gains, grew 27% compared to prior year levels while adjusted noninterest expense¹ grew 18% - providing 9% operating leverage.  Ten full-service offices were taken out of service during the third quarter of 2016, most in the Central Florida region, with an anticipated favorable reduction to noninterest expenses prospectively.

Noninterest expense decreased $1.4 million from the second quarter, 2016 due to a higher level of merger expenses recorded in the second quarter related to 2016 acquisitions.  Adjusted noninterest expense1 grew $1.8 million or 6%. Contributing to the higher adjusted noninterest expense¹ during the third quarter of 2016 were salary and benefits costs, occupancy and equipment, and data processing expense, largely from acquisition activity.  Additionally, incentive costs increased with strong third quarter production.  Of note, our recent brush with Hurricane Matthew is not expected to have any material impact to noninterest expense in the fourth quarter.

Third Quarter 2016 Balance Sheet Highlights

Strong Originations Drive Loan Portfolio Even Higher
Net loans totaled $2.77 billion, an increase of $670 million or 32% above the third quarter 2015.  Excluding acquisitions, loans increased $330 million or 16% above the prior year.  Loans increased $153 million or 23%, annualized, from second quarter 2016.      

Loan production continued at a strong pace across all business lines.  Commercial loan originations for the quarter exceeded $109 million, well ahead of 2015 levels, with the commercial pipeline (in underwriting and approval or approved and not yet closed) totaling $119 million at September 30, 2016.

Consumer loan and small business originations totaled $88 million during the third quarter of 2016 compared to $53 million one year ago.  Closed residential production for the quarter totaled $114 million compared with $74 million during the third quarter 2015, with a total residential pipeline of $79 million as of September 30, 2016, up from $38 million one year ago.  $27 million of third quarter loan growth is related to marine and mortgage loan purchases made during the quarter.

Credit Quality Remains Stable and Strong
The provision for loan losses was $550,000 for the third quarter of 2016, down from $987,000 in the third quarter 2015 and $662,000 recorded in the second quarter 2016.  The decrease in provision was driven by strong credit results, including $1.4 million in net recoveries collected during the quarter, offset by the impact of continued loan growth. The ratio of allowance for loan losses to non-acquisition related loans was 1.00% as of September 30 2016, a slight decrease from 1.01% as of June 30, 2016.

Additional highlights include:

• Nonperforming loans to total loans outstanding at the end of the third quarter decreased to 0.66%, down from 0.81% as of September 30, 2015;
• Nonperforming assets to total assets declined to 0.69%, compared to 0.73% one year ago. Of $31.2 million in nonperforming assets, eleven properties at a carrying value of $7.6 million relate to closed branch properties held as REO.

Deposits Built on Core Customer Growth and Acquired Deposits
Total deposits were $3.5 billion as of September 30, 2016, $768 million or 28% above the third quarter 2015.  Core customer funding increased to $3.31 billion, a $728 million or 28% increase.  Excluding acquisitions, core customer funding increased by $218 million or 8% and total deposits increased $127 million or 5% above the third quarter 2015.  Core customer funding increased $14 million and total deposits grew $9 million compared to the second quarter 2016.  Seacoast recognized growth in deposits despite seasonal drawdowns of public funds, planned decrease in high-cost acquired certificates of deposit and significant branch consolidation.   This increase compares to a slight decrease in deposits, excluding acquired deposits, during the third quarter 2015.

Noninterest demand deposits grew $22 million or 2% (not annualized) from the second quarter of 2016 and $299 million or 34% from the third quarter of 2015.  Excluding acquired deposits, noninterest demand deposits increased $114 million over the third quarter 2015 and represent fully one-third of total deposits.

Other Highlights

Income Taxes
Seacoast recorded a $4.3 million income tax provision in the third quarter of 2016, compared to $2.8 million in the second quarter of 2016 and $2.7 million in the prior year.  The third quarter 2016 tax provision benefited from the early adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting.  As a result, Seacoast recorded a benefit of $418,000, adding $0.01 per diluted share.

Excluding the adoption of ASU 2016-09, the year-to-date effective tax rate was 35.7%. Implementation of this new accounting standard will continue to have an impact on the effective tax rate in future periods depending on stock-based compensation grants and their related vesting and exercise timing, as well as stock price.

Capital Ratios Remain at Strong Levels
The common equity tier 1 capital ratio (CET1) was 10.9%, total capital ratio was 13.4% and the tier 1 leverage ratio was 9.2% at September 30, 2016.  Ratios decreased slightly as average assets increased due to the BMO Harris acquisition late in the second quarter.

Tangible book value per share increased $0.27 to $9.35 while book value per share increased $0.25 to $11.45 compared to the second quarter of 2016.  Tangible common equity to assets was 8.0% at September 30, 2016.

Conference Call Information
Seacoast will host a conference call on Thursday, October 27, 2016 at 10:00 a.m. (Eastern Time) to discuss the earnings results.  Investors may call in (toll-free) by dialing (888) 517-2458 (passcode: 9762 990). Slides will be used during the conference call and may be accessed at Seacoast's website at SeacoastBanking.com by selecting "Presentations" under the heading "Investor Services."  A replay of the call will be available for one month, beginning late afternoon of October 27, by dialing (888) 843-7419 and using passcode: 9762 990.

Alternatively, individuals may listen to the live webcast of the presentation by visiting Seacoast's website at SeacoastBanking.com. The link is located in the subsection "Presentations" under the heading "Investor Services." Beginning the afternoon of October 27, 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.

About Seacoast Banking Corporation of Florida (NASDAQ: SBCF)
Seacoast Banking Corporation of Florida is one of the largest community banks headquartered in Florida with approximately $4.5 billion in assets and $3.5 billion in deposits as of September 30, 2016. The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through advanced banking solutions, 47 traditional branches of its locally-branded wholly-owned subsidiary bank, Seacoast Bank, and five commercial banking centers. Offices stretch from Ft. Lauderdale, Boca Raton and West Palm Beach north through the Daytona Beach area, into Orlando and Central Florida, and west to Okeechobee and surrounding counties. More information about the Company is available at SeacoastBanking.com.

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, 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, or expect to acquire, 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, 2015, 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.

Explanation of Certain Unaudited Non-GAAP Financial Measures
The measures entitled adjusted net income; adjusted diluted earnings per share; return on average tangible common equity; adjusted revenue; adjusted return on assets; adjusted return on average tangible common equity; adjusted efficiency ratio; adjusted pre-tax, pre-provision income; annualized adjusted operating expenses as a percent of average assets; and adjusted noninterest expense are not measures recognized under U.S. generally accepted accounting principles (GAAP) and therefore are considered non-GAAP financial measures. The most comparable GAAP measures are net income, diluted earnings per share, return on average equity, revenues, return on average assets, return on average equity, expenses/revenues, net income, noninterest expense as a percent of average assets, and noninterest expense, respectively.

Management uses these non-GAAP financial measures in its analysis of the Company's performance and believes these presentations provide useful supplemental information, and a clearer understanding of the Company's performance, and if not provided would be requested by the investor community. The Company believes the non-GAAP measures enhance investors' understanding of the Company's business and performance. These measures are also useful in understanding performance trends and in facilitating comparisons with the performance of other financial institutions. The limitations associated with operating measures are the risk that persons might disagree as to the appropriateness of items comprising these measures and that different companies might calculate these measures differently.  The company presents non-GAAP measures to remove or adjust for items like transaction related merger and acquisition costs or other costs or revenue items that are not related to the ongoing operations of the company as well as to adjust intangible assets and intangible asset amortization from acquired companies.  The Company believes these measures are useful to investors because removing the amount of intangible assets and amortization thereof, and removing costs and revenues not related to ongoing operations of the company (the level of which may vary from company to company and from period to period), allows investors to more easily compare the Company's capital position and financial performance to other companies in the industry that present similar measures. The Company also believes that removing these items provides a more relevant measure of the Company's financial performance from period to period. These measures are utilized by management to assess the capital adequacy and profitability of the Company.

These disclosures should not be considered an alternative to GAAP. The computations of adjusted net income; adjusted diluted earnings per share; return on average tangible common equity; adjusted revenue; adjusted return on assets; adjusted return on average tangible common equity; adjusted efficiency ratio; adjusted pre-tax, pre-provision income; annualized adjusted operating expenses as a percent of average assets; and adjusted noninterest expense and the reconciliation of these measures are set forth in the tables below.⁵:

SOURCE Seacoast Banking Corporation of Florida

Related Links

http://www.SeacoastBanking.com