SBCF Seacoast Banking Corporation of Florida

STUART, Fla., April 25, 2017 /PRNewswire/ -- Seacoast Banking Corporation of Florida ("Seacoast" or "the Company") (NASDAQ: SBCF) today reported net income of $7.9 million for the first quarter of 2017, a 100% or $4.0 million increase from the first quarter of 2016. The company reported first quarter adjusted net income¹ of $10.3 million, representing a 46% or $3.2 million increase year-over-year.

Dennis S. Hudson, III, Seacoast's Chairman and CEO, said "We sustained our prior year momentum during the first quarter, with robust loan pipelines, interchange and household growth reaching record levels, as we continued initiatives to become more efficient as the year progresses."

"We incurred certain expenses in the first quarter 2017, notably higher than the fourth quarter last year, that position us well for the balance of this fiscal year. We also successfully completed a public offering of 2.7 million shares during the first quarter, generating net proceeds of $55.7 million and situating us to sustain our strong organic growth and make selective acquisitions. On April 7, we closed the GulfShore Bank acquisition, extending our proven integration strategy into the attractive Tampa market."

Notable Items Affecting First Quarter 2017 Results

Certain items during first quarter 2017, aggregating $3.6 million in noninterest expense, were significant in comparison to fourth quarter 2016, and position the Company for much stronger performance looking forward.

• Return of seasonal 401(k) and payroll tax expense.
• Restructured the executive team, with salary expense overlap and severance-related charges. This was largely complete by first quarter end.
• Hired a commercial lending team, expected to be earnings accretive in fiscal year 2017.
• Completed a reduction in force, resulting in severance expense during the first quarter.
• Consolidated four branch locations, resulting in closure charges and severance in the first quarter, with anticipated benefits partially realized in the second quarter and more fully in the second half of 2017.

Guidance

The Company's previous baseline adjusted diluted earnings per share guidance of $1.24 to $1.28 remains unchanged.  The Company has updated its definition of adjusted net income to exclude the effect of the amortization of acquisition related intangibles.  Updating its guidance for this new definition and the greater number of shares in issue following the Company's capital raise, the Company has revised its 2017 expected adjusted diluted earnings per share guidance to $1.28 to $1.32.

First Quarter 2017 Financial Highlights

Income Statement

• Net income was $7.9 million, or $0.20 per average common diluted share, compared to $0.28 for the prior quarter and $0.11 for the first quarter of 2016. Adjusted net income¹ was $10.3 million, or $0.26 per average common diluted share, compared to $0.31 for the prior quarter and $0.20 for the first quarter of 2016.
• Net revenues were $48.1 million, an increase of $716 thousand, or 2%, compared to the prior quarter and an increase of $9.1 million, or 23% year-over-year. Adjusted revenues¹ were $48.1 million, an increase of $723 thousand, or 2%, from the prior quarter and an increase of $9.7 million, or 25% year-over-year.
• • Net interest income totaled $38.2 million in the first quarter of 2017, an increase of $740 thousand or 2% from the prior quarter. Compared to the prior year quarter, net interest income increased 26% or $7.9 million.
  • Noninterest income totaled $9.9 million for the first quarter of 2017, flat to the prior quarter and $1.2 million or 14% higher than the prior year quarter.
• Net interest margin was 3.63% in the current quarter compared to 3.56% in the prior quarter and 3.68% in the prior year quarter.
• The provision for loan losses increased from the prior quarter by $304 thousand and from the prior year quarter by $1.1 million to $1.3 million, as a result of growth in loans outstanding.
• Noninterest expense increased $4.4 million sequentially and increased $2.4 million compared to the prior year quarter.
• • The current quarter included expenses of $2.6 million associated with consolidation activity in the retail branch network, the realignment of our executive team structure, and expenses associated with a reduction in workforce initiative. The earnings benefit from this work will be realized over the remainder of 2017. In addition, $1.3 million was included in the quarter for merger related charges and amortization of intangibles acquired through acquisitions.
  • Adjusted noninterest expense1 was $30.9 million, an increase of $2.1 million, or 7%, compared to the prior quarter and $4.1 million, or 15%, compared to the prior year quarter. The increase quarter over quarter is primarily the result of seasonal expense associated with payroll taxes and incentive compensation accruals, the hiring of a commercial lending team during the quarter, and expenses associated with an investor relations event.
• Seacoast recorded a $4.1 million income tax provision in the first quarter of 2017, compared to $5.3 million in the fourth quarter of 2016 and $2.4 million in the first quarter of 2016. The Company adopted ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting" in the third quarter of 2016; as a result, benefits related to stock-based compensation were $234 thousand in the current quarter and $383 thousand in the prior quarter.
• Revenues, excluding securities gains, increased 24% compared to prior year levels while adjusted noninterest expense¹ increased 15%, providing 9% operating leverage.
• The efficiency ratio increased to 71.1% compared to 62.4% in the prior quarter and improved from 81.7% in the prior year quarter. The adjusted efficiency ratio¹ increased to 64.7% compared to 60.8% in the prior quarter and improved from 69.6% in the prior year quarter.

Balance Sheet

• At March 31, 2017, the Company had total assets of $4.8 billion and total shareholders' equity of $502.5 million. Book value per share was $12.34 and tangible book value per share was $10.41, up $0.88 and $1.04, respectively from December 31, 2016.
• Loan production continued at a strong pace across all business lines. Net loans totaled $2.95 billion at March 31, 2017, an increase of $93 million, or 3%, compared to December 31, 2016, and an increase of $514 million, or 21%, from year-ago levels. Excluding acquisitions, loans increased $456 million or 19% from year-ago levels. During the quarter, the Company purchased a residential adjustable mortgage pool, totaling $43 million.
• • Consumer and small business originations reached $90 million, a new record level, during the current quarter.
  • After recent record quarters, commercial originations remain strong at $95 million.
  • Closed residential loans retained during the quarter reached $78 million, reflecting continued strong performance.
• Pipelines (loans in underwriting and approval or approved and not yet closed) remain strong at $123 million in commercial, $78 million in mortgage, and $44 million in consumer and small business.
• • Commercial pipelines increased $33.9 million, or 38%, over prior quarter and $24.8 million, or 25%, over year-ago levels.
  • Mortgage pipelines increased $5.7 million, or 8%, over prior quarter and $20.6 million, or 36%, from year-ago levels.
  • Consumer and small business declined from prior quarter by $1.4 million, or 3%, and increased from year-ago levels by $12.2 million, or 38%.
• Total deposits were $3.7 billion as of March 31, 2017, an increase of $155 million, or 4%, compared to prior quarter and an increase of $456 million, or 14%, from the first quarter 2016.
• • Deposit growth reflects our success in growing households both organically and through acquisitions. Since March 31, 2016, interest bearing deposits (interest bearing demand, savings and money markets deposits) increased $249 million, or 14%, to $2.1 billion, noninterest bearing demand deposits increased $171 million, or 16%, to $1.2 billion, and CDs increased $36 million, or 10%, to $398 million. Excluding acquired deposits, noninterest bearing deposits increased 7% and total deposits increased 3% compared to March 31, 2016.
  • The Company's balance sheet continues to be primarily core deposit funded. Core customer funding increased to $3.5 billion at March 31, 2017, a 3% increase from December 31, 2016 and a 13% increase from March 31, 2016. Excluding acquisitions, core customer funding increased by $149 million, or 5%, from one year ago.
  • Seacoast's overall cost of deposits is 0.14%, in line with the prior quarter and 0.13% in the prior year quarter, reflecting the significant value of the deposit franchise.
• First quarter return on average assets (ROA) was 0.68%, compared to 0.94% in the prior quarter and 0.44% in the prior year quarter. Return on average tangible assets (ROTA) was 0.74%, compared to 1.00% in the prior quarter and 0.48% in the prior year quarter. Adjusted ROTA¹ was 0.90% compared to 1.05% in the prior quarter and 0.80% in the prior year quarter.

Capital

• Completed a successful public offering of 2.7 million shares of common stock on February 21, 2017, generating net proceeds of $55.7 million.
• The common equity tier 1 capital ratio (CET1) was 12.3%, total capital ratio was 14.9% and the tier 1 leverage ratio was 10.3% at March 31, 2017.
• Tangible common equity to tangible assets was 9.0% at March 31, 2017.

Asset Quality

• Nonperforming loans to total loans outstanding at March 31, 2017 decreased to 0.57% from 0.62% at December 31, 2016 and from 0.63% as of March 31, 2016.
• Nonperforming assets to total assets declined to 0.52% at March 31, 2017, compared to 0.60% at December 31, 2016 and 0.59% one year ago. Of the $25 million in nonperforming assets, $4 million relates to six closed branch properties held as REO.
• The ratio of allowance for loan losses to non-acquisition related loans was 0.95% at March 31, 2017, 0.96% at December 31, 2016, and 1.04% at March 31, 2016.

First Quarter 2017 Strategic Highlights

Modernizing How We Sell

• New households served grew by a record 1,416 new households in March. This was achieved despite having fewer branches and fewer FTEs in the retail business unit.
• Consumer loans closed remotely increased to 33%, from 0% one year prior.
• Consumer and small business loans originated in digital channels or by our call center grew by 38%. These are the fastest growing channels as our customers migrate to these channels for convenience.
• Invested $200 thousand in hiring a commercial banking team, to be headquartered in Tampa, Florida with nationwide distribution, primarily serving lower middle market commercial and industrial business relationships.

Lowering Our Cost to Serve

• Closing four locations in the first half of 2017. Costs associated with branch closures in the current quarter were $515 thousand. This consolidation effort is expected to lower operating expenses by $2.0 million on an annual basis.
• Customers continue to move to more convenient digital channels, and we still expect non-teller transactions to surpass teller transactions by this summer.
• Initiated a reduction in workforce initiative during the first quarter, in line with our focus on efficiency.

Driving Improvements in How Our Business Operates

• Last June, we launched our online mortgage portal, where customers can apply online, upload documents, and track where they are in the process. In the first quarter, 51% of customers who closed a loan utilized the portal. Customer adoption has exceeded our expectations and the online portal continues to improve both our customers' experience and our lenders' efficiency. Our goal by 2020 is to replicate this across our other major product platforms.
• In the current quarter, we opened a new call center in the Orlando area to support our growth strategy. This new location supports our 24/7 customer service model, provides us with access to a larger talent pool, and helps us strengthen our business continuity plan.
• In the current quarter, we invested $127 thousand in relocating our secondary data center to a managed service provider environment creating reliability and scalability to support the growth of the organization.

Scaling and Evolving Our Culture

• In January 2017, we announced key leadership changes to drive our growth strategy. Charles M. (Chuck) Shaffer was appointed CFO and head of strategy, Julie Kleffel, who has headed small-business banking for the past two years, will succeed Shaffer as EVP, Community Banking, Jeffery (Jeff) Bray was appointed EVP of Service and Operations and Joe Forlenza joined us as EVP, Chief Audit Executive. We also welcomed Al Monserrat, CEO of RES Software, a leading digital workspace technology company, to the Seacoast board of directors.
• On April 7^th, we completed our acquisition of GulfShore Bank, adding Joe Caballero as EVP, Tampa Market President, anchoring Seacoast in one of the most attractive markets in Florida.

OTHER INFORMATION

Conference Call Information

Seacoast will host a conference call on Wednesday, April 26, 2017 at 10:00 a.m. (Eastern Time) to discuss the earnings results.  Investors may call in (toll-free) by dialing (800) 774-6070 (passcode: 7756 381). 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 April 26, by dialing (888) 843-7419 and using passcode: 7756 381.

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 April 26, 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 $4.8 billion in assets and $3.7 billion in deposits as of March 31, 2017. The Company provides integrated financial services including commercial and retail banking, wealth management, and mortgage services to customers through advanced banking solutions, 46 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, 2016, 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.